MPIfG Working Paper
02/8, July 2002
European Social Model: Coping with the Challenges of Diversity
Fritz W. Scharpf
Max-Planck-Institute for the Study of Societies
Prof. Fritz W. Scharpf is Director at the Max Planck
Institute for the Study of Societies, Cologne.
European integration has created a constitutional
asymmetry between policies promoting market efficiencies and policies promoting
social protection and equality. National welfare states are legally and
economically constrained by European rules of economic integration,
liberalization, and competition law, whereas efforts to adopt European social
policies are politically impeded by the diversity of national welfare states,
differing not only in levels of economic development and hence in their ability
to pay for social transfers and services but, even more significantly, in their
normative aspirations and institutional structures. In response, the "Open
Method of Coordination" is now applied being in the social-policy field. It
leaves effective policy choices at the national level, but tries to improve
these through promoting common objectives and common indicators and through
comparative evaluations of national policy performance. These efforts are useful
but cannot overcome the constitutional asymmetry. Hence there is reason to
search for solutions which must have the character of European law in order to
establish constitutional parity with the rules of European economic integration,
but which also must be sufficiently differentiated to accommodate the existing
diversity of national welfare regimes. The article discusses two such options,
"Closer Cooperation" and a combination of differentiated
"framework directives" with the Open Method of Coordination.
Die Europäische Integration hat eine
konstitutionelle Asymmetrie zwischen marktschaffender Politik und soziale
Sicherheit und Gleichheit fördernder Politik erzeugt. Sozialstaatliche Politik
auf der nationalen Ebene wird beschränkt durch Marktintegration,
Liberalisierung und das europäische Wettbewerbsrecht. Zugleich scheitert aber
eine einheitliche europäische Sozialpolitik an Unterschieden in der
wirtschaftlichen Leistungsfähigkeit noch mehr an der Verschiedenartigkeit der
normativen Erwartungen und der institutionellen Strukturen der nationalen
Sozialsysteme. Als Antwort darauf wird nun die "Offene Methode der
Koordinierung" in der Sozialpolitik angewandt. Die Methode belässt die
Wahl der Policy auf nationaler Ebene, versucht aber gleichzeitig, diese durch
die Definition gemeinsamer Ziele und Indikatoren sowie durch Erfolgsvergleiche
zu verbessern. Diese Bemühungen sind zwar nützlich, können jedoch die
konstitutionelle Asymmetrie nicht beseitigen. Es lohnt sich deshalb, nach
Lösungen zu suchen, die den Status europäischen Rechts haben, um so
konstitutionellen Gleichrang mit dem europäischen Recht der wirtschaftlichen
Integration zu erreichen. Diese Lösungen müssen aber zugleich ausreichend
differenziert sein, um die legitimen Unterschiede nationaler Wohlfahrtsregime zu
respektieren. Dieses Working Paper beschäftigt sich mit zweien solcher
Lösungsmöglichkeiten: "Vertiefte Zusammenarbeit" sowie eine
Kombination differenzierter Rahmenrichtlinien mit der Offenen Methode der
1Social Europe: The Road Not Taken
Why is it that concern about the "European Social Model" has risen so
dramatically in the last decade? Or why is it that efforts to promote employment
and social policy at the level of the European Community have come so late and
seem so feeble in comparison to the success stories of the Single Market and the
Monetary Union? In approaching an answer, I find it useful to begin with
another, historically counterfactual question: Where would we now be if, in the
1956 negotiations leading to the Treaties of Rome and the creation of the
European Economic Community, French (Socialist) prime minister Guy Mollet had
had his way? Mollet, supported by French industry, had tried to make the
harmonization of social regulations and fiscal burdens a precondition for the
integration of industrial markets. But since he had even more pressing concerns
to fend for - opening European markets for French agriculture, support for
former French colonies - what he got in the final package deal was merely the
political commitment of other governments to increase social protection
nationally (Moravcsik 1998, 108-150; Küsters 1980; Loth 2002).
So what if Mollet had won on all counts? Could attempts to
harmonize social policies have succeeded or would they have blocked European
integration altogether? We cannot know, of course, but we do know that in the
mid 1950s European welfare states were still rudimentary in quantitative terms
and structurally much more similar than they became during the following
decades. Moreover, the Original Six included only member states whose welfare
states had been shaped by the Bismarck model of work-based social insurance.
Thus, harmonization would not have been hopeless - much less difficult, at any
rate, than it would now be in the face of much greater quantitative and
structural heterogeneity among the present Fifteen, let alone in the EU after
If a commitment to harmonization in 1956 could be assumed,
it seems plausible that the process of European integration would have been
driven by the same political demands which, under conditions of increasing
affluence, pushed the rapid expansion of national welfare states in the
following high-growth decades. It would have been a highly political process, in
which normative disputes and class conflict would have played a significant role
and in which it would also have been necessary to define the line of demarcation
between the spheres of market competition and protected social and cultural
concerns at the European level. If these conflicts could be resolved, the
outcome would have boosted political legitimacy and facilitated European
political integration among the Original Six - but it would also have made
subsequent rounds of enlargement considerably more difficult.
In any case, what could not have happened was the
political de-coupling of economic integration and social-protection issues which
has characterized the real process of European integration from Rome to
Maastricht (Scharpf 1999, chapter 2). It allowed economic-policy discourses to
frame the European agenda exclusively in terms of market integration and
liberalization, and it ensured the privileged access of economic interests to
European policy processes. Even more important, however, was the constitutional
asymmetry following from the selective Europeanization of policy functions. At
the national level, economic policy and social-protection policy had and have
the same constitutional status - with the consequence that any conflict between
these two types of interests could only be resolved politically, by majority
vote or by compromise. The same would have been true in the European Community
if Guy Mollet had had his way. As it was, however, once the European Court of
Justice had established the doctrines of "direct effect" and
"supremacy," any rules of primary and secondary European law, as
interpreted by the Commission and the Court, would take precedence over all
rules and practices based on national law, whether earlier or later, statutory
or constitutional. When that was ensured, all employment and welfare-state
policies at the national level had to be designed in the shadow of
"constitutionalized" European law.
Initially, it is true, that shadow was so light that it
was hardly noticed. In the sixties, the integration of industrial markets did
not exceed the level of a customs union, whereas in agriculture, where
integration went further, the de-coupling of economic and social concerns was
avoided and Common Agricultural Policy was directly dealing in some way with the
social problems it induced. In general, however, national systems of social
protection could and did expand rapidly, just as France had been assured by her
partners in Rome. In doing so, however, they also diverged structurally - and
heterogeneity increased dramatically in the 1970s with the accession of Denmark,
Britain and Ireland, three definitely non-Bismarckian welfare states.
The shadow of European law began to matter very much in
the 1980s, however, when in response to widespread apprehensions of
"Eurosclerosis" economic integration was greatly deepened and widened
by the Internal Market program and the Single European Act, and it came to
matter even more when the Maastricht Treaty committed member states to create
the European Monetary Union in the 1990s. The Single Act had introduced
qualified-majority voting, minimal harmonization and mutual recognition to
remove the non-tariff barriers of nationally differing product standards; it
required the liberalization of hitherto protected, highly regulated and often
state-owned service public industries and infrastructure functions, including
financial services, air, road and rail transport, telecommunications, and
energy; and it extended the reach of European competition law to all national
policies that could be regarded as distortions of free competition. Going even
further, Monetary Union eliminated all national control over exchange rates and
monetary policy while the Stability and Growth Pact imposed rigid constraints on
the public sector deficits of its member states.
