Yes, larger deficits are needed to support aggregate demand at desired levels.
However, the problem is the national govts are currently like US states and as such are revenue constrained.
So relaxing the deficit limits without some kind of ECB funding guarantees can cause markets to abstain from funding the nat govts.
Said another way, without the ECB the euro members are currently deep into ‘ponzi’.
By Ambrose Evans-Pritchard
The European Commission is preparing a major shift in economic strategy, fearing that excessive fiscal tightening will inflict unnecessary damage on a string of eurozone countries.