Introduction:

By 2023, the EU has gone through 15 years of almost uninterrupted crises. It started with the North Atlantic financial crisis in 2008, which morphed into its sovereign debt phase with the Euro Area (EA) crisis in 2010. This reached its turning point in 2012 but lingered on until mid-2015 with a renewed escalation related to Greece’s third bailout programme. In that same summer, a refugee crisis erupted, partly due to a large number of Syrians who fled the war that President Assad waged against his own people, partly due to EU-internal disagreement over how to address this recurrent hard policy problem. This unedifying image has almost certainly tipped the Brexit referendum in favour of the Leave vote in June 2016; the much anticipated membership crisis of the EU did not materialise, however. The slow recovery was then rudely interrupted by the Covid-19 pandemic that the EU for once shared with the rest of the world. The Russian invasion of Ukraine has led to another surge of refugees but this is less salient than the cost-of-living crisis, fuelled by pent-up demand and supply chain interruptions from the pandemic as well as the bounty of liquidity with which central banks tried to tide economies over wave after wave of severe disruptions since 2008. So far, so familiar. The EU responded with a whole battery of reforms and new institutions. It is arguably underappreciated what an achievement it is to pull this off in terms of overcoming collective action problems (Rhodes, 2021; Schelkle, 2017). But do these new institutions add up to anything or is it just muddling through, preparing the ground for another crisis (Jones, Kelemen and Meunier, 2016)? This chapter argues that a system of re-insurance has emerged, i.e., insurance that covers the excess loss of severe member state crises, which could sink these primary insurers, here: national welfare states. The system emerged not because it was designed that way but because it is what governments with very different views of inter-state solidarity can agree on. This is not institution building of the second-best, lowest-common denominator variety. It is potentially a genuine functional and political alternative to a fiscal federation, not its weak imitation.

To cite this chapter:

SCHELKLE, Waltraud, When all else fails : European re-insurance of member states, in Annette BONGARDT and Francisco TORRES (eds), The political economy of Europe’s future and identity : integration in crisis mode, Florence : European University Institute, 2023, pp. 234-242   – https://hdl.handle.net/1814/76443