ABSTRACT
This article aims to address what we have learned in the political economy literature on the relationship between economic and monetary union (EMU) and what constitutes the heart of the European social model – the welfare state. It concerns itself with the impact of ‘the single most important and supranational step in European integration on the single most important area still reserved to national politics’ (Martin and Ross 2004: 17). From the early 1990s onwards, research reports on European welfare states referred to significant pressures stemming from EMU that severely constrained domestic social policies. In parallel, the literature on EMU pointed to serious ramifications for European welfare states. In fact, scholars of diverse persuasions were surprisingly in general agreement. Whether with anxiety or exultation, opponents and advocates of EMU expected that EMU would potentially downsize Europe’s welfare states through imposing macroeconomic austerity in general and budgetary restraint in particular. According to the conventional wisdom of the time, the integration process would breed very strong pressures on domestic budgets to ‘slim down’ on the way to EMU membership and these would ultimately lead to the downsizing of welfare states. Additionally, it was often suggested that EMU would also provide governments with a trump-card that would serve to strengthen their hands in pruning their welfare states. Some scholars even went so far as to claim that this scenario of across-the-board retrenchment would spell the end of the European welfare state as we know it.
