Why EMU Is—or May Be—Good for European Welfare States

Abstract

Abstract Argues that the commonly expressed fear, that EMU will contribute to the decline of welfare states in Europe, is not clearly borne out by the historical evidence, and that it may even possibly come to show positive effects in contributing to a new architecture for a coordinated welfare policy. The argument proceeds in four stages. First, it contests the assumption that EMU is a ‘neo‐liberal’ project inherently inconsistent with the preservation of large, re‐distributive welfare states. Second, it shows that, while there have been some corrective adjustments linked to public sector debt reduction, there has been no ‘downward convergence’ in welfare spending. Third, it argues that the Stability and Growth Pact implies no mechanisms inherently adverse to the welfare state, and that EMU implies no weakening of the capacity of Europe's social and employment systems to cope with external shocks. Finally, it considers the experimental development of a new capacity at EU‐level to coordinate broad macroeconomic objectives with social and employment policies.

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