The State of the European Union. The European Parliament faces its most important elections yet

THE STATE OF THE EUROPEAN UNION 90 only countries without a statutory minimum wage. This is the case in northern Europe as the collective bargaining system is still intact there. Up to now, minimum wage legislation has al- ways been interpreted, even by the northern trade unions, as state intervention, which un- dermines bargaining autonomy and ultimately yields poorer results. They feared that European legislation would harmonise wage rates down- wards, as there are enormous differences be- tween minimum wages in Europe. A statutory minimum wage automatically adapts to price and wage developments or is set by the legislature or a commission. There are almost always two main motivations for setting a minimum wage. One of the aims of this type of remuneration is to protect employees who have very little negotiating power and power of representation from potential exploitation by an employer. In such cases, the term “wage dump- ing” plays an important role. In addition, a min- imum wage is designed to help the working poor. The idea is that the economically active population can independently support them- selves without having to depend on state ben- efits or grants. Currently, however, only French legislation supports the working poor – a European guideline must be formulated to ad- dress precisely this issue and it must be applied to all countries. Second step – European unemployment (re) insurance One possible remedy would be to turn the euro area into a full-scale fiscal union. However, a number of Member States are adamant that they do not wish to go down that route out of fear that this could result in large-scale perma- nent transfers. Therefore, solidarity by means of large-scale transfers is not a convincing solution for the future of the euro area. Instead, the euro area will require solidarity that is based on a fair system of insurance where no Member State will have to feel unduly disadvantaged in the long run. And politically, by far the most attrac- tive form of “solidarity’ insurance is unemploy- ment insurance since it tackles head-on the worst and most visible consequence of large- scale economic shocks and alleviates the fiscal strain in bad times in the context of the Stability and Growth Pact. However, designing a full-blown and fair sys- tem for euro area unemployment insurance would require a substantial harmonisation of euro area Member States’ labour market regula- tion and welfare systems, which is definitely not on the cards for the time being. Therefore, a slightly less ambitious model that still offers suf- ficient shock absorption capacity should be en- visaged. Designing such a system, which works both politically and economically, is precisely what a German-Spanish working group had in mind when it proposed “a European Unemployment Insurance fit for purpose”: 13 ‘From insurance theory we know that ordinary insurance across a longer period of time can typically be closely modelled as a mix of self-in- surance and reinsurance. For example, in car insurance a significant part of the insurance is self-insurance. In fact, after an accident, the in- surance premium increases, allowing for a sub- stantial share of the losses to be paid back to the insurance company over time. On the other hand, in case of accidents with very high dam- 13  Dullien, S.; Fernández, J.; López, M.; Maass, G.; del Pra- do, D.; von Weizsäcker, J.: Fit for purpose: a German-Span- ish proposal for a robust European Unemployment Insur- ance , Madrid, 2018. Available at: http://fes-madrid.org/ media/2017_FESpublicaciones/FES_Propuestas.pdf