2European Constraints on Welfare States
In their own terms, the efforts to complete the Internal
Market and Monetary Union have succeeded beyond expectations. At the same time,
however, the advance of economic integration has greatly reduced the capacity of
member states to influence the course of their own economies and to realize
self-defined sociopolitical goals. In order to appreciate the magnitude of the
change, it is useful to remind oneself of the policy instruments which, in
various combinations, were routinely used by many member states only a decade or
two ago, and which are now ruled out by European law. Thus Monetary Union has
not only deprived member states of the ability to adjust exchange rates in
response to economic problems, but it has also replaced national monetary policy
by ECB interest rates which - since they must necessarily respond to average
conditions in the Eurozone at large - will be too high for economies with
below-average rates of economic growth and inflation and too low for countries
above the average. Hence they will further impede the recovery of sluggish
economies and add to inflationary pressures in countries with high growth rates
(Enderlein 2002). Yet while the inevitable misfit of European monetary policy
increases the need for compensatory strategies at the national level, member
states find themselves constrained in their fiscal policy by the conditions of
the Stability and Growth Pact - which will punish countries suffering from slow
growth, but can do nothing to discipline the governments of overheating and
highly inflationary economies. At the same time, the Internal Market removed
legal barriers to the free mobility of goods and services, and it eliminated
controls of capital movements which had persisted well into the 1980s. European
liberalization and deregulation policies have eliminated the possibility of
using public-sector industries as an employment buffer; they no longer allow
public utilities and the regulation of financial services to be used as tools of
regional and sectoral industrial policy; and European competition policy has
largely disabled the use of state aids and public procurement for such purposes.
In short, compared to the repertoire of policy choices
that was available two or three decades ago, European legal constraints have
greatly reduced the capacity of national governments to influence growth and
employment in the economies for whose performance they are politically
accountable. In principle, the only national options which under European law
remain freely available are supply-side strategies involving lower tax burdens,
further deregulation and flexibilization of employment conditions, increasing
wage differentiation and welfare cutbacks to reduce reservation wages. At the
same time, governments face strong economic incentives to resort to just such
strategies of competitive deregulation and tax cuts in order to attract or
retain mobile firms and investments that might otherwise seek locations with
lower production costs and higher post-tax incomes from capital. By the same
token, unions find themselves compelled to accept lower wages or less attractive
employment conditions in order to save existing jobs. Conversely, welfare states
are tempted to reduce the generosity or tighten the eligibility rules of
tax-financed social transfers and social services in order to discourage the
immigration of potential welfare clients.
3The Dilemma of Social Europe
It is no wonder, therefore, that countries and interest
groups that had come to rely on social regulations of the economy and generous
welfare-state transfers and services are now expecting the European Union to
protect the "European Social Model" and thus to re-establish the
constitutional parallelism of economic ("market making") and
social-protection ("market correcting") interests and policy purposes
that had existed at the national level before the take-off of economic
integration - and which would have existed at the European level if France had
had her way in the Treaty of Rome. So why not return to the agenda of 1956 by
trying to combine the policies creating and liberalizing European markets for
goods, services and capital with the European harmonization of market-correcting
social regulations and taxes?
In purely economic terms, that would still be feasible,
and the much maligned Common Agricultural Policy demonstrates that it is
possible in practice as well. While there is presently much public commotion
about the destabilizing consequences of "globalization," that would
not prevent the creation and protection of Social Europe. The world economy is
still much less integrated, and WTO rules are much less constraining, than is
true of the Internal Market, and there is of course no global monetary union
that would rule out currency adjustments and independent monetary policy at
national or European levels. At the same time, the European Union is much less
dependent on imports and exports than its individual member states, and with the
creation of the Monetary Union it has become much less vulnerable to the
vicissitudes of international capital speculation. Hence macroeconomic
management, industrial policy and the social regulation and taxation of business
activities, which have become economically constrained at the national level,
would still be feasible policy options for the European Union. So would be the
harmonization of national welfare-state policies on the basis of Treaty
amendments having the same constitutional status as the provisions creating the
Internal Market and the Monetary Union. This was indeed the promise of the
"Social Dimension" which Jacques Delors had promoted along with the
deepening of economic integration. In reality, however, the road not taken by
the Original Six in 1956 was no longer open for the Fifteen in the 1990s.
It is foreclosed not by external economic constraints but
by the diversity of European welfare states. There are, first, differences in
economic development which had increased greatly after Southern enlargement. At
the end of the 1990s, per-capita GNP in purchasing power parities was about
twice as high in Denmark as it was in Greece and, excepting Slovenia, it was
three to six times higher than in the Central and Eastern European accession
states (Kittel 2002, table 1). Thus, social transfers and public social services
at a level that is considered appropriate in the Scandinavian countries could
simply not be afforded by Greece, Spain or Portugal - let alone by the candidate
countries on the threshold of Eastern enlargement. If that were all, however, it
might still be possible to define harmonization by reference to relative
standards reflecting differences in the ability-to-pay of member states at
different stages of economic development (Scharpf 1999, 175-180). Yet even
though Britain and Sweden may be similarly wealthy, they could still not agree
on common European policies regarding the welfare state or industrial relations.
What matters here is the divergent development of
welfare-state institutions and policies that began in the 1950s and reached its
high point in the early 1970s (Esping-Andersen 1990; Scharpf and Schmidt 2000a;
2000b; Huber and Stephens 2001). After its first enlargement in the 1970s, the
European Community included countries belonging to each of the Esping-Andersen's
(1990) "Three Worlds of Welfare Capitalism," with Denmark representing
the "Scandinavian" model, Britain and Ireland the
"Anglo-Saxon" type, while the Original Six conformed to the
"Continental" pattern. Southern enlargement in the 1980s and Northern
enlargement in the 1990s increased and solidified this heterogeneity (Ferrera et
al. 2001; Begg et al. 2001). These groups of countries differ not only in the
average levels of total taxation and social spending but also in the relative
weights of various taxes and social security contributions on the revenue side,
and of social transfers and social services on the expenditure side (Scharpf and
Schmidt 2000a, tables A 23 - A 28). Of even greater importance than these
operational differences, however, are differences in taken-for-granted normative
assumptions regarding the demarcation line separating the functions the welfare
state is expected to perform from those that ought to be left to private
provision, either in the family or by the market (Esping-Andersen 1999; Scharpf
2000; Huber and Stephens 2001; Ferrera et al. 2001).
|| All three groups of countries provide means-tested
social assistance to the needy, publicly financed primary and secondary
education, and some form of collectively financed health care.
|| In Scandinavia and on the European continent, however,
the state also provides work-based and earnings-related social insurance that is
meant to secure the standard of living of average-income families in case of
unemployment, sickness, disability and in old age, whereas in Anglo-Saxon
welfare states, workers with average and higher incomes are expected to rely
primarily on private provisions for these eventualities.
|| Finally, only the Scandinavian welfare states are
providing universal and high-quality social services for all families and needy
individuals, freeing wives and mothers from family duties while at the same time
providing the public-sector jobs that have raised female participation in the
labor market to record levels. In Anglo-Saxon, Continental and Southern-European
countries, by contrast, these caring services are mainly left to be provided in
the family or by the market.
|| Differences of similar significance are also
characteristic of the industrial-relations institutions of EU member states
(Crouch 1993; Ebbinghaus and Visser 2000).
These structural differences have high political salience.
They correspond to fundamentally differing social philosophies which can be
roughly equated with the social philosophies and the postwar dominance of
"liberal," "christian democratic" and "social
democratic" political parties (Esping-Andersen 1990; Huber and Stephens
2001). In any case, however, citizens in all countries have come to base their
life plans on the continuation of existing systems of social protection and
taxation and would, for that reason alone, resist major structural changes.
