An Unemployment Insurance Scheme for the Euro Area

The Great Recession and the resulting European debt crisis revived a debate about deeper fiscal integration in the Eurozone. We discuss different alternatives how an unemployment insurance system for the euro area could be designed and run counterfactual simulations based on micro data to analyze the effectiveness of a basic scheme and a benefit extension program to act as an insurance device in the presence of asymmetric macroeconomic shocks. We find that a basic insurance scheme could be implemented with a relatively small annual budget of roughly 61 billion euros over the period 2008-2013. Net benefits would have stabilized incomes in particular in Cyprus, Estonia, Greece, Ireland, Portugal and Spain whereas Austria, Germany and the Netherlands would have been the largest net contributors.