Intensified European integration

The European Union (EU) is, like the modern welfare state, an institutional innovation of the mid twentieth century. In recent years, the EU has emerged as a critical force in issues of work and welfare. Historically, social policy is premised on the national state. The fusion of territory, national identity, political legitimacy, law, public policy, and administration in the 'nation state' is increasingly being challenged, undermined, and superseded by the cross-border movement of capital, goods, services, and persons, regulated by binding European rules of supranational cooperation (Zurn and Leibfried, 2005). Although substantive social policy choices largely remain domestic affairs, national welfare states today are embedded in a complex multi-level system of EU social and economic governance. It is fair to say that in the EU we have entered an era of semi-sovereign welfare states (Leibfried and Pierson, 2000; Ferrera, 2005a; Falkner, 2010a).

Since the Treaty of Rome of 1957, European integration has deepened, expanded, and, hence, constantly reinvented itself. The Union successfully incorporated twenty-one new Member States, beyond the original six, established a single market, and developed a single currency—the euro—which has become the second largest global reserve currency. In the process, European economic integration has fundamentally redrawn the boundaries of national systems of welfare provision, by constraining the autonomy of domestic policy options and also by opening opportunities for EU legislation, directives, guidelines, and social policy agenda-setting (Ferrera, 2005a; Zeitlin, 2005c). From the beginning, European leaders understood the need for domestic welfare provision as a key complement to the establishment of the common market. The ultimate aim, now anchored in the Lisbon Treaty, was to create a 'social market economy' with a clear commitment to high employment, universal social protection, and effective anti-poverty policy.

Throughout the post-war decades, the assumption was that EU institutions would best concentrate on cross-border market integration, leaving national governments free to develop and expand their welfare states as they saw fit. Since the mid 1980s, this division of labour has proved progressively fragile. EU market liberalization and macroeconomic policy integration, evoked by the neoclassical economic policy consensus of the 1980s, have made domestic social policy systems ever more 'institutionally incomplete' in regulatory coverage (Ferrera, 2005a). While national leaders agreed on the rules for the Single Market, they did not recognize the need for establishing some kind of supranational social policy framework. According to Maurizio Ferrera, there is an inherent tension or institutional asymmetry between the genuine EU concern with social cohesion and the predominant institutional modus operandi of the EU. Post-war welfare state expansion hinges on the logic of 'closure', of clearly demarcating cohesive citizenship communities of the nation-state. In contrast, the logic of European integration is based on 'opening'—on the weakening of barriers and closure practices that European nation-states have built to protect their citizens from economic contingencies, in favour of free movement, undistorted competition, and nondiscrimination. With the supremacy of free movement and competition rules since the late 1980s, the nation-state is no longer the sole and ultimate arbiter of inclusion and exclusion of social protection. On the contrary, the thickening layer of European market integration has resulted in an erosion of domestic social and economic policy autonomy, because the Single Market and the EU's macroeconomic policy repertoire is asymmetrically designed to serve the purposes of price stability, fiscal sustainability, and the progressive removal of barriers to trade, labour, capital, and services so as to enforce the 'economic liberties' of individuals and firms (Scharpf, 1999, 2004, 2010). The growing asymmetry between market-making 'negative integration' and market- correcting 'positive integration' has been reinforced by the basic legal architecture of the EU. Because EU law precedes domestic law in areas related to the Single Market, the rulings of the European Court of Justice (ECJ) have binding effect. In turn, the ECJ rather aggressively assumed responsibility for progressive European economic integration through its interpretation of the Treaties to remove national regulation (Dolvik and Visser, 2009; Scharpf, 2010). In addition, the high consensus requirements of political decisions in favour of 'positive integration' in a Union of 27 Member States make it nearly impossible for European policymakers in concert to correct market deficiencies through common social policy directives and some measure of tax harmonization. The initiative for positive integration lies in the jurisdiction of intergovernmental institutions, such as the European Council and the European Parliament. As intergovernmental decisionmaking require unanimity or qualified majorities, it is exceedingly difficult to reach political consensus across all Member States. A number of attempts to expand 'social Europe' have on numerous occasions met with Member States' fierce resistance, eager to preserve their domestic labour market and social policy competences, either as a shield to welfare regime competition or so as to accelerate domestic labour market deregulation and welfare retrenchment (Burgoon, 2009).

Notwithstanding the legal primacy of the Single Market, the European Commission has tried to step up EU-wide social policy ambitions since the late 1980s. This has resulted in a few examples of positive integration, ranging from directives on working time and parental leave, supported by European social partners (Falkner and Leiber, 2004; Falkner etal., 2005). In 2000, the Portuguese presidency of the EU raised the social and economic policy ambitions of the EU by putting forward an integrated agenda of economic, employment, and social objectives, committing the Union to becoming the 'most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion'. The Lisbon Strategy was strongly influenced by the social investment paradigm as it emphasized the positive complementarities between equity and efficiency by 'investing in people and developing an active and dynamic welfare state'. The Lisbon Strategy between 2000 and 2010 played an important role in raising the importance of the EU's social dimension. Particularly the European Employment Strategy (EES), embodied in the Lisbon strategy, helped to redefine the European employment problem away from managing unemployment towards the promotion of employment, fostering the diffusion and acceptance of the overriding objective of increasing labour market participation, on the basis of social investment priorities of activation, active ageing/avoidance of early retirement, part-time work, lifelong learning, parental leave, gender mainstreaming, balancing labour market flexibility with social security, and reconciling work and family life. Over the Lisbon term, employment rates in Europe have indeed risen by an impressive 8 per cent. However, in the policy areas of social inclusion, the Lisbon process failed to address rising inequalities. It does seem that the old division of labour between EU institutions and domestic political arenas, with the former concentrating on market liberalization and the latter seemingly retaining near monopoly over domestic social policy and labour market governance, has reached a cul-de-sac in the aftermath of the global financial crisis (Tsoukalis, 2009).

 
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