LORENZO BINI SMAGHI: Former Member of the Executive Board, European Central Bank.

Comparing the creation of the European Union's Next Generation Fund with Hamilton's decision to consolidate the existing debt of the thirteen pre-existing colonies is not simple. On the one hand, the recent EU policy initiative does not affect existing debt, which remains the responsibility of the member states. It involves, however, the issuance of new European debt, which is a novelty, for an amount that is not that different, in terms of GDP, from the initial issuance of U.S. federal debt in the early nineteenth century. On the other hand, it should be remembered that Hamilton's decision did not prevent individual states from continuing to issue their own debt, subject to distinct rules, while the EU member states still have to respect the rules of the Stability and Growth Pact, even though the latter has been temporarily suspended. Furthermore, the license granted by Hamilton to the First U.S. Bank was not renewed by President Adams, which laid the grounds for severe financial and monetary instability in the nineteenth century, until the creation of the U.S. Federal Reserve in 1914. In this respect, the issuance of European debt takes place in a much sounder economic and financial environment.

The NextGenerationEU fund is an initiative engineered to address the effects of the Covid-19 crisis. As such, it is a one-off experiment. This does not exclude, however, that it could be repeated, in some form, in case of a new systemic crisis, determined by health or some other factor. This will depend on the success of the action for the following reasons.

First, there is demand for a safe European asset, both from European and foreign investors. The scarcity of safe...