- Are the decision-making structures of the EU (Council, European Parliament, Commission) in combination with nation-state institutions suited to a harmonised social democratic politics?

Both questions will briefly be considered in the four policy areas of fiscal, monetary, employment and social policy.

Fiscal policy

All social democratic governments had turned to a policy of budgetary consolidation by the end of the 1980s. There are currently no signs that they want to use the European arena  for a coordinated policy of fiscal demand stimulation. However, the leftist governments of Italy and France in no way interpret the fiscal stability criteria of the Maastricht treaty in full accord with the orthodox-fiscal spirit of the EMU 'Growth and Stability Pact'. This approach is not shared by the other left-wing governments such as those in Britain30, the Netherlands, Denmark and, since Lafontaine's resignation, Germany. These governments would not only reject a coordinated demand policy through the European Union, but would also pressure for strict adherance to the stability criteria in EMU member states.

However, even if there were social democratic consensus for a new form of 'Euro-Keynesianism', there would be little hope that such a policy could be effectively implemented. A central problem would be that of timing; specifically, a targeted implementation of an anti-cyclical European demand policy. Due to the European Union's complicated multi-level decision making procedures the periods of decision making and implementation would be too lengthy. The danger of belated pro-cyclical intervention in the economic cycle would be even higher in the European context than is already the case in federal polities³¹. The EU does not currently have sufficient resources to pursue a fiscal policy of its own, nor is it likely to have these in the foreseeable future. A demand policy launched at the European level is for these reasons neither probable nor likely to be effective.

There does, however, appear to be more willingness among social democratic governments for European coordination on the revenue side; i.e. in taxation policy. From a social democratic perspective there would seem to be a greater need to reach agreement here so as not to be drawn into a 'tax-dumping' race for reasons of national competitiveness. However, the history of the past ten years shows how difficult it is to harmonise or even simply coordinate national tax policies within the EU. There has been particular resistance from the Blair government to more closely coordinated tax policy. On the other hand, France, Germany and Austria have displayed increased willingness to pursue harmonisation in the area of tax policy. The social democratic-led Danish, Swedish and Finnish governments are also likely to be in favour of European coordination of taxation, as it is these highly-taxed welfare state countries that have the most to fear from each new round of 'tax-dumping'. However, this fear has so far clashed with the pronounced Scandinavian tendency to protect their nation-state prerogatives as far as possible³². The coordination of tax policy within the EU remains a worthy and realistic social democratic goal, but one which has thus far been too little pursued in practice.

Monetary policy

With the EMU taking effect and the establishment of the European Central Bank (ECB), since 1999 the eleven EMU member states have centralised their monetary policy. The institutional structure of the ECB and the philosophy behind it has committed the European Central Bank to a policy of price stability. However, here there is - to varying degrees - willingness among the leftist governments of Europe to relax this rigid monetarist policy. This is particularly the case when, as at present, there is no current inflationary pressure and there exists the danger of economic downturn promoted by monetary policy. However, the willingness does not extend so far as to instrumentalise monetary policy in a neo-Keynesian manner so as to achieve anti-cyclical evening out of the business cycle. However, there is a clear tendency to add to the goal of price stability the aims of growth and employment as equally important parameters in monetary policy. This would tend to be less restrictively construed in the direction of a less rigid control of money flows, as has been successfully practised by the US Federal Reserve Bank in the 1990s. From this perspective the European Central Bank and the monetary union appear to provide a stronger chance to support the more strongly growth and employment oriented social democratic economic policy than was previously the case under the largely European dictates of the German Bundesbank. However, even this possibility must be more strongly utilised by the social democratic governments than has so far been the case. In particular, the German red-green government will have to examine and 'social democratise' its uncritical adoption of the conservative dogma in monetary policy. In this the French leftist government would be a powerful partner.

Employment and labour market policy

The greatest convergence among the social democrat-led governments around launching a common economic policy within the European Union seems to be in labour market policy. Here there is broad consensus for reviving the 1993 employment programme of Jacques Delors, though this is still resisted by the British Labour government and the Dutch social-liberal government. However, so that such a policy would not be acting solely in the area of regulation or deregulation, but would also include an active labour market policy, member states would need to allocate more resources to the European Union or undertake substantial restructuring of the EU budget. Potential exists here in the area of agricultural expenditure. However, this would require a political will that by no means exists uniformly across the social democratic governments.

The Amsterdam Treaty and the employment guidelines subsequently passed so far constitute only a framework, albeit a perfectly sound one, that must be fleshed out with concrete measures. The move from persuasive guidelines to convincing employment measures must be made more decisively than it so far has been. In European employment policy the social democrat-led governments would demonstrate that the loss of options for national control through globalisation can be regained at the European level. In addition, they could use this genuinely social democratic policy area to sharpen their political profile with respect to the conservative and liberal parties.

Social policy

Social policy can be separated into regulative and redistributive policies (Schmidt 1998). Up until now the latter was completely left over to member states’ national political arenas. There currently appears to be neither the possibility nor the will among the social democartic governments to organise a common redistributive social policy at the European Union level. There appears to be no realistic possibility of developing in the near future such a policy that would simultaneously meet the welfare needs of Portugal on the one hand and Denmark on the other. The levels of expenditure and the institutional heterogeneity among the welfare systems of the member states currently preclude effective social policy coordination (Scharpf 1998: 161). Further, according to the European political formula of settling on the lowest common denominator, policy coordination would lead to either a simple framework for organisation at the nation-state level or reduction in the welfare state in those countries with highly developed welfare systems. However, there are better social democratic arguments and chances for enforcement in the regulatory dimension. The 'social chapter' of the Single Europe Act (1986) and the Maastricht Treaty's 'social protocol' were finally signed by the Labour government in 1997. These regulations principally relate to minimum standards for colective employment rights, security in the workplace and for the participation of European Works' Councils.

The question of how and to what extent social democratic governments can utilise the European Union as a political arena that offers them additional opportunities to exercise political control over the markets requires more detailed analysis. However, preliminary consideration shows that, though to a lesser extent in fiscal and distributive social policy, scope for action at the supranational level both makes sense and could be realised in the fields of taxation, employment and monetary policy. It is thus astonishing that neither social democratic programmes nor political action has sufficiently 'discovered' this European space for social democracy. Here there exists a pressing need for policy and action by the social democratic parties and governments, for the window of opportunity opened by social democratic participation in twelve EU member states at the end of the 20th Century could just as quickly close again in the 21st Century.