An analysis of the German government's response to European Union (EU) social policy initiatives may be a more difficult task than for several other Member States for three interrelated reasons. First, Germany is a federal state. It gives the single states (Länder), as well as the municipalities, certain jurisdictions in the area of social policy, and the Länder have constantly opposed EU interference in their competencies. Moreover, the Länder have power via the Bundesrat, the second chamber, and may take social policy positions that contrast with that of the federal government or the Bundestag, independent of proposed or legislated responses to EU initiatives. Second, federal elections in September 2005 produced a change of government. The Christian Democrats (CDU/CSU), the major opposition party from 1998-2005, now lead a coalition government with the former government's major party, the Social Democrats (SPD), which previously formed a coalition with the Green Party. Thus, the conflicting interests and cross-party positions of the two political parties now forming the federal government still persist. Third, the two parties of the ‘Grand Coalition’ have agreed to tackle a number of social policy reforms during this parliamentary term (2005-09). Therefore, social policy is in such a state of flux that this chapter is unable to foresee all imminent changes.

We first explore the relationship between the ‘European’ and the German model of social policy and analyse the direction of social policy reform in Germany since the early 1990s. We then examine official responses to various EU initiatives. Our study shows a considerable difference between the European ‘third way’ social model as promoted by scholars such as Giddens (1999) and Esping-Andersen (2002) and the German approach to a social market economy. However, Germany generally welcomes an EU role in social policy and has already moved to some degree to the EU's ‘third way’ model. Despite this, however, politicians in Germany are not prepared to carry out a complete shift and are reluctant to further extend EU competencies in social policy.

The European social model versus the German Model

Analysing the relationship between Germany's social model and what the EU envisages as a model for European social policy requires a discussion of two questions.