Internationale Politikanalyse Europäische Politik, Oktober 2005 Alexander Petring& Christian Kellermann* New Options for a European Economic and Social Policy T here is increasing ambivalence concerning the eco­nomic and social consequences of European inte­gration in the political debate across Europe. On the one hand, people hope for protection against the ef­fects of globalisation and safeguarding of their own welfare state from the European Social Model, while on the other hand, people feel threatened by the ef­fects of European integration. Catchwords such as job exportation, tax competition and migration of low wage employers who force high-wage employees out of their jobs, dominate the European political dis­course. In France and the Netherlands, this discontent found expression in the defeat of the constitutional referenda and ushered in a crisis of the EU. The Euro­pean Economic and Social Model faces the daunting task of harmonising the interests of 25 member states. * Against this background the present paper focuses on the different policies making up the European Eco­nomic and Social Model. It is true that leading politi­cians have already developed approaches in some policy areas in order to strengthen the positive effects of enlargement and integration and to limit the nega­tive ones. But in many policy fields concrete reform proposals are lacking. Moreover, it remains largely un­clear to what extent even the existing proposals are capable of achieving consensus in an enlarged Europe. Such consensus is indispensable, however, in order to realize policies at EU level. In the following, eleven central policy areas of Euro­pean economic and social policy will be discussed: fis­cal policy, the Stability and Growth Pact, monetary pol­icy and the European Central Bank, wage policy, em­ployment policy and the Lisbon Strategy, social policy, social dialogue, macroeconomic coordination, tax har­monisation, agricultural policy, structural and cohesion policy, and the services directive. Within the policy ar­eas, we will briefly examine the discursive range of each issue so as to identify central critical points and corresponding reform proposals(primarily with a short­term focus). Fiscal Policy and the Stability and Growth Pact The regulations of the Stability and Growth Pact were set up in order to stabilise the monetary union on a permanent basis. The two regulations which comprise the Pact bind participating states to submit‘stability programmes’ and‘convergence programmes’, as well as to adhere to a deficit limit of 3% of GDP. Over the last few years, a number of weaknesses have become apparent in the Stability and Growth Pact. Above all, the Pact has been unable to effectively diminish the tendency to incur debt and to reduce in­debtedness in economic upswings. Furthermore, the Pact has left little fiscal room to manoeuvre in the case of weak economic growth. Problems arising due to strongly diverging regional economic cycles and rates of price increases have been particularly significant. On the basis of the uniform interest-rate structure, coun­tries with higher inflation have lower real interest rates than those countries with lower price increases. Downward spirals can thereby be set in motion, as re­cently observed in Germany(low growth and low infla­tion, relatively high real interest rates, low investment and low consumption, even lower growth, and so on). The most recent EU enlargement has heightened the problem of a‘one size fits all’ rule even further. Particular regulations have also frequently been criticised: For example, the 3%-rule is regarded by many as too restrictive and arbitrary. The most recent relaxation of the Stability and Growth Pact is essentially an extension of situations in which no deficit proce­dure was instituted despite violations of the 3%-rule. Structural reform of the Pact was not agreed, however. * Wissenschaftszentrum Berlin& Friedrich-Ebert-Stiftung, Bonn