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Next Generation EU and Fiscal Integration in Europe

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  • Nelly Popova

Abstract

The creation of Next Generation EU in response to the COVID-19 pandemic was a significant milestone in the European integration project. NGEU is an innovative financial instrument with the ambitious tasks to boost economic recovery and to finance long-term investments, thus raising the question if it can be viewed as a common fiscal capacity. The aim of the present article is to analyse in detail the structure of NGEU expenditure from the perspective of the public sector's three main functions (allocation, redistribution and stabilisation) and to draw conclusions about whether this instrument increases the EU’s capacity to perform them. After a concise literature review of the main arguments in favour of a supranational fiscal capacity, the article examines in detail the expenditure side of NGEU’s main component, the Recovery and Resilience Facility. It is concluded in the article that NGEU increases the EU’s capacity to perform the redistribution function and to some extent the allocation function. However, it cannot be viewed as a macroeconomic stabilisation mechanism. The article discusses several challenges arising from the establishment of the fund.

Suggested Citation

  • Nelly Popova, 2024. "Next Generation EU and Fiscal Integration in Europe," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 46-64.
    • Handle: RePEc:bas:econst:y:2024:i:3:p:46-64
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    File URL: https://www.iki.bas.bg/Journals/EconomicStudies/2024/2024-3/03_Nelly-Popova.pdf
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    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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