NGEU: A New Marshall Plan for Europe and a Template for Global Finance

Abstract

In April 2020, President of the European Commission Ursula von der Leyen called for a “Marshall Plan for Europe.”1 Almost a year after her appeal, the European Union implemented the recovery and resilience program Next Generation EU (NGEU). NGEU, we show, shares several features with the Marshall Plan, including size, redistributive allocation, conditional grantmaking, and the pursuit of a distinct political agenda. But the new Marshall Plan also differs from the old. NGEU is financed through common EU debt rather than an infusion of funds from the United States. Marshall aid was disbursed almost entirely as grants, while NGEU funds consist of a mix of grants and loans. Further, NGEU is unprecedented in distributing grants in exchange for post-austerity and climate-friendly reforms and investments, rather than budget cuts. This alternative model, we argue, can serve as a template for international financial institutions such as the International Monetary Fund (IMF) and the World Bank.