JORG ASMUSSEN: Member of the Board, German Insurance Association, and former Member of the Executive Board, European Central Bank.

In response to the coronavirus pandemic, EU leaders agreed in July to establish an EU Recovery Fund (Next Generation EU). The initiative draws extensively on the Merkel-Macron proposal and thus once again underlines the importance of German-French cooperation for the European Union.

As the pandemic is having asymmetric economic effects across member states, the fund should prevent a deeper economic divide within the European Union. There is no doubt: the fund represents a major paradigm shift in the European Union's institutional architecture. Crises in the past have served to develop and deepen the institutional architecture. For the first time, the European Union will issue bonds on a large scale, a measure long rejected by Germany and others, and provide grants in particular to the member states that are most severely affected.

For a long time, the European Central Bank has called for a stronger role for fiscal policy. The agreement on the Recovery Fund is an important sign of European solidarity. In addition, there are strong economic interests with respect to the importance of the EU single market and the role of the European Union globally.

The EU Recovery Fund is often compared to America's first Treasury Secretary Alexander Hamilton's 1790 agreement on public borrowing. The agreement dealt with the mutualizing of legacy debt from the Revolutionary War of thirteen loosely confederated former colonies, and was one of the major steps in founding a federal union.

However, the current Recovery Fund does not go so far. In its framework, each member state is only liable up to its own financial contribution. This is an...