The 1990s have been a decade of big changes for welfare states. The adaptation process which in the United States and in Britain started in the 1980s has become part of policy-making also in continental European countries. The main objective of reform is to restore the compatibility of social policies with the changing economic and demographic contexts. In most cases, this objective is pursued by retrenching existing social programmes. Welfare retrenchment, thus, is not any longer an Anglo-Saxon idiosyncrasy. Countries such as Sweden, France and Germany, in which social policies are widely praised and contribute to the structure of national identities, have all curtailed their welfare states in the last few years.

In both waves of retrenchment, pension schemes have been a privileged target of governments' attempts to reduce spending on welfare. Pensions generally constitute the largest single item of social expenditure, so that successful cost containment in this area of policy is particularly beneficial to governments' budgets. In addition, pensions are directly exposed to the twin pressures of economic and demographic change. Economic changes, like globalisation, are reducing governments' ability to generate revenues. On the other hand, population ageing is resulting in increased pension expenditure. This is a powerful incentive for governments to take action. It explains why pension reform has been high on the agenda in most advanced industrial countries over the last decade.

In general, however, continental European welfare states are proving to be less vulnerable to cuts than their Anglo-Saxon counterparts. One way to explain this is with reference to their higher degree of middle-class integration.