LORENZO CODOGNO: Visiting Professor in Practice, London School of Economics and Political Science, and Founder and Chief Economist, Lorenzo Codogno Macro Advisors Ltd.

It was not a "Hamiltonian moment." It is probably more Roosevelt than Hamilton. The Next Generation EU package represents a significant boost to public investment and potentially a milestone in EU economic integration. It is a sign of internal cohesion and real solidarity that goes far beyond the actual money involved.

The European Union recognized that there are "public goods" that are better managed centrally, with proper "own resources" in the EU budget. The Commission will borrow to spend on behalf of the European Union. Funds will be repaid starting from 2027 and until 2058, by the introduction of EU plastic levies, carbon adjustment measures, emission trading schemes, and digital taxes.

Countries will have to present their Recovery and Resilience Plans based on the European Semester recommendations, and these will have to be approved by the European Commission, which will allocate the funds. If a country were not perceived to fulfill the "agreed milestones and targets set out in the recovery and resilience plans," there will be a possibility to raise the issue at the level of the European Council.

The funds will support public investment and provide incentives for structural reforms, giving laggard countries a chance to catch up in economic terms. Italy will get the largest allocation of resources, on the assumption it can put forward credible projects. As a percentage of national GDP/GNI, countries currently benefiting the most from cohesion funds will get by far the most generous Recovery Plan allocations.

The Recovery Plan is de facto a sort oversized "cohesion fund" and an ex post insurance program for countries hit by Covid-19. It is a mechanism that the European Union will likely use in the future for similar external shocks if the experience is successful. Seventy percent of the grants will be committed in 2021-2022 according to criteria linked to the level of economic development of a country. In 2023, the allocation of the remaining 30 percent will be based on each country's recorded contraction in 2020-2021...