Voters in Britain simply could not accept the high levels of taxation that
sustain the generous Swedish welfare state; Swedish families could not live with
the low level of social and educational services provided in Germany; and German
doctors and patients would unite in protest against any moves toward a
British-style National Health System. Thus uniform European solutions would
mobilize fierce opposition in countries where they would require major changes
in the structures and core functions of existing welfare-state institutions, and
member governments, accountable to their national constituencies, could not
possibly agree on European legislation imposing such solutions.
Political parties and unions promoting "Social
Europe" are thus confronted with a dilemma: To ensure effectiveness, they
need to assert the constitutional equality of social-protection and
economic-integration functions at the European level - which could be achieved
either through European social programs or through the harmonization of national
social-protection systems. At the same time, however, the present diversity of
national social protection systems and the political salience of these
differences makes it practically impossible for them to agree on common European
solutions. Faced with this dilemma, the Union has opted for a new governing
mode, the Open Method of Coordination (OMC), in order to protect and promote
4Can the Open Method of Coordination Overcome the Dilemma?
The new governing mode was established - avant la lettre -
by the Maastricht Treaty (Arts. 98 - 104 TEC) for the purpose of coordinating
national economic policies through "Broad Economic Policy Guidelines"
and recommendations of the Council (Hodson and Maher 2001) and it was again used
by the Amsterdam Treaty for developing a coordinated strategy for employment
(Arts. 125-128 TEC). Without creating a new Treaty base, the Lisbon Summit then
introduced the generic label of OMC and resolved to apply it not only to issues
of education, training, R&D and enterprise policy, but also to "social
protection" and "social inclusion." While procedures differ among
these policy areas, all of them share two essential characteristics:
|| Policy choices remain at the national level and European legislation is
|| At the same time, however, national policy choices are defined as matters of
common concern, and efforts concentrate on reaching agreement on common
objectives and common indicators of achievement.
|| Moreover, governments are willing to present their own plans for comparative
discussion and to expose their performance to peer review.
|| Nevertheless, coordination depends on voluntary cooperation, and there are no
formal sanctions against member states whose performance does not match
The Open Method was most fully specified for the European
Employment Strategy (EES) which came to be known as the "Luxembourg
Process." Its core is an iterative procedure, beginning with an annual
joint report to the European Council which is followed by guidelines of the
Council based on proposals from the Commission. In response to these guidelines,
member governments present annual "National Action Plans," whose
effects will then be evaluated in the light of comparative benchmarks by the
Commission and a permanent committee of senior civil servants. These evaluations
will feed into the next iteration of joint annual reports and guidelines, but
they may also lead to the adoption of specific recommendations of the Council
addressed to individual member states. In any case, however, "the
harmonization of the laws and regulations of Member States" is explicitly
excluded from the measures the Council could adopt (Art. 129 TEC). In other
policy areas, procedures may be less formalized and less demanding, but the
essential characteristics are the same.
The Open Method has already become the focus of much
attention in the literature (e.g., Goetschy 1999; 2000; Hodson and Maher 2001;
Begg et al. 2001; de la Porte and Pochet 2002a), but most academic assessments
are still speculative and preliminary. An official evaluation by the Commission
(which, however, will be based on national studies commissioned by each member
government) is presently under way. It will be interesting to see if the closer
look will change the rather skeptical view expressed in last year's White Paper
on European Governance (Commission 2001; Scharpf 2001), but for the time being
there is no sense in trying to anticipate the findings of this investigation.
Instead, I will use what is presently known about the objectives and the design
of the Open Method in the areas of employment and social policy to discuss the
question of whether these could, assuming optimal implementation, overcome the
basic dilemma of Social Europe as I defined it above. In other words, could the
Method of Open Coordination generate solutions that are less vulnerable to the
legal and economic challenges of European economic and monetary integration
while still maintaining the legitimate diversity of existing welfare-state
institutions and policy legacies at the national level?
4.1What OMC Can Do
While respect for national diversity seems to be ensured
through the essential voluntarism of the method which leaves effective policy
choices to the member states, the first question raises issues which are
generally ignored in a growing literature that seems to focus exclusively on the
beneficial effects of the Open Method. The emphasis there is on policy learning
through information exchange, benchmarking, peer review, deliberation and
blaming and shaming (e.g., Trubek and Mosher 2001; Begg et al. 2001;
Esping-Andersen et al. 2001; Visser and Hemerijck 2001). All this may be true as
far as it goes. While national governments remain responsible for the adoption
of specific policy solutions, they are required to focus on jointly defined
problems and policy objectives, and to consider their own policy choices in
relation to these "common concerns." Moreover, by exposing their
actual performance to comparative benchmarking on the basis of agreed-upon
indicators, to peer review and to public scrutiny, the process does in fact
provide favorable conditions for "learning by monitoring" (Sabel
1994), and it may also contribute to shaming governments out of
"beggar-my-neighbor" strategies that would be self-defeating if
everybody did adopt them.
It is also true, however, that the expected benefits of
OMC depend crucially on the willingness of those national actors who are in fact
in control of policy choices to get themselves involved in processes of European
coordination (Coron and Palier 2002; Jacobsson and Schmid 2002). If that is the
case, European recommendations may be used as powerful arguments in national
policy discourses; if not, National Action Plans may simply reflect the status
quo of national policy routines while the innumerable rounds of meetings in
Brussels will merely educate national liaison officers who have no influence at
home. But these are not the main reservations. Even if the willingness to learn
could be generally assumed, it is still necessary to ask what type of policy
choices could optimally be learned under OMC conditions.
4.2What OMC Cannot Do
In this regard, a look at the four "pillars" of
the employment guidelines adopted in the Luxembourg Process is quite
instructive. Apart from Equal Opportunities, which has a base in the commitment
of the original EEC Treaty to gender equality, the other three pillars all refer
to the type of supply-side policies which are favored by neo-liberal economists
and which are fully compatible with maximal economic integration. Thus
Employability is about improving the skills and increasing the work incentives
of the unemployed, Entrepreneurship is about removing red tape and other
barriers to entry affecting start-up businesses; and Adaptability is primarily
about the deregulation of employment protection. Similarly, when the Lisbon
Summit adopted a commitment to "Modernizing the European Social
Model," its primary focus was, again, on education and training, skills and
life-long learning - which is also the main approach toward its goal of Social
Inclusion. The one exception from this supply-side emphasis appears to be the
commitment to "Modernizing Social Protection" which, apart from
admonishing member states "to ensure that work pays," appears to be
mainly worried about the fiscal "sustainability of pension systems"
(COM (2000) 622 final). Recent research confirms the impression that a major
motive for creating an "Open-Method" process for pension reform was
the concern that otherwise the Economic Policy Committee and ECOFIN might
unilaterally impose their own views on how to constrain the run-away deficits of
public pension systems (de la Porte and Pochet 2002b). It seems fair to say,
therefore, that pension reform came on the European agenda at least in part as a
spillover from Monetary Union and the Stability Pact and their concern with the
soundness of national fiscal commitments.
In short, the selection of policy goals confirms the
expectation that, under the constitutional priority of European law, policies
promoted through the Open Method of Coordination must avoid all challenges to
the acquis of the Internal Market and of Monetary Union. Even when responding to
OMC guidelines, therefore, member states continue to operate under exactly the
same legal and economic constraints of economic integration which limit their
policy choices when they are acting individually. In order to appreciate the
severity of these constraints, it is useful to think of policy options that are
not, and could not be, on the agenda of OMC deliberations. Thus, if unemployment
rises in the Eurozone generally, Luxembourg EES guidelines could not recommend
lower ECB interest rates; if unemployment rises nationally, EES recommendations
could neither relax the deficit rules of the Stability and Growth Pact nor the
competition rules on state aids to depressed regions or industries. Similarly if
expenditures on health care are rising, OMC could not recommend price controls
or "positive lists" for pharmaceuticals; and if social services are
being eroded by fiscal constraints, there is no chance for guidelines promoting
either a concerted increase of taxes on capital incomes or failing that, the
re-introduction of effective capital exchange controls.
