Next Generation EU: Responding to voices from the past

The decisions taken at the European Council in July 2020 to adopt the Next Generation EU (NGEU) package to finance the economic recovery from the Covid-19 pandemic could mark a critical juncture in the development of the European Union (EU). In contrast, we argue that accounts of a path-breaking NGEU are exaggerated. In this article, we point to strong path dependencies in policy development, as we show that NGEU is mainly a response to the economic and political imbalances left over from the Eurozone crisis. We demonstrate that in the pandemic, like in the Eurozone crisis, the major concern was about avoiding a break-up of the Eurozone and a further economic fragmentation and political de-stabilization of the EU. We argue that NGEU is a pre-emptive intervention, especially in structurally weak economies, to avoid ex-post bailouts as in the Great Recession with their ensuing political consequences. In explaining this limited novelty and strong path dependency, we focus on two interrelated challenges for the survival of the Eurozone (and by extension the EU) as a result of the pandemic shock: economic and political.