There is a growing sense that the European social model is unsustainable and in need of reform. As the German chancellor, Angela Merkel, is fond of claiming, the European Union (EU) accounts for roughly 7 per cent of the world’s population and 25 per cent of its GDP, but over 50 per cent of its welfare spending. The implication is that Europe’s welfare states are not only generous in comparison with provisions elsewhere, but will become unaffordable without major recasting.

The European ‘welfare state’ eludes concrete or universal definition. Its principal purpose, however, has been to help governments reconcile the often competing dynamics of capitalism, equity and democracy. Free-market economies have an inherent tendency towards income inequality and distribute economic power unequally, while democratic government seeks to distribute political power more evenly and to promote notions of social equality.

In short, it seems that while the EU’s welfare activities perform not too badly if compared to the more cautious demands, they clearly fall very short of the more far-reaching conceptions. What remains is the suspicion, shared by many authors, that “member governments have lost more control over national welfare policies … than the EU has gained de facto in transferred authority”.

The growing challenges & the welfare state system

It is fairly noted and observed that the domestic welfare states are nowadays restrained by European integration: Firstly, by having to guarantee free movement of labour within the integrated Europe and the related trans-national social security careers with the related EU co-ordination rules. Secondly, by having to execute the anti-discrimination policies imposed by EU law aimed to support women and minorities with regards to age, racial and ethnic origin, religion and belief, sexual orientation, and disability. Thirdly, by having to respect the minimum standards laid down in EU regulation for the fields of health and safety at the workplace and labour law. Fourthly, by respecting some procedural rules under the open method of coordination (see above) and hence by regularly reporting and justifying the domestic choices in many other fields of social policies. These are all direct effects of European integration.

The Schegen agreement

Thirty years ago in Luxembourg, European leaders signed the Schengen Agreement, enacting a policy of freedom of movement that has been a source of pride for the whole continent.

While the Schengen Agreement tore down internal borders, Europe kept reinforcing its external ones with a complex system managed by the supranational agency Frontex. Then it began putting up fences, walls, and even resorting to the army. And now, Europe is erecting again its internal borders as countries try to stop the advance of migrants.

National borders are reassuring, but are largely useless when their re-establishment would mean hindering European exchange, dealing a new blow to the EU’s economic growth and disrupting a European unity that has already been under strain.

The EU is not working. The EU is unloved by its citizens. Over the next few months, its popularity will be measured by polls for the UK referendum. The EU, in spite of everything, will survive, but the last thing it needs is the end of the Schengen zone: after reaching that point, the uphill climb will just get even steeper.

Multiculturalism and  the migration policy

Europe has constantly behaved with arrogance at all three levels: each country’s internal policies, continental policy, and international policy.

The failure of multiculturalism amid an exhausted welfare state, along with a short-sighted policy in the Middle East (where it has sent troops), are some reasons why people are massively crossing the Mediterranean sea to reach Europe.

The migration policy Europe’s welfare state has attracted migrants from all over the world for decades. However, that inefficient model is already crumbling under its own weight. It should be replaced immediately while countries open their doors to migrants.

Migration and mobility bear an enormous potential for the European Union, migrants, and also the countries of origin. For the EU and its Member States, migration can help to reduce the shrinking working-age populations, contribute positively to state finances and social security systems and create innovations and entrepreneurial potential. On the individual level of the migrant, well-managed migration means development: Migrants can improve their standard of living, expand their personal skill-set and qualifications and realise upward social mobility in the country of destination.

Countries of origin may benefit from remittances, knowledge transfer, investments and the establishment of new business relations. However, in reality, these benefits are often not – or only partially – realised; inadequate regulatory frameworks for mobility and integration lead to suboptimal results. In the EU, badly managed migration may cause wage-dumping, a lack of efforts to increase the labour market participation of the domestic working-age population and a sceptical public opinion on migration as well as populist politicians exploiting and fuelling this scepticism.

Finally, let’s not forget that behind all the statements, the calls for European solidarity, and humanitarian do-gooders, lies the never-ending negotiations and processes inherent to politics. Cold calculations, power games, and trade of favors are always present.

That’s why Europe, now led by the countries that migrants want to reach, reacts by imposing a quota, telling every country how many people they should receive.

Even so, it will be difficult to keep people in the country of arrival. They will continue their march from Eastern and Central Europe to Germany, France, and Scandinavia. There is where they want to live. And that is when Europe starts to clash with its own principles.

Maps are showing again internal borders and walls in Europe. And we all know that it is easier to build a wall than to tear one down.

