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German finance minister pushes for EU-wide unemployment scheme

Olaf Scholz, Germany's finance minister, proposed the scheme - Bloomberg
Olaf Scholz, Germany's finance minister, proposed the scheme - Bloomberg

Germany wants to set up a new European Union fund to help pay unemployment benefits across the bloc, according to proposals leaked to the German press on Wednesday.

The new fund, paid into by all EU members, would lend money to member states suffering from high unemployment to help them pay benefits to their citizens. Member states would have to pay back the loans after five years.

The plans, which emerged in a government working paper leaked to Handelsblatt newspaper, are the first details to emerge of a scheme proposed by Olaf Scholz, the German finance minister.

Mr Scholz first proposed an unemployment insurance scheme as part of Eurozone reforms over the summer and is set to discuss his proposals with EU finance ministers in December.

They are likely to attract countries such as Greece which have suffered high unemployment rates in recent years and blame Germany for imposing harsh conditions on a bailout during the Euro crisis.

But their chances of making it into European law may be limited. Mr Scholz is already facing considerable opposition within the German government from his coalition partner, Angela Merkel’s Christian Democrats (CDU).

What Mr Scholz is proposing is a reinsurance fund to bolster existing national unemployment schemes rather than replace them.

The intention, according to the working paper, is to prevent member states from spiralling into debt as they try to cope with high unemployment levels, and to “strengthen solidarity between member states”.

But there is widespread opposition in Germany to anything that could be considered a “transfer union”, in which Germans would be forced to pay for what they see as the failure of weaker economies.

France’s Emmanuel Macron is trying to force through sweeping Eurozone reform and Mr Scholz has pushed for the unemployment scheme to be included.

The German finance minister is desperate for a policy success he can hold up as evidence his centre-Left Social Democratic Party (SPD) is able to puruse its agenda as Mrs Merkel’s junior coalition partner.

The SPD suffered its worst ever regional election results last weekend and has been plummetting in the national polls, and there are growing calls within the party to leave the coalition.

But so far the plans have been blocked by Mrs Merkel’s party, which controls the economy ministry and is wary of anything voters will see as Germany paying for other EU states.