The short of it is that optimistic or pessimistic
assessments of the maximum potential for policy learning that could be achieved
through the Open Method depend very much on the authors' estimates of the range
of options that are still available at the national level under the constraints
of an internationalized economy. In the literature on the comparative political
economy of welfare states, this question has become the subject of a large and
controversial theoretical and empirical literature (Sinn 1993; Tanzi 1995;
Garrett 1998; Swank 1998; Alber and Standing 2000; Scharpf and Schmidt 2000a;
Pierson 2001; Huber and Stephens 2001). It is fair to conclude that these
studies by and large do not provide empirical support for expectations of a
general "race to the bottom," but emphasize the path-dependent
resistance of welfare-state regimes to the downward pressures of economic
competition. Moreover, comparative research did identify several instances of
successful policy learning and creative adjustment through which some countries
were able to maintain or achieve international competitiveness and high levels
of employment without sacrificing their social-policy aspirations (Hemerijck and
Schludi 2000; Scharpf 2000; Huber and Stephens 2001).
4.3The Vulnerability of Best-Practice Models
It should be noted, however, that particularly successful
countries usually had the benefit of favorable economic and/or institutional
preconditions (Schwartz 2001), and that there are in fact more countries that
are stuck in economic difficulties or that had to impose significant cutbacks on
welfare-state transfers and services and to accept a considerable increase in
social inequality and insecurity. Moreover, most of the studies cited look at
the longer-term effects of "globalization," rather than at the more
recent impact of the completion of the Internal Market and the Monetary Union in
Europe. It is important to point out, therefore, that some of the most
successful solutions are potentially quite vulnerable to the seemingly
inexorable deepening and widening of the reach of European competition law.
Thus, the Scandinavian system of universal social services
and egalitarian social protection was generally treated as a best-practice model
by Esping-Andersen and his collaborators in their report to the Belgian
Presidency on the "New Welfare Architecture for Europe"
(Esping-Andersen et al. 2001). Moreover, in our own comparative study of Work
and Welfare in the Open Economy (Scharpf and Schmidt 2000a), we concluded that
in terms of economic competitiveness and fiscal viability, Scandinavian welfare
states were quite secure - noting that if there should be reason for concern,
their potential vulnerability would be political, hinging on the continuing
willingness of citizens to pay comparatively very high rates of personal income
taxes. In a different line of research, finally, it was shown that the broad
political support presently enjoyed by the Scandinavian welfare state depends
critically on the universalism of high-quality and publicly provided social
services from which middle-class families benefit directly as well as indirectly
through high levels of public-sector employment for married women (Svallfors
1997; 1999; Rothstein 1998).
But now let us assume that European competition law should
be invoked to liberalize these "markets" by opening them to commercial
service providers - as it has been used to crack the monopoly of public
placement services and to expose national health insurance systems to
reimbursement claims for unauthorized dental services or spectacles obtained
abroad, and as it may next be used to allow private financial services to
compete with public pension systems (Leibfried and Pierson 2000). Let us further
assume that in order to ensure a "level playing field," the opening of
social-service markets would be accompanied by the requirement that private
providers must receive public subsidies per client that match the budget
allocations received by their public-sector counterparts, but would still be
free to charge additional user fees.
If that should happen, the Scandinavian welfare state
might evolve toward a very "American" future through a vicious cycle:
Once well-to-do clients should gravitate toward private, but publicly
subsidized, "premium" services, financial constraints would reduce the
comparative attractiveness of public providers that would still need to serve
poorer neighborhoods and "unprofitable" rural areas - with the
consequence that the political support of middle-class voters would rapidly
erode. Just as is true of education and health care in the United States, the
end might then be a two-class system where tax-financed public institutions
could provide no more than minimal services for those who cannot afford to pay
for private day care, private schools, private health insurance, or private
long-term care for the elderly.
This has not happened yet, and it may not happen soon. But
as was true of dental care abroad, retail price maintenance for books, public
transport, or publicly owned banks, the only thing that stands between the
Scandinavian welfare state and the market is not a vote in the Council of
Ministers or in the European Parliament, but merely the initiation of Treaty
infringement proceedings by the Commission or legal action by potential private
competitors before a national court that is then referred to the European Court
of Justice for a preliminary opinion. In other words, it may happen any day now.
Once the issue reaches the ECJ, the outcome is at best uncertain. In principle,
at any rate, the Commission and the ECJ have been treating such conflicts by the
logic of a lexicographic ordering: In consequence of the doctrines of
"supremacy" and "direct effect," any requirement deduced
from primary or secondary European law will override any national policy
purposes, no matter how substantively important or politically salient in the
If these legal constraints cannot be challenged, OMC may
still help member states to discover more intelligent and effective ways of
adjusting to the economic pressures of integrated product and capital markets.
Within these limits, I would certainly not deny the usefulness of policy
learning. Under the circumstances, it is indeed the one best hope for employment
and social policy in Europe (Vandenbroucke 2002). But even if all this is
granted, it remains true that the European Social Model that could at best
emerge from these learning processes can only be a model of "competitive
solidarity" (Streeck 2000). Whereas the welfare state was once about
limiting the reach of market forces and about the partial
"decommodification" of labor (Esping-Andersen 1990), the agenda of
"Social Europe" as it must be defined through the Open Method, is
about optimizing the adjustment of social protection systems to market forces
and fiscal constraints and about facilitating the "recommodification"
of the labor potential of persons who are threatened by "social
exclusion" - which is understood to mean primarily exclusion from the labor
market. If this is considered insufficient, Open Coordination by itself will not
4.4A Positive Example
There is of course no sense in considering the
deconstruction of the Internal Market and the Monetary Union. But what one might
and should demand is a balancing of market-enhancing and market-correcting
concerns at the European level, instead of the lexicographic ordering that
presently prevails. This is not impossible, and there have indeed been cases
where the Commission and the Court did strain the market logic in order to allow
nationally salient solutions to stand - the compromise reached over book-price
maintenance in Germany or the cautious treatment of the Swedish alcohol monopoly
(Kurzer 2001) are cases in point. But in the absence of a countervailing logic
derived from values or goals institutionalized at the European level, such
exceptions cannot be relied upon. What would be needed instead is illustrated by
a recent ECJ decision in the field of environmental policy that upheld a German
statute requiring electricity networks to buy, at prices considerably above the
market level, electricity that is generated (in Germany!) from renewable
When the EU had started to liberalize energy markets, it
was widely feared that exactly these types of "green" policies would
now be ruled out as protectionist distortions of competition, and the Court did
in fact assume that the legislation in question constituted a potential barrier
to trade under Art. 28 (ex 30) TEC. It also noted that environmental protection
is not specifically listed among the allowable exceptions in Art. 30 (ex 36)
TEC. In other words, from the one-sided perspective of European internal-market
and competition law, the German statute is about as bad as it could be: It
amounts to a restraint on trade, it discriminates against foreign suppliers, and
it does not serve one of the recognized purposes that could justify barriers to
trade. Nevertheless, in a surprising reversal of past decisions (Gebauer et al.
2001), the Court let the statute stand. In reaching this outcome, the decision
treated the environmental purpose of the statute as a justification supported by
European law - pointing (1) to international agreements on climate change to
which the EU had become a party, (2) to Treaty provisions defining high levels
of environmental protection as a policy goal of the EU (Arts. 6 and 174 TEC),
and (3) to the fact that the liberalizing directive itself had made some
allowances for environmental protection (Directive 96/92, Art. 8,3), and that
the Commission had already drafted a directive promoting the use of renewable
energy (200/C 311 E/22).