The demon of Islamophobia

Islamophobia stretches across the political spectrum in Europe. The German organization, PEGIDA (Patriotic Europeans against the Islamization of the West), based in Dresden, is building ties with other right-wing populist movements throughout Europe.

Greater collaboration is driving the number of protestors who are angered in part by the European political establishment and media. To the PEGIDA ( a UK based anti Islamisation movement) demonstrators, the counter-demonstrators hold a monopoly on the public discourse surrounding the future of immigration and Islam in Europe.

While retaining the ideals of the social-welfare state favored by the left, the right-wing populist parties advocate for great restrictions on the construction of mosques and number of immigrant arrivals along with a healthy dose of Euroscepticism.

With the continuing economic troubles in the continent, the anti-immigration and anti-Islamization trend is becoming a part of the mainstream public discourse. The success of the Sweden Democrats (SD) illustrates this pattern all too well.

France, Austria, and Denmark are three countries that show how Islamophobia poses greater political risk to Europe’s struggling economy:

The reforming strategies

Those contemplating reforms of social models and policies should not overlook the abiding strengths of European welfare states, even if it is accepted that major challenges arising from the drivers of change discussed above have to be confronted. Transformation of the welfare state cannot, however, be avoided, so it is pertinent to ask towards what, for whom and how? It is worth stressing, first, that austerity and the aftermath of the financial crisis are largely short-term considerations.

Certainly, welfare states need to be fiscally sustainable. Countries that have allowed social spending to race ahead of fiscal capacity will have to rein in the excesses. Equally, however, the proposition that welfare spending needs to decline sharply as a proportion of GDP is a false one.

The welfare state offers a comprehensive response to social risks which, if not covered by the state, would still arise. Critics often overlook the fact that the welfare state deals with these risks efficiently. Instead, the question Europeans need to answer, not least in pondering the ‘Merkel formula’, is whether the costs of ‘non-social’ responses would be lower.

The employment challenge

New employment patterns are an acknowledged, if often insufficiently understood, part of the picture. As noted above, the median worker today is no longer a man employed in a factory, but is as likely to be a woman as a man, working in an office, hospital or care service. Careers evolve and may be subject to sharp changes of direction. Work–life balance is an objective that can have pronounced effects on welfare arrangements. In the light of these transformations, the answer may be to reinforce moves already apparent in some EU countries towards a system in which entitlement is based on citizenship rather than employment history.

A more pessimistic scenario of the future of European welfare states follows the argument of the German social thinker Fritz Scharp who says that, due to the inherent bias towards negative integration, the formation of a European social market economy with a strong social dimension is impossible. Instead, EU member states will converge towards a liberal welfare model, entailing retrenchment of the welfare state, especially in the social-democratic countries (following the Esping-Andersen conceptualization). Choices have to be made, and the means by which decisions are taken invites examination, particularly where new demands (e.g. for enhanced childcare provision) can only be met if other spending is reduced.

It is well known that welfare states are ‘sticky’, in the sense of being politically resistant to change – if only because losers from reform are bound to shout louder than new winners. Politicians apprehensive about losing elections find it easy to shy away from necessary reforms. Nevertheless, as Anton Hemerijck (the director of the Netherlands Council for Government Policy), taking issue with some of the more negative assessments, asserts: ‘’both the welfare state and EU, two major feats of mid-twentieth century institutional engineering, have at critical times been able to reinvent themselves’’.

The ‘Nordic model’ and the European integration

More specifically, the Nordic countries are the best examples for the rest of Europe to follow, according to the experts. Universalism is one of the main characteristics of the Nordic model of the welfare state, meaning that there is more generalized access to welfare state services and fewer conditions regarding access to social benefits. Another central characteristic of the Nordic countries is that they are sustained with high levels of taxes and high social contributions from both employees and employers. Usually, their services are very efficient and are characterized by high quality.

The European Economist Rodríguez Mora argues that the rest of Europe “will have to imitate the Scandinavian model.” Along the same lines, Bahillo cites Denmark, Finland and Luxembourg as models for the entire European Union to follow and imitate. More specifically, de Bustillo an economic researcher says that the right path forward for each nation “will depend on the ideal vision of society that each country has in its head.” While he generally agrees with his colleagues, he adds some nuances.

” for me, the Scandinavian model seems a particularly good example to follow because it combines competitiveness with solidarity and high levels of protection regarding risks of illness, unemployment, old age and so forth. The issue is that in order to have this model, you need — among other things — to be ready to support high levels of taxation. On the other hand, history shows that it is not easy to translate institutions from one country to another country, and institutions must be adapted to local conditions.”

