The idea of a European Unemployment Insurance Scheme (EUIS) has become popular among politicians and scholars, but discussions are still marked by deep divergences regarding the extent, scope, purpose and structure of any such system.

This paper strives to identify how an EUIS could benefit the euro area and which characteristics it should have. It begins by examining the US Unemployment Compensation system, providing considerable insight on the stabilising effects that could be expected from an EUIS, as well as illustrating how a federal-level system can be conciliated with a variety of state social regulations. It concludes by proposing the creation of an EUIS fully managed at the European level, able to cover a significant part of short-term unemployment benefits. A European Fund financed through a common tax rate and hosting European and national accounts would help address the potential for moral hazard. Finally, this construction should be complemented by an institutional overhaul of the EU, giving it exclusive competence in dealing with unemployment resulting from serious economic downturns. The European Commission’s legitimacy should be improved in order to allow it to carry out the harmonisation of a part of national social policies.