Assessing next generation EU

The unprecedented fiscal package adopted by the European Council in the summer of 2020—dubbed Next Generation EU—was vital for the recovery of the euro area from the pandemic shock. However, our computations with a stylized macroeconomic model illustrate that an alternative approach, with ex ante risk sharing through the creation of a Eurobond and permanent fiscal capacity at the Centre, would have been at least as powerful, yet it would be more sustainable, automatic and timely.