EurActiv.com

EU news and policy debates across languages

05/12/2016

European unemployment insurance gains ground

Social Europe & Jobs

European unemployment insurance gains ground

Unemployment insurance office in Spain. [Flickr]

The idea of an EU unemployment insurance has resurfaced during the European elections. Experts argue that it could reduce the effects of the economic crisis and bolster Union social policies. EurActiv France reports.

Although European elections candidates of all political orienttions have called for a more social Europe, their proposals are rarely concrete. During this election season, some ideas have resurfaced, such as a European employment insurance, which is supported by think thanks like the German Glienicker and the French Eiffel.

The economist, Florian Mayneris, wrote on the issue for a piece published by the Terra Nova think tank, and argues that a common EU unemployment insurance scheme would reinforce the Eurozone’s economic efficiency and encourage a political revival in Europe.

Need for stabilisation

The starting point of Mayneris’s piece is economic in nature: the last financial crisis exposed a need for stabilisation at the heart of the Eurozone. Financial interdependence created by a single currency also has its weaknesses, notably a problem of asymmetry.

Indeed, it became difficult to intervene in just one part of the Eurozone’s economy. General macroeconomic issues also became more noticeable.

“Despite historically low interest rates established by the ECB, pessimism, and (the) degenerating banking situation prevents investment and economic growth to enhance, and in such a situation, the only mean to advance is through a budgetary policy”, he argues.

A central problem is that rules of the Stability Pact prevent all economic stimulus programmes.

The solution: a common economic stimulus

In order to put in place budgetary mechanisms that are compatible with single currency regulations, a European budgetary capacity must be established. Its dominant principle would be fairness: according to the author, countries must see how much they have contributed in the long term. As opposed to European structural funds, which are designed to favour less well-off areas, the tools put in place to support the European budget aim to mitigate the crisis, not to change to distribution of wealth. According to the economists, the necessary budget for such a project represents somewhere between 0.2% and 2% GDP of participating countries.

“GDP insurance”

The European budget could compensate yearly divergences between forecasted GDP and actual GDP in cases of particularly bad results. Extreme GDP variations could therefore be checked, and their negative consequences could be lessened. This would reduce business failures, redundancies and unemployment.

A more efficient common unemployment insurance

The idea of directly confronting the problem instead of its macroeconomic origins has emerged as the best solution.

According to a study by the Centre for European Policy Studies, “the creation of a minimum common employment insurance regime for the Eurozone could act as an automatic stabiliser”. Had it been put in place before the crisis, it could have prevented GDP losses of €15 billion. Unemployment is also a reason for economic slowdowns, as it reduces revenues and affects consumption levels, and therefore economic activity.

According to a study published in 2013, a common employment insurance could have prevented a quarter of GDP losses in Spain.

The details of an unemployment insurance have provoked debate. However, the general consensus is that it should be initialised at a European level, and completed at a national level.

Basic income in question

The idea of a common employment insurance is not so different to that of a European minimum income, an idea supported by a 2013 European citizens’ initiative which collected almost 300 000 signatures. The philosopher, Philippe van Parijs, alluded to the idea of “eurodividends” which would bring Europe out of the crisis and be financed by value-added tax.

“It must be a simple system, not a super welfare state. The sum must be adjusted to approximately €200, depending on purchasing power parities” he stated.

>> Read: Interview with Van Parijs

“The idea of a European unemployment insurance is definitely a good idea,” claimed Stanilas Jourdan, activist from a French association for basic income.

In France, political parties are split on the idea of basic income. Some French Parties, such as Nouvelle Donne (‘change’) and the Pirate Party, have introduced it to their European political programmes. In the more established French parties, only the Greens, the European Movement and certain members of Union of Democrats and Independents (UDI) support this initiative. The idea of basic income is still being debated in the French Socialist Party and the far-left, but much less in the UMP.

 

Background

All European Election candidates have called for a more social Europe, whilst Europe is sometimes seen as a source of social dumping, especially in relation to posted workers. The current establishment of a youth guarantee is considered one of the last legislation’s key advances on Europe’s social side. To go further still, the issue of a common European insurance is gradually gaining ground, as is the idea of a European basic income. 

Further Reading

Think Tank Terra Nova

European Parliament

Bertelsmann Stiftung