Automatic stabilizers for the Euro area: What is on the table?
The immediate pressure to reform the euro area has diminished, but questions on the euro area’s medium term structure of the euro area. In her policy paper Nathalie Spath considers the possibility to equip the euro area with a mechanism for asymmetric shock absorption to respond to the challenge of automatic stabilization. She compares three of the most influential proposals for an automatic stabilization mechanism: a cyclical shock insurance, a European unemployment insurance and a reinsurance. The analysis reveals the underlying assumptions of each proposal, identifies main requirements and compares net payments as well as stabilization properties.
Nathalie Spath is policy adviser at KfW DEG, she formally worked for the Jacques Delors Centre.