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Analysis: Is the €500bn recovery fund plan Europe's 'Hamilton Moment'?

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Analysis: Is the €500bn recovery fund plan Europe's 'Hamilton Moment'?
Copyright  Francois Mori/AP Photos
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In 1790, the newly formed United States reached a historic constitutional compromise forged by three of the Founding Fathers: Alexander Hamilton; James Madison; and Thomas Jefferson.

The parties agreed to place the US capital between Maryland and Jefferson’s home state of Virginia.

More importantly, of course, the US federal government also assumed all the debt incurred by the US states during the War of Independence, laying the foundation for a strong, central federal government, for the United States we know today.

Yesterday, via video link and in the midst of a global pandemic, did France and Germany, under Emmanuel Macron and Angela Merkel create Europe’s “Hamilton moment”?

Well, not quite. But, last night's agreement between the EU’s wealthiest and most powerful countries, is certainly a big step and sends a political signal that the European Union is about closer and deeper cooperation.

So what have they agreed? Germany and France have joined forces to push for a €500 billion EU recovery fund.

The funds would be raised through the European Commission borrowing on capital markets and would be used to support EU spending, rather than giving loans to national governments.

With the continent's economies battered, countries facing their biggest recessions since World War Two and a significant north-south split a bold initiative was needed. Merkel and Macron clearly think this is it, a breakthrough moment.

In a press conference following the meeting, the German Chancellor said the EU was facing the “gravest crisis in its history and such a crisis demands appropriate answers”. The French President described the proposals as “a major step,” adding: “This is the transfer of real budget money to the worst-affected regions and the worst-hit sectors.”

Notably their solution to the coronavirus crisis is to include grants - not just loans - and the amount is much higher than most expected.

The news was welcomed by some. Pedro Sánchez, Spain’s prime minister and one of the leading proponents of the recovery fund, tweeted hailing it as “a first step in the right direction (and) an initiative in line with our demand.”

The Taoiseach in Ireland added “a financial diuretic to give the Union a boost. Good news for Europe and Ireland too”.

But that doesn’t mean a deal has been sealed. Far from it.

In contrast, the Austrian Chancellor, one of the so-called frugal four, seemed less than enthusiastic: “Our position remains unchanged. We are ready to help [the] most affected countries with loans. We expect the updated MFF to reflect the new priorities rather than raising the ceiling.”

And at what price will other countries, like Poland and Hungary, be expected to support the deal remains unclear.

The Merkel-Macron proposal certainly adds weight to the prospect of a final agreement between all 27 member states.

However, it will be up to Council President, Charles Michel, to get it over the line. That seems a long way off. No Council meeting has yet been scheduled, deep divisions clearly remain and any one country could veto it. And remember this proposal involves the EU budget, the seven-year multiannual financial framework (MFF), which has already been bogged down in protracted negotiations.

So, for Europe, this isn’t yet a Hamilton moment. But, be in no doubt, it is significant. A push by the EU’s most powerful countries towards a more integrated, more dependent union. More Europe, not less. No wonder Mr Macron had a massive smile on his face.

Darren McCaffrey is Euronews' Political Editor.

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