The next generation EU: An analysis of the dimensions of conflict behind the deal

Abstract

This article presents an analysis of why it was possible to reach an agreement on the Next Generation EU (NGEU), the EU's fiscal and policy response to the COVID-19 pandemic, since the deal breaks with the norms of no common debt issuance and will result in significant redistribution across Member States through grants. Based on an in-depth case study analysis, we identify three main dimensions of conflict underlying the political negotiations: the fiscal dimension, the rule-of-law dimension and the policy dimension, especially the climate and digitalization agendas. Various coalitions of actors were able to negotiate on these aspects, keeping a balance between their main priorities, but also making concessions, to enable an agreement. Our analysis reveals that the Franco-German alliance has been revived, enabling the grant instrument in the NGEU to be adopted; a new alliance of small rich northern states named the Frugals' has emerged as a surprisingly strong coalition, insisting on conditionality for accessing the grant; a clear Polish-Hungarian front has appeared to be challenging the EU's commitment to the rule-of-law; and a weakly coordinated Spanish-Italian front was successful in terms of securing grants as an instrument. The article also assesses that despite the agreement on the deal, there will continue to be battles in the NGEU, especially on the fiscal and rule-of-law dimensions. Yet, it could represent a ‘Hamiltonian moment,’ if the NGEU becomes a permanent fiscal instrument, which would advance European integration further.