EU’s covid-19 recovery fund Known in Brussels jargon as NextGenerationeu (NGEU)
The multi-year budget worth €832bn funded by eu debt, previously a rare commodity.
Some called it Europe’s Hamiltonian moment , invoking Alexander Hamilton, America’s first treasury secretary, who masterminded the fiscal federalisation of the United States.
But the eu is some way from a fiscal federation. Northern finance ministers insist that the recovery fund was a one-off.
In early 2020 the European Central Bank had to intervene forcefully to stop interest rates on the enormous debt of Italy, which was hit hard by the pandemic, from spiralling out of control.
The fund’s second purpose was to aid the recovery from the depths of the covid recession. That was never going to work. Fiscal stimulus should focus on consumption, not investment—think American-style stimulus checks, or tax cuts.
The biggest recipients got huge sums. (Richer countries got little, and will end up disproportionately paying off the debt.)
The final purpose of the NGEU was to bribe the eu’s outcasts, countries run by the populist hard right.
The smell of billions in fresh cash from Brussels led Poland and Hungary to agree reluctantly to new powers for the European Commission, to monitor whether breaches of the rule of law threaten the union’s financial interests.
Having spent €832bn in 27 member states, the eu will have to make the case for a larger budget and more authority anew.
The Economist 18 February 2024
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