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This chapter examines the European Union’s social policy. In the 1980s and 1990s, the EU accumulated significant regulatory mandates in social policy, reaching out more recently to anti-discrimination politics. Yet due to pressures from integrated markets, member governments have lost more control over national welfare policies than the EU has gained in transferred authority, although this development may have stopped, affected by the EU’s responses to the economic crises since 2008. The chapter first considers the limited success of activist social policy before discussing European integration and market compatibility requirements, focusing on the freedom of movement for workers and freedom to provide services and their implications for European competition policy. It also explores how European integration affects national welfare states and concludes with an assessment of Europe’s multi-tiered social policy.

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This paper uses the findings of a very recent major international research collaboration on the impact of federal arrangements on the development of the welfare state to explore the possibilities of progress beyond Europe's present diversity of nation-state welfare standards. These findings -based on the longterm historical experience of the OECD's oldest federations -suggest that federal arrangements tend to slow down welfare state consolidation, but that much depends on the context of historical development. The emergence of bypass mechanisms circumventing federal veto-points is located as the key to welfare progress, and the role of regulation in European integration and the special role of the ECJ as well as that of 'the open method of co-ordination' are tentatively identified as possible EU bypass equivalents.

Where are we at with European integration in the context of increasing world market interdependence? How does European integration already affect national welfare states? How does the asynchronic realization of the four market freedoms in building the Single Market affect the developmental potential for a European vision of welfare? Is Europe a special case in world market integration? Does the Western European case offer unique chances for defending its welfare state cultures-if not any more at the national, then now at the European level? Are these chances special compared with other integration efforts such as NAFTA? Questions such as these are confronted in this essay. The author sees the twenty-first century as a special window of opportunity for re-embedding the post-World War II welfare state compact at the European level, though this will not take the form of a déjà vu, of a "European welfare state". Rather it may take the form of a mixture of European "re-insurance" of basic welfare elements, "integrated" welfare state reform efforts EC-wide and sectoral "buffer insurance" ( for example for European Monetary Union in the area of unemployment). Such steps require a constitutional move towards a full economic and fiscal union. Compared with the USA Europe will otherwise never be able to "get its act together". An EFTA will not do in Europe, on such saturated welfare state terrain.Social disintegration is not a spectator sport-those on the sideline also get splashed with mud from the field. (Rodrik : )