The Economic Crisis, the EU and National Welfare State Reforms in the 21st Century

This paper argues that the agenda and policies of European welfare state reforms have changed fundamentally within the last four years. Expansion and consolidation is giving way for retrenchment and fragmentation. Social investments and insurance is giving way for budget cuts and incentives. Mixes of blame avoidance, obfuscation and credit claiming is supplemented by forthright agendas on cuts in welfare benefits, wages and staff. This paper investigates on-going European national reform strategies undertaken and scheduled in view of the debt crisis, EU general demands and country specific recommendations. The analysis concerns reforms of labour markets (employment protection legislation, unemployment insurance and active labour market policies), pension reforms (old age and early exit schemes) and public sector reforms (social services, education and health).  Based on up-to-date material from national experts in these three areas the comparative analysis shows that most countries see two waves of reforms. The first wave of reforms mainly responds to the crisis as a demand shock. The second wave is unfolding with more fundamental reforms not only in the PIIGS countries, but also in Northern European countries with better public finances. Permanent austerity, stagnation of productivity growth and ageing population is likely to further the direction of reforms, if, and when the economic crisis is over. The Nordic model with an emphasis on active labour market policies, social investments in children and youth, and active ageing is no longer the blueprint for the European social model and national welfare reforms.