The EU’s covid-19 recovery fund has worked, but not as intended

FEBRUARY 19TH will mark three years since the European Union’s recovery fund came into force. Known in Brussels jargon as NextGenerationEU (NGEU), this multi-year budget worth €832bn ($897bn, or 5.2% of the bloc’s GDP in 2022) is funded by EU debt, previously a rare commodity. It is the main political innovation to emerge from the pandemic in Europe. 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. And the extent of its success is still unclear.

Next week the European Commission will present its first external review. The funds are still being spent, so the economic effect is hard to measure. More curiously, experts cannot agree on what the fund’s purpose was. But that is not surprising. Just as national fiscal policy does not serve a single purpose, neither does its equivalent at the EU level.