Towards a sustainable European ‘Marshall Plan’: How to turn the crisis into an opportunity

In the last weeks a growing debate among European economists has focused on how to fund the national expansionary fiscal policies of the euro-area countries that are required to deal with the negative economic impact of the Covid-19 crisis. The discussion is pointing to three alternative options: (i) the possible use of the various credit lines offered by the European Stability Mechanism, (ii) the issuing of a common debt instrument (the so-called corona-bonds/ Eurobonds) by other European institutions, and (iii) some forms of monetization of the national debt by the European Central Bank (ECB). The last option appears unfeasible since it would require profound changes in the European Treaties and in the ECB’s statute. On the other hand, options (i) and (ii) do not contrast with the current European norms. The main difference between the two is that option (i) can dispose of potentially covered funds (around either 250 or 410 billion euro) but implies some forms of conditionality for the beneficiary countries, whereas option (ii) cannot rely on preexisting funds and introduces a certain degree of risk sharing among the EMU member states. As shown by the disappointing but temporary conclusions of the Eurogroup and European Council in their meetings at the end of March and beginning of April 2020, these trade-offs between options (i) and (ii) are hampering the possibility of striking a deal in the euro area (EA). In fact, they echo the recurrent debate between EA ‘core’ and EA ‘peripheral’ countries that led to long phases of stalemate in the evolution of European governance from 2010 to 2019 due to the contraposition between risk reduction and risk sharing.