LUDGER SCHUKNECHT: Deputy Secretary-General, Organisation for Economic Cooperation and Development, and former G20 Deputy and Chief Economist, Federal Ministry of Finance, Germany.

The agreement on the European recovery package, covering [euro]360 billion in loans and [euro]390 billion in grants (plus a much-enlarged EU budget), is certainly an important step in the development of the European Union. And the reference to Alexander Hamilton has certainly raised expectations.

What are the hopes? The European Union will be able to issue debt of a much more significant amount than before. As this represents almost half the bund market--for German benchmark instruments--this has the potential of creating much more highly liquid and highly rated debt in Europe.

Moreover, given the prospect of a very dire budgetary situation in many member countries, this will allow for financing investment and other spending that might not otherwise happen. The need for a "reform and investment agenda," which will be discussed in European fora, reinforces economic and financial policy surveillance in the European Union. So there should be more reforms and a higher quality of spending.

But for all this to become an important step towards a strong and stable monetary union, perhaps even the "United States of Europe," a few things must fall into place. The additional spending must be productive and must come together with structural reforms. The lack of investment in Europe is rarely a question of insufficient money but more a lack of confidence, slow bureaucracy, and a lack of capacity and processes, which all reinforce the "not in my backyard problem." And often it is better, not more, spending that is needed, given our large...