Monetary Union and Social Europe

Abstract

Establishing a single currency will launch the EU on a journey into the unknown. Thus while it is widely accepted that the fall-out from this decision will be far-reaching, little consensus exists on the impact on particular policy arenas. This article explores some of the main implications of monetary union for Social Europe-national systems of welfare pro vision and employment regulation. It is argued that efforts by virtually all the member states to meet the Maastricht criteria for joining the single currency club are impacting negatively on Social Europe. Moreover, with the member states signing a deflation-oriented Stability Pact, this cold climate threatens to spill over into the actual operation of the new Euro- zone. Thus the road to monetary union paved by Europe's political elite spells bad news for already beleaguered welfare and employment systems. At the same time, the article argues that a different form of monetary union is necessary to create more robust macroeco nomic foundations to Social Europe. At present, it is suggested that a big coordination deficit has emerged inside the European economy, causing an inhospitable environ ment for the social dimension in the absence of a single currency. Thus retreating to national mechanisms for economic management is rejected as an alternative project to the Maastricht plan for monetary union. Finally, the article investigates the viability of various reform paths to make the new Euro-zone more socially friendly.