Will the European Union’s US$2 trillion trillion deal herald a new era of solidarity?
- The package is distinguished not only by its size and the long drawn-out negotiations that led up to it, but also by its commitment to mutualised debt that paves the way for greater, future EU supranational powers
European Union leaders secured a breakthrough agreement on July 21 on an around €1 trillion (US$1.15 trillion) long-term budget and a €750 billion (US$868 billion) coronavirus recovery fund. While these matters are primarily economic in nature, they represent a major political milestone in the post-war history of European integration.
The historic deal follows the longest summit of EU leaders in two decades as the continent recovers from the devastating pandemic that has inflicted up on it least 135,000 deaths and an estimated economic contraction of around 8 per cent this year.
The summit is such a milestone not just because of the mammoth size of the overall agreement, but also because, for the first time ever, EU leaders committed to the principle of mutualised debt as a funding tool (for the coronavirus recovery package), potentially paving the way for greater, future EU supranational powers of taxation and a more politically federalised continent.
Ultimately, the pandemic recovery deal will see €390 billion (US$451 billion) in non-repayable grants for the worst-hit countries and €360 billion in loans, with the money raised partially through jointly issued debt.
There is even talk about a “Hamilton moment” for Brussels in reference to Alexander Hamilton, the Treasury secretary of the newly created United States of America, who convinced the Congress in 1790 of the benefits of common debt.
