A Hamiltonian glimpse in Europe
Thorsten Beck believes that as the compromise reached on the European recovery support will never be enough to overcome the COVID-19 challenges in the EU, it really is an important first rung on the ladder.
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The European Council has come to a compromise on the European recovery support, after four days of negotiations. The primary pillars as proposed by Macron and Merkel time ago still stand – joint financing and a significant grant element. However the grant amounts have been down and many forward-looking programmes, including support for climate change, have already been reduced. So, is this a glass half empty or a glass half full? Taking the viewpoint a year ago none of the could have been even imaginable is a valid point if one takes the long-term view towards a slow move towards European fiscal policy integration. As my buddy Sony Kapoor highlights, however, this will not remember that the COVID-19 crisis constitutes a massive risk to the complete European project, you start with the euro, when there is asymmetric recovery and divergence over the EU (and again, especially the euro area). Many economists, including yours truly, have therefore called in early stages for a joint recovery effort on the European level, on economic, political and social grounds. And as a decade ago with the banking union, when these calls were first dismissed as unrealistic, it ultimately did happen. Angela Merkel and Emmanuel Macron have stepped up to the task.