Automatic Stabilizers for the Euro Area and the European Social Model

The debate on automatic stabilizers for the Euro area is definitely on the agenda. Analytically, the case for a stabilisation capacity is compelling; politically it is an uphill battle. We therefore need a careful exploration of different scenarios and a thorough understanding of how they fit into the broader challenge of developing a European social union. We discuss two options: a genuine European Unemployment Insurance and a model of ‘Reinsurance'. Both require social convergence, a challenge that is also identified by the recent Commission initiative to launch a ‘European Pillar of Social Rights'. However, the governance method and the flexibility with which convergence is pursued in these models differ. With regard to the problem of moral hazard, they also offer different perspectives. Politically, the reinsurance option may better reflect the idea that a European social union should be a union of welfare states, rather than a European welfare state