New financial tools, new rules and new dynamics of European integration: How the COVID-19 pandemic enhances integration in EU budget policies

When the long-lasting negotiations on the new Multiannual Financial Framework (MFF) 2021-2027 of the European Union were in their final round, the COVID-19 pandemic broke out. This posed an unprecedented challenge not only to public health services, but also to society as a whole, the economy as well as politicians on all governmental levels from local to European. On that basis, the European Commission reacted by putting forward a new proposal for the MFF, which included substantial adjustments to former structures. With the EU recovery fund ‘Next Generation EU’ member states not only agreed to include debt-financed grants instead of limiting the package to loans. Furthermore, they coupled the recovery fund to the MFF and the new Own Resources Decision. This constitutes a striking move, since that approach was not only vehemently rejected during the eurozone crisis, but also sheds new light on the underlying integration dynamic. This paper (i) assesses the MFF 2021-2027 including NGEU compared to the eurozone crisis management and (ii) asks what it says about the future of the EU budget and its financing by own resources based on European integration theory. EU budget policies have been criticized for decades for disintegrative effects of intergovernmental bargaining and the inability to reform the evolved structures. Against this background, the Euro crisis management was characterized not only by limited financial assistance but also a shrinking of solidarity between member states. Recent events might have opened up a window for a new path of institutional development. Following this analysis, there is a substantial change regarding European financial instruments with an unprecedented level of risk-sharing and liabilities that might influence the further development of budgetary politics in the EU heavily in the direction of a closer Union.