NextGenerationEU: Hamiltonian moment or European New Deal?

Abstract

During the coronavirus disease (COVID-19) pandemic, the European Union (EU) took the unprecedented step of borrowing 750 billion euros on capital markets, part of which was to be spent in the form of grants. As prior interpretations of the Union’s constitution tended to suggest that it had no power for deficit spending, NextGenerationEU (NGEU) arguably constitutes a major constitutional transformation for the Union. As so often in the literature on the EU, the comparison was made with the federal system of the USA: Commentators likened the Union’s constitutional transformation to the transformation engineered by Hamilton, the financial founding father of the USA, as well as Roosevelt’s New Deal. When the USA was teetering on the brink of bankruptcy, Hamilton transformed the landscape of public debt in the USA by proposing to restructure and assume the debt of the states on the balance sheet of the federal government. For the first time, the public debt of the federal government of the USA played a critical role in its economy. The Great Depression prompted another transformation for the finances of the USA. Roosevelt promised his voters to bring back economic growth. During Roosevelt’s tenure in office, the public borrowing of the USA went up significantly. This contribution examines the constitutional controversies provoked by Hamilton’s and Roosevelt’s transformative policies. It argues that, in spite of some similarities, the question of the constitutionality of deficit spending was controversial neither in Hamilton’s nor in Roosevelt’s day. More fundamentally, it argues that both Roosevelt and Hamilton had a transformative vision for the economy not shared by NGEU.