The Recovery Fund: An institutional step to preserve economic integration

Abstract

In this paper I argue that well designed European institutions are needed to eliminate market imperfections that prevent risk sharing within the European Union. In particular, building a stock of European public goods is key to stabilize the economy when markets are incomplete and to facilitate the functioning of private risk sharing mechanisms. The funding of institutions and public goods make the case for a budget and a common public policy.

Keywords:

COVID-19, externalities, public institutions, economic integration, mutualisation of risks, Recovery Fund