Of the many good ideas currently being discussed in Europe, the most interesting proposal is to let national unemployment schemes manage the regular business cycle, and to provide European financing to extend the duration of unemployment benefits during a crisis period.

The construction of the euro area left aside the question of a fiscal union, but the crisis re-opened the debate. Of the three classical functions of fiscal policy – provision of public goods, redistribution and stabilisation – only the last provides a clear justification for fiscal policy...