It has been called Europe’s “Hamiltonian moment.” It’s true that for the first time the EU has seen a common issuance of debt.

As the Wall Street Journal summarizes:

On Tuesday European Union leaders agreed to a recovery plan funded by the bloc’s first major issuance of common debt, and some are calling it a historic moment for the Continent’s political and fiscal integration. This is a significant development, but don’t hold your breath for a United States of Europe.

The EU announced €1.8 trillion in spending to address the pandemic-induced economic contraction, with more than €1 trillion going to the bloc’s seven-year budget. The European Commission also will borrow on capital markets for a €750 billion recovery package. Some €390 billion of that will come as grants, with the rest in loans. Economic basket cases like Italy and Spain stand to be the biggest recipients.

In Italy, the agreement was preceded by a heated diatribe against the so-called “frugal” countries, in particular the Netherlands, which demanded more “conditionality:” that is, the government of the Netherlands wanted to make sure countries like Italy or Spain were not wasting the money on more government spending of the most blatantly unproductive kind. In a sense, this was paradoxical: if, in essence, the agreement enables the EU to provide loans to a number of countries—including Italy—at a rate of interest lower than what these countries could get on the market, it is precisely because the “frugal” countries kept their books in order and the “spendthrift” ones can now take advantage of these circumstances. But it also tells you that it is very likely that this new “European aid” will be wasted as our Dutch and Swedish friends fear. There is such widespread rhetoric against “austerity” that increased government spending goes with a sense of entitlement. Believe it or not, the main “argument” of Italian politicians who are opposing this deal is that the funds are (partly) provided as loans and that “we’ll need to repay them,” as if repaying a debt was an outrageous innovation foisted upon the unsuspecting Italian people.

The true novelty in the agreement is that conditionality is very limited and this move triggers the evolution of Europe towards a transfer union. These transfers will be dressed up as special anti-COVID19 aid, aiming at fostering a more innovative, greener, economy and the other shibboleths of our time. Yet the staggering thing is that nobody, within or outside of Italy, seems worried about the effect such spending will have on economic growth. Typically this sort of government intervention pretends to be “fostering growth.” Now, in the dominant political rhetoric, even mentioning growth is a taboo.

In short, we see a profound institutional transformation of the nature of the Union, with the main aim of kicking the can down the road. It is profoundly paradoxical that Italians are so happy about that. Italians have evidence in the South of their country that showering a territory with aid won’t do much for economic development. And yet they seem determined to become, for the whole of Europe, what the Mezzogiorno is for Italy.