The Managing Director of the European Stability Mechanism, Klaus Regling, has said the European Union's Stability and Growth Pact needs to be reformed.  

Mr Regling told an online audience at the Institute for International and European Affairs that the debate over how much debt countries can sustain has changed since the time the Maastricht Treaty was signed in 1992.  

He said interest rates are "permanently lower" than 10 or 20 years ago. 

The capacity of governments to service debt is higher than the levels envisaged in the Treaty, but how much higher is a matter for debate, he added. 

Mr Regling also said the rules determining how big a government's deficit should be are based on a system that "doesn't work anymore".  

These rules focus on "structural fiscal deficits", which were subsequently enshrined in the Irish constitution in the Fiscal Compact referendum in 2012.  

He also indicated that the target debt level for countries of 60% of GDP also "didn't work anymore". 

The EU's fiscal rules are currently suspended in response to the Covid-19 pandemic and many EU economies have borrowed heavily in response to the public health crisis.  

Klaus Regling said it is expected that euro zone GDP is expected to return to 2019 levels sometime next year. 

At that point, what affordable debt levels are will have to be discussed, he added.