Book Description

Most EU Member States are equipped with a set of powerful instruments to mitigate the effect of economic shocks on employment and income. With the inception of the Economic and Monetary Union (EMU), countries have lost control over their monetary policy, which instead is now managed centrally at the EMU-level. Fiscal policy, which comprises important automatic stabilisers such as a country’s unemployment insurance scheme, remained a national competence. EMU does not have such a stabilisation mechanism. In the past, EMU’s dual institutional architecture has been strongly criticised and many have called for reform, especially after the financial crisis starting in 2008 and the subsequent European debt crisis. This weakness was also underlined more recently, in the Five Presidents’ Report “Completing Europe’s Economic and Monetary Union” published in 2015, which proposed to introduce in the longer term a fiscal stabilisation function for EMU. Such automatic stabilisation at the euro area level should improve the cushioning of large macroeconomic shocks and thereby make EMU overall more resilient, provided a significant degree of economic and financial integration is achieved, together with further pooling of decision-making on national budgets and democratic accountability. The exact design of such euro area stabilisers requires more in-depth work on the legal, economic and political preconditions. A European unemployment benefits scheme (EUBS) has long been discussed as one possible response to stabilisation needs, among other potential stabilisation mechanisms. In 2014, the European Commission, following a request from the European Parliament, commissioned an investigation into the feasibility and added value of a European Unemployment Benefit Scheme as a fiscal stabilisation mechanism for the Eurozone (for more details on the project, see Annex 1). This study was conducted by a consortium led by the Centre for European Policy Studies (CEPS) and examined 18 EUBS variants (on which more details are provided in Annex 2). It does not represent the Commission’s position. A comparative assessment of the EUBS with other stabilisers, however, was beyond the scope of this study.