Internationale Politikanalyse International Policy Analysis Anke Hassel Reconsidering the Social Contract after the Crisis Market and State in European Social Democracy „ Capitalism in the process of radical change: The profound politicial, social and economic transformation taking place in modern societies pres­ents social democracy with the major challenge of redefining the relation­ship of politics to the market economy. This challenge has been further accentuated by the financial crisis. In a basic policy paper, Anke Hassel analyses the underlying conditions and possibilities for evolving a market model that combines social justice and solidarity with economic dynamism and the modernisation of society. With this publication the Friedrich-Ebert­Stiftung would like to make a contribution to the debate on the relation­ship between market and state from a social democratic perspective. It will be followed by papers outlining the European and international perspec­tives of the social democrats. „ The financial crisis has shown the limits of globalisation and spelled the end of economic liberalisation. Nevertheless, a turn away from liberalisa­tion cannot mean a return to conservative social structures. Instead, it will be necessary to take the modernisation agenda in a direction that con­strains liberal markets while allowing space for social development. „ This will require social inequality to be curbed, both through egalitarian education and social policies and by reducing national, European and in­ternational economic imbalances. To do this we will need a new form of cooperation between civil society, the private sector and policy-makers founded on the principle of embedding the market economy firmly in a social and political framework. SEPTEMBER 2009