Report of October 31, 2012
Abstract:
The European Monetary Union brought with it a standardization of monetary policy and a system of fixed exchange rates. This was accompanied by disincentive effects which, in turn, resulted in serious economic distortions. Proposals are currently being put forward as to how financial policy equalization mechanisms could be used to better synchronize the economic development of the Member States in the euro area in future.
Comprehensive fiscal equalization systems are not workable in practice and are associated with a risk of resource wastage. Furthermore, these systems can also have undesirable negative effects. The alternative to a fiscal equalization system, some form of European unemployment insurance, would be superfluous as national benefits already act as automatic stabilizers. Such a move would ultimately only lead to a transfer of competences to the supranational level. This would be accompanied by a harmonization of national unemployment benefit systems and the deferral of control functions to a neutral European authority—and thus, more red tape. Moreover, the introduction of common unemployment insurance would result in a significant redistribution of resources, at least during the initial phase, which could raise questions about distribution in the donor countries.
The complete publication in German by Karl Brenke in:
DIW Wochenbericht 44/2012 (PDF, 105.54 KB)