The Recovery and Resilience Facility (RRF), introduced as EU’s main macro-financial response to the Covid-19 pandemic, has been hailed as Europe’s Hamiltonian moment and raised great expectations for future fiscal integration. Despite its promised radicality, the actual status of the RRF in the Eurozone architecture remains ambiguous. On the one hand, it is integrated into the EU budget and therefore can be understood as the biggest joint debt-financed program on the EU ‘Treasury’ balance sheet. On the other hand, the RRF’s status as a temporary extra-budgetary fund allows it to be read as yet another off-balance-sheet fiscal agency (OBFA) that allows policymakers to eschew fundamental questions about the EU’s future as a common fiscal space. Building on the emerging critical macro-finance literature, we scrutinise the radicality of the RRF and investigate how it transforms the Eurozone’s monetary architecture. First, we clarify the position of the RRF as an ‘institution’ within the Eurozone’s web of interlocking balance sheets. Second, we discuss the conceptualisation of RRF debt as ‘instruments’, looking at similarities and differences with sovereign bonds and their implications for the emergent EU Primary Dealer System. Finally, we look at the intersection with the central banking segment, discussing their potential to function as European safe asset and implications for TARGET2 balances. We argue that given the EU’s propensity for governing through OBFAs, the RRF can be read as auguring a form of ‘quiet radicality’ in the EU’s evolution.
Friederike Reimer, Global Climate Forum
Andrei Guter-Sandu, University of Bath
Armin Haas, Global Climate Forum