In other words, since the national statute was seen to be
serving European policy purposes, the issue could be framed as a conflict
between two equally legitimate European goals, rather than between European
legal requirements on the one hand and the idiosyncratic (and legally
irrelevant) policy purposes of a member state on the other. Having framed the
issue in this fashion, the Court then had to strike a balance, in view of the
specific circumstances of the case at hand, between the relative importance of a
merely "potential" restraining effect on trade on the one hand, and
the real environmental benefits of the program. There is no question that
"Social Europe" would stand on safer legal grounds if the Court and
the Commission could be required to apply a similar balancing test to potential
conflicts between European internal-market and competition law and national
policies promoting employment and social protection.
5Can Social Europe be Europeanized?
It is tempting to think that the
"Europeanization" of social-protection purposes could be achieved by
simply adopting a Treaty amendment which, in parallel to the formula protecting
environmental purposes in Article 6 TEC, might perhaps read as follows:
"Employment and social protection requirements must
be integrated into the definition and implementation of the Community policies
and activities referred to in Article 3, in particular with a view to promoting
However, the differences between the environmental and
social policy fields should not be underestimated. Environmental protection has
become a fully developed domain of European policy whose coverage is by now
nearly as inclusive as the environmental regimes of the most active member
states. It is true that the German form of subsidizing the use of renewable
energy was still breaking new ground but, as the Court did point out, even this
sub-field was about to be cultivated by EU directives. By contrast, European
"hard law" in the fields of employment and social-protection policy
remains limited to minimum standards, and for the reasons discussed before, the
Open Method of Coordination could not be used to create European legislation.
The question is, therefore, if other governing modes could be employed or
designed to achieve this purpose while still respecting the diversity of
politically salient national solutions.
At first sight, a plausible candidate might be the option
of "Closer Cooperation" (Title VII TEU) through which groups of member
states could avail themselves of EC procedures to adopt and implement
legislation that pertains only to members of the group (Art. 44 TEU). If this
route were open, European social policy could take advantage of the fact that in
spite of increasing differentiation it is still possible to identify groups of
EU member states with roughly similar welfare-state institutions and policy
legacies which face similar challenges, suffer from similar vulnerabilities, and
tend to share similar political preferences (Scharpf and Schmidt 2000a; 2000b).
As a consequence, resistance to the harmonization of welfare-state reforms ought
to be considerably lower among the more homogeneous members of each group than
it is within the European Union as a whole.
Unfortunately, however, the conditions specified in the
Amsterdam Treaty were so restrictive that Closer Cooperation has not yet been
used at all. If the Treaty of Nice should ultimately be ratified in spite of the
initial rejection in Ireland, some of the present constraints will be relaxed.
Nevertheless, the requirement that there must be a minimum of eight member
states forming a group (Art. 43 g TEU) would still rule out the use of Closer
Cooperation for either the Scandinavian or the Continental or the Southern
groups of welfare states. Moreover, the Nice Treaty also tightened precisely
those substantive constraints which the harmonization of social-protection rules
would have to challenge: Cooperation must respect the acquis and may neither
affect the Internal Market nor impede trade or distort competition among member
states (Art. 43 c, e and f TEU). Thus, if these conditions are taken literally,
the state monopoly of social services in Scandinavian welfare states could still
not be defended through legislation based on Closer Cooperation.
But why this seeming hostility against Closer Cooperation?
One reason, surely, is the fierce defense of the acquis by the Commission - and
the dominance of economic integration and liberalization discourses within the
Commission. But why should governments - which could overrule the Commission in
the process of Treaty reform - share that aversion? One of the reasons, I
suggest, is a case of unfortunate "framing." Regardless of the variety
of terms that have been used since the early 1970s - "variable speed,"
"variable geometry," "concentric circles," "two
tiers," "core" or most recently, "pioneer group" - the
notion of differentiated integration has always been associated with the image
of greater or lesser progress along a single dimension from less to more
integration, and with the formation of solid blocks within the Community
(Ehlermann 1984, 1998; Giering 1997; Walker 1998; Búrca and Scott 2000). The
idea was that an "avant-garde" of member states that were able and
willing to move ahead of the others toward tighter integration should be allowed
to do so - which immediately mobilized the opposition of all others who resented
being assigned to the rear guard and relegated to second-class citizenship in
Europe. Alternatively, objections to Closer Cooperation may be based on the
suspicion that rich member states might form a club of their own in order to
escape from the obligations of solidarity and from the side payments exacted by
the beneficiaries of "cohesion" programs whenever advances of European
were on the agenda.
In a rational debate, these suspicions would of course not
apply to the solutions proposed here. In social and employment policy, Closer
Cooperation would be issue-specific. Rather than creating of solid blocks of
countries, it would result in overlapping clusters. Thus Britain, the
Netherlands, Italy and the Scandinavian countries could join forces in trying to
reform their tax-financed national health systems in ways that are compatible
with the increasing mobility of patients and the potential competition of
service providers, whereas another group consisting of France, Belgium,
Luxembourg, Germany and Austria would seek their own solutions to similar
challenges facing countries with compulsory health insurance systems. In seeking
to protect the provision of universal social services, the Scandinavian
countries might form a group that is also joined by France, whereas in reforming
Bismarckian pension systems, Sweden ought to join a group of Continental welfare
states that probably would not include the Netherlands, and so on.
These solutions, clearly, would not imply either a
two-class Europe or a renunciation of solidarity. If they are nevertheless
rejected, the reason appears to be a more abstract but deeply held conviction
that European integration would, or at any rate should, lead to greater
uniformity - of political preferences, legal rules and administrative practices
- among formerly diverse member states. From this perspective, Closer
Cooperation appears as a regression from the ideal, a backward move toward
disintegration and "Balkanization," that all good Europeans must
resist. What would be needed instead is a recognition of legitimate diversity
within the European Union even in policy areas where strictly national solutions
are no longer sufficient whereas uniform European solutions could not be agreed
upon - and would not be legitimate, if they were imposed by majority vote
5.2Combining Framework Directives with OMC?
In the current debate on a European constitution,
assertions of legitimate diversity are likely to be misunderstood as demands for
limiting European competencies or as references to the principle of
"subsidiarity." It needs to be emphasized, therefore, that at the
present state of economic integration, the aspirations of "Social
Europe" can no longer be realized through purely national solutions. In the
horizontal relationship among policy areas, European social law is necessary in
order to provide a legal counterweight to the supremacy of Internal Market and
European competition law. At the same time, moreover, European social law also
has an important role to play in the vertical dimension in order to control the
beggar-my-neighbor incentives which will tempt individual member states once
they will seriously begin to adjust their social-policy regimes to the
constraints and competitive pressures of the Internal Market and the Monetary
Under present conditions, there is no question that such
legislation could not be uniform. But even in a longer-term perspective it makes
no sense to consider either the Scandinavian or the Anglo-Saxon welfare states
as an avant-garde with which others ought to catch up. Their divergent shapes
reflect legitimate differences of social philosophies and normative aspirations.
Hence instead of striving for uniformity, European social law should allow
different types of welfare states to maintain and develop their specific
institutions in response to different understandings of social solidarity; it
should allow the Bismarckian welfare states on the European continent to seek
common solutions to their common problems; and it should support Southern
countries as well as the accession states of Central and Eastern Europe in
developing economically and politically viable institutions of social protection
without being required to conform to a uniform European blueprint (Müller 1999;
Müller et al. 1999). So if the mode of Closer Cooperation should remain
unavailable, it seems important to investigate other potential courses leading
toward the goal of differentiated Europeanization.
