EMU during Covid-19

Abstract

Abstract Chapter 3 examines the transformations of Economic and Monetary Union (EMU) during Covid-19. It maps the responses that the European Union (EU) institutions and Member States deployed to address the sudden halt in demand and supply due to the pandemic and the restrictive measures taken to contain it. To this end, the chapter first surveys the action of the Commission, the European Central Bank, and the Eurogroup, and then focuses on the approval of the ‘Next Generation EU’ (NGEU) Recovery Fund—from the May 2020 Commission proposal sponsored by France and Germany, to the July 2020 European Council endorsement, and the December 2020 entry into force after the European Council overcame a veto threat by Hungary and Poland. As this chapter points out, NGEU constitutes a paradigm change in the functioning of EMU, as it endows the EU with a fiscal capacity and leads towards the emergence of new governance arrangement in economic policy. This contrasts with the EU responses to the euro-crisis and can be explained in light of changing political stances, notably by Germany, towards fiscal integration.