ABSTRACT
Arguments have recently been advanced to provide the Community in EMU with a capacity to assist member states in stabilizing their economy upon the occurrence of negative, country-specific shocks. Traditional automatic stabilizers are a by-product of large tax and transfer systems which cannot be drawn on to this end as they are not likely to be transferred to the Community level. A new instrument needs therefore to be devised. This chapter presents a concrete proposal for two variants of stabilization mechanisms based on year-on-year changes in countries’ unemployment rates relative to the Community average. It also offers a quantitative assessment of how these mechanisms would have performed over the past decade.
