Background The recession has increased job insecurity in the European Union (EU) which may result in higher levels of psychological distress, burnout and anxiety.

Aims To investigate the association of job insecurity and financial difficulties with mental health in 27 member states of the EU and to explore the moderating effect of having financial difficulties on the relationship between job insecurity and mental health.

Methods The sample consisted of employed people from 27 European countries where the Eurobarometer survey (73.2 wave, 2010) was administered by the European Commission. Mental well-being and psychological distress were measured using the Vitality and Mental Health Index (MHI-5) subscales from the Short-Form 36-item health survey (SF-36v2). Linear regression including an interaction term was used to test the underlying factors in this study.

Results Among the 12594 respondents, experiencing job insecurity was associated with lower Vitality [β = −3.82, 95% confidence interval (CI) −5.29 to −2.36] and MHI-5 (β = −3.48, 95% CI −4.91 to −2.04). Similarly, having financial difficulties was significantly correlated with lower Vitality (β = −8.65, 95% CI −12.07 to −5.24) and MHI-5 (β = −11.51, 95% CI −15.08 to −7.94). However, having financial difficulties did not moderate the relationship between job insecurity and both mental health scales.

Conclusions This study highlights the negative effect of job insecurity and financial difficulties on mental health in the EU. Support to employees facing job security issues should be a priority regardless of the financial circumstances.