Revision lecture: Crises in European Welfare States Globalisation and the role of EU expansion

European welfare crisis From early 1990s, pressure to reduce welfare budgets (rising unemployment) ‘growth to limits’? – causes –Demography (ageing populations & changing dependency ratios) –EMU and convergence criteria –Welfare costs as cause of unemployment (globalisation and growing competition).

The Globalisation thesis Growth of multinational firms – seeking cheap rents Growth of global financial markets ‘Drive to the bottom’ – competitive undercutting by EU member states –Pension reform –Tighter control on unemployment benefits –Transformations from help for social dependence to labour market activation strategies (post 1997)

Is globalisation the driving factor? Changing demography (burdens of age) Overall welfare expenditure has not declined (no ‘drive to bottom’) Leibfried: voters ‘punish’ governments that cut welfare (viz Schroeder + Sarkozy) Firms require infrastructure Strategies of ‘competition on excellence’ can work (Sweden) Crouch: ‘liberal’ states fuel consumption + employment via private sector debt (viz the sub- prime crisis crash)

And the effects of EU expansion? CEE states with lower labour costs will undercut old EU 15 (drive to bottom) Migrant labour will force down wages Hence:- – constraints on immigration imposed by Germany and France –Political pressure to contain immigration across Europe –Rise of far right political parties across EU

The counter-arguments (liberal) CEE countries: –a long wait for signs of growth: –little help with Copenhagen criteria (restructuring) CEE countries: economic growth raises demand for other products and services Migrant labour: –Not a burden, but take on unpopular jobs –Not a permanent fixture –Help to raise demand by sending wages back to own country –Thereby equalising living standards across EU

EU – the liberal turn Post-2000: the EES: divisions between ‘good’ and ‘bad’ welfare expenditure OMC (benchmarking and ‘soft law’) to replace directives (inc. pensions, health and social exclusion) –Assumes competition produces excellence –Assumes viable ‘policy learning’ (e.g.‘flexicurity’) –No sanctions against miscreant countries

The EU and democratic deficit Foundation (EEC) 1957 Treaty of Rome –Commission as initiator of directives –Unanimity in Council of Ministers –Gender equality main social issue ‘Ever closer union’ Maastricht Treaty 1992 –Qualified majority voting (+ opt-outs) –EMU –Social Chapter (UK opt out) 2003 Nice introduces QMV (population and weighting)

Reform: Treaty of Lisbon 2007 More democratic Europe? Central representation –A European council president (2.5 year term) –Single foreign representative Co-decision on directives: Council and European Parliament Citizen’s Initiative ( 1 million signatures) Charter of Fundamental Rights made legally binding (Dec 2009) – UK opt out Extension QMV in Council voting from 2014

The Crash and its impact Translation private debt to public debt Where the Stability and Growth Pact fails, the bond markets succeed PIIGS: debt: fiscal orthodoxy & the Troika Recurrent Eurozone crisis= lost solidarity Democratic defences v. financial probity What price the European Social Model?