Are we moving towards a EU fiscal union?

Abstract

The establishment of a European Recovery Instrument financed by joint EU borrowing (called “Next Generation EU”, or NGEU) is an important step which will probably have long-term implications. This paper discusses what could be the legacy effects of NGEU. It starts with some general reflections about the lessons to be drawn from the US experience and about the meaning of EU fiscal union.

It then sketches out four possible scenarios for the future, not necessarily mutually exclusive. These range from the maintenance of the EU covid debt to finance other joint investments to the introduction of reforms to the post 2027 EU budget without further centralisation.