The key difference between structural and cyclical deficits today

We try to break down euro-zone countries’ fiscal deficits in 2020 and 2021 between structural and cyclical deficits. Today there is a fundamental difference between the two types of deficits: Cyclical deficits will be fully monetised by the ECB and will therefore pose no financing problem; Structural deficits (irreversible tax cuts, irreversible public spending increases) will persist after the ECB stops monetising fiscal deficits (2022?). They will therefore lead to a deterioration in governments’ fiscal solvency and to upward pressure on long-term interest rates, unless the ECB decides to continue monetising structural deficits. This would have the added danger of giving rise to a serious moral hazard, by eliminating any limit to fiscal deficits once cyclical conditions have normalised.