László Andor*: Dealing with divergence in the EMU

An article from the ATTAC Hungary webpage

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The case for monetary reform and unemployment insurance

Introduction

The rejection of continued EU membership by the UK electorate at the June 23 referendum pushed Great Britain into a new type of political and economic crisis. However, the resulting uncertainty also creates a new challenge to the remaining 27 members of the European Union, which is now set to lose the larger of the two member states that have opted out of the single currency.

People in Great Britain, and especially in non-metropolitan England and Wales voted for leaving because they lost confidence in the EU being a win-win game. Similar feelings about the lack of fairness are even more widespread within the Eurozone, and especially in the more peripheral countries which went through a long recession and still struggle with high unemployment and rising poverty.

Following the UK referendum, various officials, including the French and German foreign ministers, called for reforming the EMU and making it more resilient and sustainable, including through the creation of a fiscal capacity for the Eurozone. This paper argues that creating a counter-cyclical fiscal capacity indeed is a crucial and urgent step to halt disintegration, and EMU unemployment insurance can be a pivotal instrument to strengthen economic as well as social cohesion in Europe.

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