Politically least difficult would seem to be an amendment
to Art. 137, 2 b TEC that would extend the authorization of directives setting
minimum standards from the list of employment-rated rules in Art. 137, 1 a-i TEC
to include "social inclusion" and the "modernization of systems
of social protection" (Art. 137, 1 j and k TEC) as well. But even though it
can be shown that, contrary to many expectations, the minimum standards set by
social directives on employment conditions are also requiring policy changes in
high-protection countries, that solution would not be sufficient here. Since
such minimum requirements would have to be met by all member states, they could
not provide much legal protection for the social services of Scandinavian
welfare states, or for that matter, for systems of compulsory health insurance
and pay-as-you-go pension insurance in Bismarckian welfare states. But what if
the authorization in the Treaty were formulated more broadly, allowing
directives to set differentiated standards for the stabilization and improvement
of national social protection systems that take account of differences in the
ability-to-pay of countries at different stages of economic development and of
the existing institutions and policy legacies of member states?
Since a directive, unlike regulations, is binding
"upon each Member State to which it is addressed" (Art. 249, para. 3
TEC), it would indeed be legally possible to adopt substantively differing
directives for different groups of member states. However, since in contrast to
Closer Cooperation such directives would always have to be adopted by all member
states, rather than just the members of the respective groups, transaction costs
could be quite high. In any case, moreover, while conditions within each group
are still similar, they are by no means uniform. The organization of the Danish
labor market differs considerably from that in Sweden (Benner and Bundgaard
2000); the Dutch pension system has departed considerably from the pay-as-you-go
Bismarck model that still prevails more or less intact in other countries of the
Continental group (Hemerijck et al. 2000), and similar differences exist among
the Southern countries (Ferrera et al. 2001). Hence to obtain even the agreement
of all members in each group, legal commitments would need to be formulated at a
fairly high level of generality, in the nature of framework directives, rather
than at the level of excessive detail that has become characteristic of EC
Without more, however, this solution could give rise to
one or the other of two basic objections: In order to accommodate existing
diversity, framework directives could be so vague as to be without legal effect
and thus incapable of directing national policy choices and of disciplining
competitive beggar-my-neighbor strategies. Alternatively, if such directives
were nevertheless treated as being legally binding, they would delegate
exceedingly wide powers of implementation to the Commission which - if supported
by the Court - could practically dictate the substance of welfare-state reforms
in individual member states through Treaty infringement procedures. There is no
reason to think that either the Council or the European Parliament would find
such solutions acceptable. Conceivably, however, both of these dangers could be
avoided if differentiated framework directives were combined with the Open
Method of Coordination.
In that case, the vagueness of the underlying directives
would matter less, since progress toward their realization would be directed by
Council guidelines, whereas member states would have to present action plans and
reports on their effects which would be periodically assessed by peer review. If
evaluation should reveal general problems, the framework legislation could be
amended and tightened. With regard to specific implementation deficits in
individual countries, moreover, the Council could not merely issue
recommendations but adopt legally binding decisions or authorize the Commission
to initiate the usual infringement proceedings. In other words: Member states
would retain considerable discretion in shaping the substantive and procedural
content of framework directives to suit specific local conditions and
preferences. Yet if they should abuse this discretion in the political judgment
of their peers in the Council, more centralized sanctions and enforcement
procedures would still be available as a "fleet in being."
Compared to the Open Method of Coordination practiced
without more, this combination of governing modes would increase the
effectiveness of the European Employment Strategy and of Social Europe in the
vertical dimension. Given the legally binding character of framework directives
and their potential enforcement, national policy makers could no longer afford
to ignore the policy discourses of Open Coordination at the European level. At
the same time, however, the benefits of the Method would be maintained: Member
states could design solutions fitting their specific conditions and preferences,
and any recommendations addressed to them would be "contextualized" by
reference to these conditions, rather than being of the one-size-fits-all
variety that often characterizes OECD and IMF recommendations (Hemerijck and
Visser 2001; Esping-Andersen et al. 2001). Moreover, as Open Coordination would
be organized within subgroups of member states with roughly similar
welfare-state institutions and policy legacies, one should also expect that the
effectiveness of policy learning would be greatly enhanced.
Even more important, however, is the fact that, in the
horizontal dimension between policy areas, the national social-protection
measures so adopted would come under the umbrella of primary European law
(through an amendment paralleling either Art. 3, 2 TEC or Art. 6 TEC, as
suggested above) and would be implementing secondary European law (authorized in
the context of Art. 137 TEC). In that respect, therefore, they would have equal
constitutional status with measures implementing the European law of the
Internal Market and of Monetary Union. As a consequence, conflicts between
social-protection purposes and market liberalizing purposes would finally have
to be resolved through a balancing test, rather than through lexicographic
To summarize: The course of European integration from the
1950s onward has created a fundamental asymmetry between policies promoting
market efficiencies and policies promoting social protection and equality. In
the nation state, both types policy purposes had been in political competition
at the same constitutional level. In the process of European integration,
however, the relationship has become asymmetric as economic policies were
progressively Europeanized while social-protection policies remained at the
national level. As a consequence, national welfare states are constitutionally
constrained by the "supremacy" of all European rules of economic
integration, liberalization, and competition law, and they must operate under
the fiscal rules of the Monetary Union while their revenue base is eroding as a
consequence of tax competition and the need to reduce non-wage labor costs.
In response, there have been demands to re-create a
"level playing field" by Europeanizing social policies as well. In
practice, however, such attempts are politically constrained by the diversity of
national welfare states, differing not only in levels of economic development
and hence in their ability to pay for social transfers and services but, even
more significantly, in their normative aspirations and institutional structures.
As a consequence, uniform European legislation in the social-policy field did
not, and could not, progress beyond the level of relatively low minimal
standards that are acceptable to all member states. Instead, the Lisbon European
Council decided to apply the "Open Method of Coordination" in the
social-policy field. The Method leaves effective policy choices at the national
level, but it tries to improve these through promoting common objectives and
common indicators and through comparative evaluations of national policy
These efforts appear useful as far as they go. But since
effective welfare-state policies will remain located at the national level, they
cannot overcome the constitutional asymmetry that constrains national solutions.
Since uniform European social policy is not politically feasible or even
desirable, there is reason to search for solutions which must have the character
of European law in order to establish constitutional parity with the rules of
European economic integration, but which also must be sufficiently
differentiated to accommodate the existing diversity of national welfare
regimes. Since the rules of "Closer Cooperation" are presently too
inflexible to serve these purposes, the article suggests that a similar effect
could be achieved through a combination of differentiated "framework
directives" - which, though addressed to subsets of member states, would
still have the status of European law - and of the Open Method of Coordination,
practiced within groups of countries facing similar economic and institutional
challenges of welfare-state reform.
Alber, Jens and
Guy Standing (2000) "Social Dumping, Catch-Up or Convergence? Europe in a
Comparative Global Context." European Journal of Social Policy Vol. 10, No.
2, pp. 99-119.
B., Bea Cantillon, Eric Mallier and Brian Nolan (2002) Social Indicators. The EU
and Social Inclusion (Oxford: Oxford University Press).
Berghman, J. and Chassard, Y. (2001) Social Exclusion and Social Protection in
the European Union: Policy Issues and Proposals for the Future Role of the EU
(London: South Bank University, European Institute).
Benner, M. and
Bundgaard T. V. (2000) "Sweden and Denmark: Defending the Welfare
State." In Scharpf, F. W. and Schmidt, V. A. (eds), Vol. 2, pp. 399-466.
Búrca, G. de
and Scott, J. (eds) (2000) Constitutional Change in the EU. From Uniformity to
Flexibility? (Oxford: Hart Publishing).
the European Communities (2001) European Governance: A White Paper. COM (2001)
428 final, Brussels.
the European Communities (2002) A Project for the European Union: Communication
from the Commission. COM (2002) 247 final, Brussels.
