Microcredit and EU Cohesion Policy

After nearly four years of the most serious financial and economic crisis Europe has seen in 80 years, most EU Member States are facing high budget deficits, growing public debts, while most entrepreneurs are facing difficulties in accessing finance due to the credit crunch. Meanwhile there are more than 23 million unemployed in the EU and unemployment rates have reached an average of 10% and more than 20% in Greece and Spain1. Microcredit can provide an answer to the employment challenges caused by the current economic crisis and to reach the 75% employment target rate set in the Europe 2020 strategy.

A budget for Europe's Monetary Union. Bruegel Policy Contribution 2012/22, December 2012

In a monetary union, national fiscal deficits are of limited help to counteract deep recessions; union-wide support is needed. A common euro-area budget (1) should provide a temporary but significant transfer of resources in case of large regional shocks, (2) would be an instrument to counteract severe recessions in the area as a whole, and (3) would ensure financial stability. The four main options for stabilisation of regional shocks to the euro area are: unemployment insurance, payments related to deviations of output from potential, the narrowing of large spreads, and discretionary spending. The common resource would need to be well-designed to be distributionally neutral, avoid free-riding behaviour and foster structural change while be of sufficient size to have an impact. Linking budget support to large deviations of output from potential appears to be the best option. A borrowing capacity equipped with a structural balanced budget rule could address area-wide shocks. It could serve as the fiscal backstop to the bank resolution authority. Resources amounting to 2 percent of euro-area GDP would be needed for stabilisation policy and financial stability.