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A European Unemployment Benefit Scheme How to Provide for More Stability in the Euro Zone

  • Erscheinungsdatum: 01.03.2014
  • Verlag: Verlag Bertelsmann Stiftung
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A European Unemployment Benefit Scheme

The recent euro crisis and the dramatic increase of unemployment in some euro countries have triggered a renewed interest in a fiscal capacity for the European Union to stabilize the economy of its member states. One of the proposed instruments is a common European unemployment insurance. In this book Sebastian Dullien from the HTW Berlin provides and evaluates a blueprint for such a scheme. Building on lessons from the unemployment insurance in the United States of America, he outlines how a European unemployment benefit scheme could be constructed to provide significant stabilization to national business cycles, yet without strongly extending social protection in Europe. Macroeconomic stabilization effects and payment flows between countries are simulated and options, potential pitfalls and existing concerns discussed.


    Format: ePUB
    Kopierschutz: none
    Seitenzahl: 144
    Erscheinungsdatum: 01.03.2014
    Sprache: Englisch
    ISBN: 9783867936019
    Verlag: Verlag Bertelsmann Stiftung
    Größe: 1833 kBytes
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A European Unemployment Benefit Scheme


According to a Chinese proverb, a crisis brings opportunity and change. How true this is has been vividly demonstrated in Europe since the outbreak of the euro crisis in 2010. One can easily argue that the recent crisis has brought more change to the European integration project than would have been imaginable over several decades of further integration attempts by national policymakers in calmer times.

European institutions have transformed with breathtaking speed. Prior to the euro crisis, the coordination of national economic and fiscal policies was almost non-existent. The Stability and Growth Pact was designed only to limit the largest excesses in public borrowing, and even for this purpose, it was widely ignored. Macroeconomic policy guidelines, designed to look beyond fiscal imbalances at potential macroeconomic problems, were little more than a discussion exercise. At the time, the European treaties clearly stated that a country with fiscal problems must not be bailed out by its partners, and this was widely interpreted as also excluding emergency loans. While not legally codified, the European Central Bank (ECB) was not expected to buy government bonds and certainly not only those of selected countries.
1.1 The new European economic governance structure

At the time of writing, European policymakers have agreed on several rescue mechanisms for illiquid national governments, starting from the first ad hoc and temporary European Financial Stability Facility (EFSF) to the European Stability Mechanism (ESM). The ESM actually has been introduced into the Treaty on the Functioning of the European Union (TEFU), to bridge the gap between the no-bail-out clause and real-world emergency funds.

Known under the terms "six pack," "two pack" and "fiscal compact," a number of new rules on deficits and debt reduction as well as the coordination, reporting and surveillance of budget plans and budget implementation to and by the European Commission has tied the hands of national parliaments and governments in budgetary matters much more thoroughly.

With the decision in the summer of 2012 to form a "banking union," with the ECB in a Europe-wide supervisory role and a common resolution regime, national governments will surrender a significant part of their remaining control over national financial institutions to the European Union. However, there continued to be bickering over specific details even at the time of writing, and it is far from clear whether integration in this area will be as encompassing in the end as originally promised.

Even more sovereignty has been signed away by crisis countries. Rescue packages assembled by European partners and the newly installed emergency funds of the EFSF and ESM come paired with harsh conditions, imposed by the so-called troika, a joint operation of the European Commission, the International Monetary Fund (IMF) and the European Central Bank. While one can argue that handing over sovereignty to the IMF has been common practice in financial crises over past decades, the imposition of harsh conditionality involving the European Commission and the ECB is clearly new.

Finally, the ECB has taken a much more active role in its monetary policymaking and has assumed new powers. In the past, the ECB was seen as a passive institution, setting interest rates and interacting with private financial institutions with the single goal of influencing a single macroeconomic price, the short-term interest rate. At the latest, with the announcement of the program of Outright Monetary Transactions (OMT), the ECB has assumed the ability to influence relative prices between government bonds of different euro-zone countries.


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