Coron, G. and
Palier, B. (2002) "Changes in the Means of Financing Social Expenditure in
France since 1945." In de la Porte, C. and Pochet, P. (eds) (2002a), pp.
(1993) Industrial Relations and European State Traditions (Oxford: Clarendon
De la Porte, C.
and Pochet, P. (eds) (2002a) Building Social Europe through the Open Method of
Co-ordination (Brussels: P.I.E. - Peter Lang).
De la Porte, C.
and Pochet, P. (2002b) "Public Pension Reform: European Actors, Discourses
and Outcomes." In de la Porte, C. and Pochet, P. (2002a), pp. 223-250.
and Visser J. (2000) Trade Unions in Western Europe since 1945 (London:
(1984) "How Flexible Is Community Law? An Unusual Approach to the Concept
of 'Two Speeds'." Michigan Law Review, Vol. 82, pp. 1274-1293.
(1998) "Differentiation, Flexibility, Closer Co-Operation. The New
Provisions of the Amsterdam Treaty." European Law Journal, Vol. 4, pp.
(2002) "Wirtschaftspolitik in der Währungsunion. Die Auswirkungen der
Europäischen Wirtschafts- und Währungsunion auf die finanz- und
lohnpolitischen Institutionen in den Mitgliedsländern." Dissertation, Ms.,
Max Planck Institute for the Study of Societies, Cologne.
G. (1990) The Three Worlds of Welfare Capitalism (Princeton, NJ: Princeton
G. (1999) Social Foundations of Postindustrial Economies (Oxford: Oxford
G., Gallie, D., Hemerijck, A. and Miles, J. (2001) "A New Welfare
Architecture for Europe?" Report submitted to the Belgian Presidency of the
European Union. Ms., Final version, September.
(1998) EU Social Policy in the 1990s. Towards a Corporatist Policy Community
Hemerijck, A. and Rhodes, M. (2001) The Future of Social Europe. Recasting Work
and Welfare in the New Economy (Oeiras: Celta).
(1998) Partisan Politics in the Global Economy (Cambridge: Cambridge University
Wollenteit, U. and Hack, M. (2001) "Der EuGH und das
Stromeinspeisungsgesetz: Ein neues Paradigma zum Verhältnis von Grundfreiheiten
und Umweltschutz?" Zeitschrift für neues Energierecht, Vol. 1, pp. 12-17.
(1997) "Vielfalt in Einheit - die Flexibilisierung der europäischen
Integration." In Europa Institut Zürich (eds) Die Europäische Union -
Wesen, Struktur, Dynamik (Zürich: Schulthess Polygraphischer Verlag), pp.
(1999) "The European Employment Strategy: Genesis and Development."
European Journal of Industrial Relations, Vol. 5, No. 2, pp. 117-137.
(2000) "The European Employment Strategy." ECSA Review, Vol. 13, No.
3, pp. 4-6.
Unger, B. and Visser, J. (2000) "How Small Countries Negotiate Change:
Twenty-Five Years of Policy Adjustment in Austria, the Netherlands, and
Belgium." In Scharpf, F. W. and Schmidt, V. A. (eds), Vol. 2, pp. 175-264.
and Visser, J. (2001) "Learning and Mimicking. How European Welfare States
Reform." Ms., University of Amsterdam.
and Schludi, M. (2000) "Sequences of Policy Failures and Effective Policy
Responses." In Scharpf, F. W. and Schmidt, V. A. (eds), Vol. 1, pp.
(2001) "Market Integration and Social Cohesion: The Politics of Public
Services in European Regulation." Journal of European Public Policy, Vol.
8, pp. 825-852.
Kerwer, D., Knill, D., Lehmkuhl, D., Teutsch, M. and Douillet, A.-C. (2001)
Differential Europe. European Union Impact on National Policy-Making (Boulder,
CO: Rowman & Littlefield).
Hodson, D. and
Maher, I. (2001) The Open Method as a New Mode of Governance. Journal of Common
Market Studies, Vol. 39, No. 4, pp. 719-746.
Huber, E. and
Stephens, J. D. (2001) Development and Crisis of the Welfare State. Parties and
Policies in Global Markets (Chicago: University of Chicago Press).
and Schmid, H. (2002) "Real Integration or just Formal Adaptation? On the
Implementation of the National Action Plans for Employment." In de la
Porte, C. and Pochet, P. (eds) (2002a), pp. 69-96.
(2002) "EMU, EU Enlargement and the European Social Model: Trends,
Challenges, and Questions." MPIfG Working Paper 02/1, Cologne.
(2001) Markets and Moral Regulation. Cultural Change in the European Union
(Cambridge, MA: Cambridge University Press).
Küsters, H. J.
(1980) Die Gründung der Europäischen Wirtschaftsgemeinschaft (Baden-Baden:
and Pierson, P. (2000) "Social Policy. Left to Courts and Markets?" In
Wallace, H. and Wallace, W. (eds) Policy-Making in the European Union Fourth
Edition (Oxford: Oxford University Press), pp. 267-292.
and Pierson, P. (eds) (1995) European Social Policy. Between Fragmentation and
Integration (Washington, D.C.: Brookings).
Loth, W. (2002)
"Der Post-Nizza-Prozess und die Römischen Verträge." Integration,
Vol. 25, No. 1, pp. 12-19.
(1988) The Choice for Europe. Social Purpose and State Power from Messina to
Maastricht (Ithaca, NY: Cornell University Press).
(1999) The Political Economy of Pension Reform in Central-Eastern Europe
(Cheltenham: Edward Elgar).
Ryll, A., and Wagener, H.-J. (eds) (1999) Transformation of Social Security:
Pensions in Central-Eastern Europe (Heidelberg: Physica-Verlag).
"New Orientations for Social Policy." Social Policy Studies No. 12.
Pierson, P. (ed)
(2001) The New Politics of the Welfare State (Oxford: Oxford University Press).
(1998) Just Institutions Matter: The Moral and Political Logic of the Universal
Welfare State (Cambridge, MA: Cambridge University Press).
Sabel, C. F.
(1994) "Learning by Monitoring: The Institutions of Economic
Development." In Smelser, N. J. and Swedberg, R. (eds) The Handbook of
Economic Sociology (Princeton, NJ: Princeton University Press), pp. 137-165.
Scharpf, F. W.
(1988) "The Joint-Decision Trap: Lessons from German Federalism and
European Integration." Public Administration Review, Vol. 66, pp. 239-278.
W. (1999) Governing in Europe. Effective and Democratic? (Oxford: Oxford
Scharpf, F. W.
(2000) "Economic Changes, Vulnerabilities , and Institutional
Capabilities." In Scharpf, F. W. and Schmidt, V. A. (eds), Vol. 1, pp.
Scharpf, F. W.
(2001) "European Governance: Common Concerns vs. The Challenge of
Diversity." MPIfG Working Paper 01/6.
W. (2002) "Legitimate Diversity: The New Challenge of European Integration."
Cahiers Européens de Sciences Po.
Scharpf, F. W.
and Schmidt, V. A. (eds) (2000a) Welfare and Work in the Open Economy. Vol. 1:
From Vulnerability to Competitiveness (Oxford: Oxford University Press).
Scharpf, F. W.
and Schmidt, V. A. (eds) (2000b) Welfare and Work in the Open Economy. Vol. 2:
Diverse Responses to Common Challenges (Oxford: Oxford University Press).
Schwartz, H. M.
(2001) "The Danish 'Miracle'. Luck, Pluck, or Stuck?" Comparative
Political Studies, Vol. 34, No. 2, pp. 131-155.
