The COVID‐19 crisis: A Hamilton moment for the European Union?

• Date: 01 August 2020
• DOI: http://doi.org/10.1111/infi.12377
• Published date: 01 August 2020

International Finance. 2020;23:340–347.wileyonlinelibrary.com/journal/infi340

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© 2020 John Wiley & Sons Ltd.

DOI: 10.1111/infi.12377

COMMENTARY

The COVID‐19 crisis: A Hamilton moment

for the European Union?

Otmar Issing

First chief economist of the European Central Bank, Center for Financial Studies, Frankfurt, Germany

Correspondence

Otmar Issing, Center for Financial Studies, Georg‐Sittig‐Str. 8, D‐97074 Würzburg, Germany.

Email: wue@otmar-issing.de

Keywords

European Union, fiscal policy, Hamilton moment

1|INTRODUCTION

According to Jean Monnet, one of the founding fathers of the European integration after World

War II, Europe always needs a crisis to make progress in integration. The COVID‐19 crisis

seems to deliver a perfect case to go forward. The pandemic represents an exogenous shock for

all EU member countries. But the impact is asymmetric. Countries with already high public

debt before the crisis would run into great difficulties in financing the measures needed to

stabilise their economies. Against this background, a number of politicians and academics have

called for a “Hamilton moment”and proposed mutualising the new debt at the European level

and providing the financial means to the countries most seriously hit by the pandemic.

In 1790, upon a proposal by the Union's finance minister Alexander Hamilton, the debt of

states accumulated during the War of Independence was assumed by the Union. Hamilton

interpreted this act as “cement”for the Union. Should the EU follow this example and move in

the direction of a fiscal union? This article tries to demonstrate that the historical comparison is

not well founded, and the establishment of a fiscal union in Europe needs a change of the

Treaty on the Union.

2|NEVERLETACRISISGOTOWASTE

European integration saw many ups and downs and always needed a crisis to make an im-

portant step forward. According to this perception, on the one hand, European integration is

based on a grand political design. On the other hand, progress in political reality can only be

achieved—and the manifold obstacles overcome—under the pressure of a crisis.

In short, politics must use the opportunity, following the motto: never let a crisis go to

waste. Since the start of (Western) European integration after the end of WWII, there has been

no shortage of crises. The great financial crisis of 2008/2009 was only partly used to deepen