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European unemployment insurance (also known as a European unemployment benefit scheme - EUBS) is a proposed transfer system for the Eurozone that is intended to provide macroeconomic stabilization. Such a system would drain purchasing power from booming economies, preventing overheating while bolstering economies which experience a recession. [1]
There are two basic variants of the system discussed: a "genuine" European unemployment insurance and an "equivalent" European unemployment insurance. In a "genuine" system, employees in the Eurozone would be directly insured against the unemployment risk through a European insurance scheme which would pay a wage replacement in the case of unemployment. In an "equivalent" system, a European fund would pay out funds to either the national budget or national unemployment insurance in case unemployment increases steeply in a member state. [2]
Thus, an "equivalent" European unemployment insurance can also be seen as a reinsurance for national unemployment systems. [3]
The idea of a European unemployment insurance goes back to the 1970s, when the possibility of introducing a common currency for the European Community was first mentioned in the Marjolin Report. The authors of the Marjolin Report state: [4] "...the means of redressing imbalances between Community countries should be considerably reinforced…. The introduction of a community system of unemployment benefit would constitute an effective approach."
Reference to the debate was made in the MacDougall Report and in a number of works on possible transfer systems commissioned by the European Commission in the early 1990s, when the institutions for managing the common currency were designed. [5]
The modern debate was started with proposals by the German economist Sebastian Dullien who in 2007 and 2008 published several papers on a possible European unemployment insurance [6] and later worked on the concept more in detail for the European Commission. [7] [8] The idea gained new prominence after the onset of the European debt crisis, when the lack of a fiscal capacity for the euro area became evident, and the idea was mentioned in the four presidents' report of 2012. [9]
In 2014, a large consortium under the leadership of the Centre for European Policy Studies think tank in Brussels was asked by the European Commission to write an extensive feasibility study on a potential unemployment scheme which detailed the different options for such a proposal, the technical challenges and the macroeconomic impact. The study was presented in early 2017. [10]
The first macroeconomic simulation of a European unemployment insurance system using a dynamic general equilibrium model of European labour markets was presented in a paper by Árpád Ábrahám, João Brogueira de Sousa, Ramon Marimon and Lukas Mayr, at the time economists in the Department of Economics of the European University Institute. [11]
Former European Commissioner for Employment, Social Affairs and Inclusion László Andor repeatedly called for the introduction of a European unemployment insurance. [12]
In June 2018, the German finance minister Olaf Scholz proposed European unemployment insurance as an element of Eurozone governance reform. [13]
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