Sinn, S. (1993)
"The Taming of Leviathan. Competition among Governments."
Constitutional Political Economy, Vol. 3, pp. 177-221.
Wolfgang 1995: Neo-Voluntarism. A New European Social Policy Regime? European
Law Journal, Vol. 1, 31-59.
Wolfgang 1997: Industrial Citizenship under Regime Competition: The Case of
European Works Councils. Journal of European Public Policy, Vol. 4, 643-664.
(2000) "Competitive Solidarity." In Hinrichs, K., Kitschelt, H. and
Wiesenthal, H. (eds) Kontingenz und Krise. Institutionenpolitik in
kapitalistischen und postsozialistischen Gesellschaften. Claus Offe zu seinem
60. Geburtstag (Frankfurt/M.: Campus), pp. 245-262.
(1997) "Worlds of Welfare and Attitudes to Redistribution - a Comparison of
Eight Western Nations." European Sociological Review, Vol. 13, No. 3, pp.
Svallfors, S. (1999) "Political Trust and Attitudes Towards
Redistribution." European Societies, Vol. 1, No. 2, pp. 241-268.
Swank, D. (1998)
"Funding the Welfare State. Globalization and the Taxation of Business in
Advanced Market Economies." Political Studies, Vol. 46, pp. 671-692.
Tanzi, V. (1995)
Taxation in an Integrating World (Washington, D.C.: Brookings).
Trubek, D. M.
and Mosher, J. (2001) "EU Governance, Employment Policy, and the European
Social Model." Ms., University of Wisconsin-Madison, European Union Center,
Frank (2002) "The EU and Social Protection: What Should the European
Convention Propose?" MPIfG Working Paper 02/6.
(1998) "Sovereignty and Differentiated Integration in the European
Union." European Law Journal, Vol. 4, pp. 355-388.
(2001) "European Commission: Involving Experts in the Process of National
Policy Convergence." Report by Working Group 4a, June.
||In 1960 and among the Original Six, the GDP share of total
public expenditures on social protection had varied by a ratio of
1.54-18.1 % of GDP in Germany and 11.7 % in the Netherlands. By 1965,
further convergence had reduced that ratio to 1.17. By 1990 and for the
Fifteen, however, the ratio had risen to 2.15-33.1% of GDP in Sweden and
15.4 % in Portugal (OECD 1994, tables 1a-1c).
||The exception are rules against the discrimination of women
in the labor market (one of Mollet's concerns that had made it into the
EEC Treaty) and rules ensuring non-discrimination and the portability of
social benefits for migrant workers (Leibfried and Pierson 1995).
||I am of course not suggesting that the Franco-German
compromise that shaped CAP - price support justified by the plight of
small peasants but benefiting large producers - was efficient in either
economic or social-policy terms (Scharpf 1988). But in that regard it was
hardly worse than the compromise solutions that had prevailed nationally
in Europe and elsewhere.
||That did not prevent the adoption of minimum European
standards on social and workers' rights either through Council directives
or through agreements reached in the "Social Dialogue" of the
peak-level organizations of capital and labor (Leibfried and Pierson 1995;
Falkner 1998). But since such standards must be acceptable to all member
states, they must not only be economically viable in the less wealthy
countries, but also compatible with existing industrial-relations and
welfare-state institutions - and hence relatively permissive (Streeck
||The importance of a Treaty base is emphasized by
||A very useful overview over all applications of OMC was
provided in the context of preparatory work for the Commission's White
Paper on European Governance by Working Group 4a (2001).
||But see, the very positive view of Minister Vandenbroucke
(2002) - whose role during the Belgian Presidency was essential for
reaching agreement on common indicators for "social exclusion"
(Atkinson et al. 2002).
||Lisbon European Council, 23 and 24 March 2000. Presidency
||Begg et al. (2001) suggest that the primary focus of
policies for social inclusion should be on the
"participatibility" of target groups - a term coined to parallel
the "employability" pillar of the Luxembourg Process.
||Similarly, Art. 126 TEC stipulates that the employment
strategy must be consistent with the "broad economic policy
guidelines" adopted by ECOFIN under Art. 99, 2 TEC.
||This is not meant to deny that most member states had their
own demographic and fiscal reasons for attempting to reform their pension
systems. It is merely suggested that pension issues came on the European
agenda when the Economic and Financial Committee threatened to treat them
in the Broad Economic Policy Guidelines from a purely fiscal perspective
||Similar differences have been observed with regard to the
impact of European liberalization policies on national regulations of
service public sectors (Héritier 2001; Héritier et al. 2001).
||ECJ, Kohll, C-158/96 (1998); ECJ, Decker, C-120/95 (1998).
||ECJ, PreussenElektra/Schleswag, C-379/98 (2001).
||Plaintiffs, after all, had been German firms, rather than
foreign suppliers of electricity.
||Minister Vandenbroucke (2002, 20) proposes a similar
amendment that would add social protection to the clause on gender
equality (Article 3, 2 TEC ) which would then read as follows:
"In all the activities referred to in this Article, the Community
shall aim to eliminate inequalities and to promote equality between men
and women and shall take into account social protection requirements, in
particular with a view to promoting accessible and financially sustainable
social protection of high quality organised on the basis of
However, the parallelism to Art. 6 is also recognized here. It would be
inserted as Art. 3, 3 TEC.
||It would be more correct to say that examples which do in
fact exist did not come about under the rules governing "Closer
Cooperation." Monetary Union has become the most important one of
these examples, but the "Schengen Area," even after it was
brought under the Treaty, also does not include all EU member states, and
the same is true of CESDP.
||In its recent Communication to the Constitutional
Convention, the Commission (2002, 17-18) goes as far as to invoke the
"equality between the citizens of Europe" to support its
campaign not only against existing "derogations" but also
against "provisions of the treaties concerning reinforced
||Even if "races to the bottom" have not yet been
reported in the literature, that should not provide much comfort. With the
completion of the Monetary Union, the high non-wage labor costs of
Bismarckian social-insurance countries have become major factors affecting
international competitiveness in the exposed sectors. If a country should
succeed in achieving major reductions, others would now find themselves
forced to follow suit - with haphazard overall outcomes that might be much
less desirable than what could be achieved through coordinated reforms.
||Under the direction of Gerda Falkner, a series of projects
is presently examining the implementation and the effects of five social
directives in all fifteen member states. A description of the projects and
draft reports are available on the home page of the Max Planck Institute
for the Study of Societies, Cologne: http://www.mpifg.de/fo/multilevel_en.html#proj5.
||This was suggested in Scharpf (1999, 175-180).
||I owe this suggestion to a discussion with Gerda Falkner
who, however, should not be held responsible for the way it is used here.
||The solution would approximate the problematic ideal of a
revitalized "Community Method" which was explicated in the White
Paper on European Governance (Commission 2001; Scharpf 2001).
||The flexibility of Open Coordination might be lost if the
Commission could automatically resort to infringement proceedings whenever
it saw the unity of European law threatened by differentiated national
solutions. Thus it seems desirable to require authorization by a majority
in the Council.
||Even in the absence of framework directives, it would thus
be useful to introduce a form of "differentiated Open
Coordination" among groups of countries facing similar problems of
social-policy reform. If successful, this might then work out as a
"foot-in-the door" strategy toward the adoption of framework
directives or even toward Closer Cooperation.
Copyright © 2002 Fritz W. Scharpf
No part of this publication may be
reproduced or transmitted without permission in writing from the author.
Jegliche Vervielfältigung und Verbreitung, auch auszugsweise, bedarf der
Zustimmung des Autors.
MPI für Gesellschaftsforschung,
Paulstr. 3, 50676 Köln, Germany