5 These low levels of risk-sharing contrasted with very high levels within individual European countries; for example, in pre-unification Germany, 91% of shocks to per capita state gross product were smoothed, with the bulk (54%) smoothed through the federal tax-transfer and grant system. 6 Risk-sharing among euro area member states seems to have increased after the introduction of the euro.
Available estimates suggest that in 2008–2009, 57% of shocks to state gross product per capita were smoothed. 7 However, in 2010 risk-sharing declined significantly in most EU countries and essentially collapsed in countries under fiscal stress. 8 A significant contribution to private risk sharing would, in my view, require the development of a genuine CMU with a high level of financial integration.