Is a fiscal rule needed if long-term interest rates remain forever lower than the growth rate?

Discussion is now taking place on reforming the euro zone’s fiscal rules, as the previous rules have become unworkable. One complication is the idea that due to persistently expansionary monetary policies and the high level of the global savings rate, long-term interest rates in the euro zone could potentially remain forever lower than the growth rate. If this is the case: As soon as there is a primary fiscal surplus, however small, fiscal solvency is ensured (whereas if the interest rate is higher than growth, the primary fiscal surplus must be larger the higher the public debt ratio); There remains a savings efficiency argument, even if fiscal solvency is ensured: the less productive public spending is, the less savings are used efficiently and the lower potential growth will be. A rule for the composition of public spending , between public spending that is efficient and useful in the long term and pure current spending , would therefore make sense. All things considered, in an environment of permanently below-growth interest rates, Europe’s fiscal rules could become: A primary fiscal surplus rule, adjusted for cyclical effects; A public spending composition rule, with a minimum proportion of efficient spending.