Abstract
In this paper, we examine possibilities and limitations of a potential European Unemployment Insurance in alleviating impact of both symmetric and asymmetric shocks on national budgets and workers’ welfare. We present various policy options and their assessment. In the paper, we first discuss the framework in which an automatic stabiliser would operate and present different options for such a stabiliser. We then focus on the idea of a European unemployment insurance, and review a range of proposals that have been made in this domain. We conclude by listing the challenges and strengths of a common insurance scheme. In terms of challenges, we consider the size, funding and stabilisation impact of the scheme, the countries involved, political feasibility and harmonisation and the issue of moral hazard and permanent transfers. We also explain how these challenges can be overcome.
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