A Hamiltonian moment for the EU?

Was hat das erfolgreiche Musical Hamilton mit der Schuldenpolitik der EU zu tun? IAN MCMASTER erklärt es Ihnen.

Imagine that at some distant future date, there is a new musical called Macron-merkel. Doesn’t sound very exciting, I know. Imagine further that one key aspect of this musical is the role these two European leaders played in establishing collective EU liability for the debts of the individual member states. Now, you definitely don’t want a ticket, right? Yet, the most successful musical of recent years has been — at least in part — about exactly that. Hamilton tells the story of Alexander Hamilton, an immigrant who became one of the Founding Fathers of the US. Hamilton was the country’s first Secretary of the Treasury — the finance minister — from 1789 to 1795 under President George Washington. Seen as the founder of America’s financial system, Hamilton successfully argued that the federal government should be able to assume liability for the debts of the individual states. Opponents said that this would lead to the more profligate states living at the expense of more frugal ones.

Fast-forward more than 200 years and we see the same debate going on in the EU, about whether there should be joint liability for debts incurred by its member states. Germany has traditionally been a strong opponent of pooled liability, and has been supported by the “Frugal Four”: Austria, Denmark, the Netherlands and Sweden. But in July, the EU — as a result of an initiative of Emmanuel Macron and

Angela Merkel — agreed that the EU Commission could borrow up to €750 billion in the financial markets for a recovery fund to mitigate the effects of the Covid-19 crisis.

This money will be distributed to member states via grants and loans, and the debt will be serviced via the states’ future contributions to the EU budget. This was a historic decision made by the EU and seen by some as its “Hamilton(ian) moment”. As the Financial Times wrote, “For the first time, the EU will be able to run a federal deficit to respond to an economic shock”. On the other hand, this step is a long way from a true Us-style fiscal union. The debts incurred by individual EU members — as opposed to those of the EU Commission — remain their own responsibility. So, it’s a mini-hamiltonian moment at most.

In Hamilton, James Madison, an opponent of Hamilton’s debt strategy, admits with a cute play on words that “he doesn’t get enough credit for all the credit he gave us”. Some might question that in the light of the various financial crashes since then. And whether Macron and Merkel will get credit for their initiative — or a hit musical named after them — remains to be seen.