What Will Common EU Unemployment Benefits Mean?

What Will Common EU Unemployment Benefits Mean?

While the idea of a central budget authority has been widely discussed, the common unemployment benefit has been largely neglected by the press.

The IMF announced last Wednesday that the EU should take another step towards becoming more integrated. There is a great theoretical debate around whether it would be possible to make the EU more of a supranational state. The debate revolves around issues of identity, nationalism and democratic deficits. The IMF’s suggestion, however, contributes to a more tangible debate that looks at the economic problems of establishing a central budget authority and a common unemployment benefit.

Introducing a common unemployment benefit would alter public-private relations across countries. In some European countries, the relationship between the state and unions has been an issue of great debate, at times constituting the key issue in elections.

A common unemployment benefit would require seeking agreements with unions at the national level or, more likely, disregarding them altogether. Bearing in mind the current economic climate, this could lead to social unrest. Some might say that this is a dated point of view because the unions no longer hold as much power as they once did. However, it is only their symbolic presence in the public sphere, which has become diluted since they were institutionalised into formal social partnerships. They are still very relevant. In fact, Germany’s swift recovery was partly due to a tightly knit relationship between the social partners.

Moreover, the unions could always recover their status as symbolic platforms for people to express their discontent, as they have already done in some areas of southern Europe. In a report published in April, the International Trade Union Confederation claimed that the IMF was trying to undermine collective bargaining and the role of the unions. Whether the IMF is indeed actively trying to do so is debatable. What is clear is that the role of unions within the EU is not as strong as it is on a national level. It is equally fair to say that social legislation in Europe has always come second to the economy, and even though the academic discourse has referred to a European social model, the reality is that only soft policies have been implemented by the EU. So far the EU has acted as a space for countries to share reports about their respective successful policies with each other and not as an enforcer of policy.

If the national unions were to be addressed, this would no doubt delay and complicate the process. Nonetheless, a way of negotiating between unions might be to divide them into rough welfare state groups and deal with the general interests of each group separately. Within the EU, there are three models of welfare: the continental (epitomised by Germany), the liberal model (exemplified by the UK) and the southern European model (embodied by Spain)—which is often said to be incomplete. Yet each model would require different strategies and, on top of that, each country has different economic necessities.

Harvard economist Peter Hall argues the current problems of the EU stem largely from the southern economies’ having been pushed towards a demand economy when they entered the EU, as the northern economies focused their efforts on a supply-side economy. Unable to alter its currency when—as a demand economy—it needed to, the south was ill-suited to handle the crisis. If this argument has any truth to it, perhaps trying to homogenise policies for every country is not the right way to go. Much more thought needs to go into how exactly the EU is going to work in the long-term.

It remains very unclear how this unified unemployment benefit would take shape. At the very least, greater financial integration would be needed to finance the project. The central budget authority would be the first step towards this greater integration. However, it remains to be seen whether it is possible to simply amalgamate diverse economic and social interests through such broad strokes.

Categories: Economics, Europe

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