New institutional leadership goes viral EU crisis reforms and the coming about of the covid recovery fund

Abstract

This article reconstructs the coming about of the 750 billion EU Covid Recovery fund. We provide an embedded process-tracing analysis of the dynamics from mid-March 2020, when the idea of 'Coronabonds' was parachuted onto the Heads' Agenda, up until the 'historic' deal on the MFF and Recovery Fund of 21 July. Where most media accounts and scholarly assessments focus on the high-level dealmaking between political leaders, we trace the proceedings inside the EU's institutional machinery, which produced the solutions and laid out the groundwork for a deal. The reconstruction assesses the role and influence of the EU institutions -the European Commission in particular -in producing this major step. We show that the process was characterized by a handicapped European Council, which hampered the ability of member states to oversee and control developments. The conclusions discuss the implications of our findings for our understanding of (institutional) leadership and policy-making during crisis. is nevertheless a 'quantum leap' in European integration, both financially and institutionally. 1 In an EU that it supposedly characterized by reluctant member states coming up with 'too little, too late' type of solutions (Börzel, 2016;Jones et al, 2016;Mody, 2018), how do we explain such a major step?The deal was also remarkable in terms of the remarkably short negotiation process. The idea had its first appearance under the label of 'Corona bonds', which landed on the table of the Heads at their 2 nd video-tele-conference of 17 March 2020. However, the idea was dismissed almost immediately by the Northern member states, including Germany, and by Commission President von der Leyen (Politico, 2020a(Politico, , 2020b. The stage appeared to be set for a lengthy process of intergovernmental bargaining resulting in a lowest common denominator type of solution. Nevertheless, only four months later, on 21 July 2020, the EU member states agreed to what was in essence a similar solution: a massive financial support package, to be financed through an unprecedented sharing of financial debts and obligations. Moreover, while there had been intense negotiation about the overall size of the package, the division between grants and loans, the conditions (if any) that should be attached to financial assistance, the principle as such of the EU entering the financial markets and issuing debt on behalf of the member states sailed through with remarkable ease. As will become clear from our reconstruction, the speed and scope of the developments from March to July also took many insiders by surprise. The Covid crisis had somehow provided the momentum for agreeing on a 1.82 trillion euro financial package that, all things considered, had less to do with addressing the immediate consequences of the Covid crisis, and was more about building what the Commission likes to refer to as, the 'Next Generation European Union' (NGEU). This article goes beyond the headlines to explore the forces at work behind the scenes that produced this unprecedented...

The Berlin puzzle: Why European solidarity prevailed in the adoption of the Corona recovery fund

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“…When EU countries faced a new economic crisis due to COVID-19 lockdowns in March 2020, the lessons of the failure of austerity loomed large in how experts and policy makers understood the new crisis. As a result, governments throughout the EU chose to adopt massive fiscal stimulus at the national level ("go big, go fast"), and even more surprisingly, agreed to an unprecedented EU-level stimulus package paid for through a combination of new income and joint debt (Smeets & Beach, 2022).…”

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