Slow and steady wins the race: the European Commission has been relentlessly pursuing a European Unemployment Benefit scheme for years.

Dr. Sch-W – 06/2018

In principle, there are two models to choose from: a direct unemployment insurance scheme which takes over a part of unemployment benefits, or a type of reinsurance which helps maintain the unemployment benefits system of a Member State in the event of a major crisis. It quickly becomes apparent that the latter is politically the more promising option. It is now the subject of a proposal for a Regulation from the European Commission, released on 31 May 2018 (COM(2018) 387 final), under the somewhat clunky title of ‘establishment of a European Investment Stabilisation Function’, abbreviated as EISF. The EUR 30 billion allocated to the fund would benefit both countries in the euro area and those wishing to join the euro. 

The EISF may not be confused with the „European Fund for Strategic Investments“ (EFSI). 

Also the European Social Fund (ESF) exists for promoting employment and social inclusion. Every year, he helps some 10 Million people to get a job (or a better job) and to integrate disadvantaged people into society. The Budget 2014-2020 amounts EUR 88,4 billion. 

EISF only in case of ‘large asymmetric shock’

The fund will be activated as soon as a Member State experiences a ‘large asymmetric shock’. Exactly this is the case is described in the proposal as follows: ‘The criteria for activating the support … are based on a double unemployment trigger. [This approach] is chosen because strong increases in national unemployment rates are a relevant indicator of the impact of a large asymmetric shock …’  


The specific criteria are described in Article 4 of the proposal: the quarterly unemployment rate a) exceeded the average unemployment rate of the last 15 years, and b) exceeded the unemployment rate for the same month in the previous year by more than one percentage point. In the event that this dual trigger occurs, the EU will step in with, what is effectively, an interest-free loan which should be repaid when possible, depending on the conditions negotiated with the Commission.  

What next?

Recital 33 of the proposal looks forward and states that EISF should only be considered as a ‘first step in the development over time of a fully-fledged insurance mechanism to cater for macro-economic stabilisation’. 


Germany’s Federal Minister of Finance Olaf Scholz has already signalled his support for the proposal. However, contrary to what much of the press has been saying, the proposal does not supplement national unemployment insurance schemes. The additional EISF funds cannot be used freely, rather they must be used to put in place measures that stimulate the labour market.