In relation to European integration, the underlying challenge can be seen as a variant on Dani Rodrik’s ‘trilemma’, in which there is mutual incompatibility between global economic integration, the nation state and democracy. In his analysis, only two out of the three can simultaneously be sustained. The result is that much of the debate about designing a welfare state and judging the pros and cons of its different components is influenced by ‘political ideology’. For some, the state should play a central role in income redistribution in order to sustain welfare budgets. For others, the capacity to deliver social welfare is a by-product of a less interventionist approach to economic governance. Inevitably, the particular political outlook then influences the methods by which a government seeks to deliver welfare policies.

The Role of the European institutions

The political and attitudinal dimensions are rarely considered in academic analysis of the welfare state, but welfare regimes are always political constructions held together by a particular constellation of democratic and electoral forces. Many of the key institutions that supported the creation and expansion of the welfare state appear to have weakened over the last thirty years – not merely the trade unions and the major social democratic parties, but many post-war ‘neo-corporatist’institutions. On the other hand, welfare states have actually been remarkably resilient in the postwar era.

For example, the attempt by neo-liberals to shrink the welfare state in the United Kingdom during the Thatcher governments barely succeeded. Dismantling existing social provisions proved almost impossible, and was a recipe for electoral unpopularity. At the same time, few influential and politically powerful coalitions emerged to persuade sectional interest groups and key electoral constituencies that the welfare state ought to be reshaped. This has led to a politics of retrenchment based on cutting and trimming at the edges, rather than determining priorities on the basis of first principles and reshaping the welfare system accordingly. In fact, centre-right governments have often been most wedded to the status quo ante.

The David Cameron advocacy

The British government is currently pushing for EU rules on freedom of movement to be changed. Prime Minister David Cameron worries that generous welfare systems are being abused by workers travelling from poorer countries to wealthier ones, bringing along their families and draining public finances. The specific details of EU reform are vague, but are rumoured to at least partially strip welfare entitlements from recent EU migrants.

Conclusion

The biggest threat to social justice in Europe is not radical institutional change, but the ‘frozen’ welfare state landscapes where resistance to change is institutionalized. Social democratic parties have been adept in the past at using higher public spending commitments to build coalitions of voters based on appealing to ‘sub-sections’ of the electorate by dispensing benefits to working parents, poorer pensioners, public sector workers, and so on. There is, as yet, no real sense that any of the parties has fully grasped the implications of moving from an era of ‘plenty’ to an era of ‘less’, while addressing the in-built conservative ‘bias’ of the welfare state.

Just like ‘globalization’ has no equal impact on the European welfare states presents a very similar argument: the effects of European integration also seem to touch all clusters of welfare states in Europe, though in various ways and degrees.

The original six EU founding states had welfare systems of the Bismarckian type of workbased social insurance. Differences were then much smaller not only in terms of structures but also of levels. Therefore, harmonization on the EU-level would initially have been easier than ever since – but this was ‘a road not taken’. After the first EU enlargement during the 1970s, Denmark, Britain and Ireland had already increased the heterogeneity of the EU dramatically. Now one Scandinavian and two Anglo-Saxon types of welfare state were within the EU. Plurality increased even further later on, with Southern, further Scandinavian and Continental, and then Eastern European reform states becoming members.

A full convergence is neither functionally needed nor politically probable, for adaptation seems to generally happen ‘in national colours’. In the medium run, it seems therefore likely that the various direct and indirect effects of European integration will result in what can be called ‘bounded varieties of welfare’ in Europe.

It seems that the Continental systems are most adversely affected by the internationalisation processes inside and outside the EU because their sources of income a partly no longer viable. When mobile production forces can easily migrate and flee high employers’ contributions to social security, shifting the burden elsewhere will be hard to prevent.

Given focus on the European reforms model based on Conservative-Corporatist, Liberal, and Social-Democratic orientations,it appears that the European leaders need to get serious about addressing Europe’s economic and social problems in a clear and consistent way. Whitewashing the problems to appeal to voters will only encourage further populist tendencies that attract disaffected voters on either end of the political spectrum.

And yet there is a growing apprehension that the concept of the European ‘welfare state system’ could be under great threat because of the ‘divisive European policy’ regarding the ‘refugees crisis ‘ accompanied by the emerging exigencies of the European security’. And the thesis– that alienating the Muslim population will increase radicalization among the vulnerable and drive out both skilled and unskilled workers that the European economy so sorely needs–holds much logic.