JAMES E. GLASSMAN: Managing Director and Senior Economist, JPMorgan Chase & Co., and Head Economist, Chase Commercial Banking.

The European Union's summer fiscal agreement, whether it was a "Hamilton moment" or not, will be remembered in the future as yet another important step towards greater economic and political integration that kept Europe's historic experiment on course. And it will defuse Covid-19 pandemic stresses that would widen the economic gaps among the twenty-seven members.

The significance of the summer agreement isn't its unique response to the Covid-19 crisis, although it was unique. It contained two components. One was the regular EU budget (referred to as the multi-annual financial framework, or MFF) worth about [euro]1.1 trillion spread out over seven years. Another component was an unprecedented one-time "Next Generation EU" fund of [euro]750 billion to help countries recover from the Covid-19 shock. It consisted of [euro]390 billion of grants with the rest debt-financed.

The significance of the agreement wasn't that it delivered what a fiscal union would (the European Union has yet to design such a system), although it effectively did that. And that complements national countercyclical programs like Germany's popular Kurzarbeit ("Short Work") Program that has been around since the Weimar Republic and guards businesses against short-term disruptions.

The significance of the agreement wasn't that it broke some taboos, although that it did. Europe's leaders agreed that the European Commission, acting on behalf of the member states, may incur debt at an unprecedented scale. The NGEU will be funded by debt issued over six years that can have maturities out to 2058. And the [euro]390 billion of grants breached a "red line" that had been assumed for intra-EU fiscal transfers.

The significance of the European Union's summer agreement wasn't in its size, although the size was impressive. The [euro]750 billion total NGEU amounts to about 5 percent of EU GDP (it will be spread out over several years) and complements national countercyclical programs. The...