Globalisation and the reform of European social models

Abstract

Europe's labour and social institutions need urgent reform in order to grasp the opportunities offered by globalisation and avoid the threats. But the notion of a single 'European social model' is largely unhelpful for thinking about reforms. Of the four main models operating in Europe, the 'Nordic' and 'Anglo-Saxon' models are both efficient, but only the former manages to combine both equity and efficiency. Critically, the 'Continental' and 'Mediterranean' models, are inefficient and unsustainable. These models must therefore be reformed, probably by adopting features of the two more efficient models. These reforms may also involve changes towards more or less equity. Combining product and capital market reforms at EU level with labour market and social policies at national level would be desirable, particularly within the euro area. The Lisbon Agenda has failed to deliver this coordination. The best policy strategy would be for the EU to go back to basics and focus all efforts on completing the single market. At the same time, member states that require urgent reform of their labour and social policies must take internal action. Failing to do would not only run the risk that Europe misses the opportunities of globalisation, but could even be damaging to both the single market and monetary union.

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