| Abstract : | The purpose of this paper is to present the discourse on the automatic stabilizer for the Euro Area, the European Unemployment Benefits Scheme. Chapter 1 introduces the theories of integration that envisaged the European Monetary Union and the incremental approach on integration that followed ever since. The theory of Optimal Currency Area as the blueprint for the EMU and the institutional building blocks of the present EMU are presented, alongside the trajectory of the debate for the EMU institutional framework in the literature. The stabilisation process in the EMU was devoid of an instrument of fiscal capacity and the aftermath of the crisis rekindled the debate for an automatic stabilizer. Based upon the lessons of the crisis and the evident inconsistencies that increased the cost of the monetary union, the EUBS theoretical project was brought into the highest level of policy-making in the five Presidents’ Report as a call for an automatic stabilizer for the Euro Area. Chapter 2 introduces the project of the EUBS and its designated utility features. The trajectory of the debate on a fiscal stabilizer traced out the design of the EUBS and the main design features as described in the literature. The common ground among the studies in the literature is analyzed in terms of stabilisation efficiency and cost, in relation to the moral hazard problem. It is further explored the danger of institutional moral hazard that arises in all multi-tiered systems, to be mitigated before establishing an EUBS framework. Chapter 2 concludes with the theoretical presentation of EUBS variants models by Miroslav Beblavý and Karolien Lenaerts in the study of Feasibility and Added value of an European Unemployment Benefits Scheme 2017, that encompasses the work of all the studies in the literature up to date. Chapter 3 presents the results of the simulations and the conclusions drawn from the performance of the respective models. The simulations include backward-looking models that estimate the stabilisation capacity and crisis mitigation if an EUBS had been established in the period 1995-2013. Moreover, forward-looking models simulate the impact on stabilisation of an EUBS in the event of four hypothetical scenarios of shocks. The results of the simulations envision the limitations and the capability of a European Unemployment Benefit Scheme andits added value on the European Monetary Union framework, the European citizens and the European Project in general.
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