"An Introduction to the European Union Unemployment Reinsurance System as Automatic Economic Stabilizer: Economic Policy and Management Recommendations"

Abstract

A few months in, it is still hard to grasp the scale and scope of COVID-19’s global impact. A third of the world population is under some sort of “lockdown.” All the while, a second crisis, in the form of an economic recession, is underway (Schwab and Vanham, 2020). During the recession, European Union (EU) members did not use fiscal policies to ease the recession, while the reinsurance system in the case of unemployment would achieve exactly this, as it acts as an automatic stabilizer. The response to unemployment in the great recession and subsequent events related to the European debt crisis has been very heterogeneous across Europe and in population groups. This study examines stabilizing power and efficiency of presented unemployment reinsurance systems (URS EU). We find that the statutory contribution rate for unemployment insurance is sufficiently high only in a small part of the EU. Only certain insurance systems are sustainable. This paper demonstrates that the need for an automatic stabilizer, such as the reinsurance in the case of unemployment, has shown even more necessary. Through this paper and these recommendations, this study hopes to encourage institutional reforms, especially in the euro area, as the monetary union reduces macroeconomic stabilization policies at national level. We believe that the URS EU would represent a possible solution to the problems outlined in the paper.