An academic piece on the communitarisation of social security.

The establishment of a European unemployment insurance (or reinsurance) scheme as a tool for supposed macroeconomic ‘stabilisation’ of the euro area has already been extensively discussed.

The idea is that in the event of external shocks, the countries most affected will receive financial assistance. Most of the exact details are still up in the air, particularly the question of whether financial transfers should specifically benefit those who become unemployed or should funds go towards strengthening investments.

Since the macroeconomic stabilisation function of social systems is not just limited to unemployment insurance, it is only a matter of time until the debate spreads to other branches of social security. Independent author Filipe Duarte has made a contribution to the debate via the Berlin-based publishing platform ‘Social Europe’. He believes that a European insurance mechanism should be established for insurance-based cash benefits, making specific reference to unemployment benefits and old-age pensions.

This would not only help current and former beneficiaries of these programmes, such as Portugal, but also dispel doubts about the sustainability of public finances and avoid structural reforms. More importantly, it is about using a system of redistribution within the framework of the European Pillar of Social Rights. This would result in less pressure on social security systems due to cyclical risks of fiscal consolidation, falling tax revenues, higher levels of unemployment and an ageing population. Such mechanisms would be financed through taxation or Member State contributions based on their GDP.

However, an even better solution would be a European pay-as-you-go pension scheme, similar to existing national schemes. This type of system could come under the umbrella of the new European Labour Authority. This is preferable to the concept of a privately-funded pan-European pension product as an expression of social (Union) citizenship.

 

Duarte’s recommendations are currently utopian and not fully fleshed out. Nonetheless, they make it evident that the proposed European unemployment insurance/reinsurance scheme is just one of several additional steps that ultimately would lead to the communitarisation of Member States’ social security systems, albeit not formally but as a result of financial transfers.