'Varieties of capitalism' and the political economy of European welfare states

Europe is haunted by the spectre of Anglo-American neoliberal capitalism. Behind the hostile reaction of Gerhard Schroeder and Jacques Chirac to the European Union's cross-border services directive, conflict over the redefinition of the rules of EMU's Stability and Growth Pact (SGP), the widespread fear that enlargement has opened the gates to a flood of cheap workers, the growing opposition of public opinion to the European Constitution, and the exploitation of Euroscepticism by nationalistic left- and right-wing parties, there lie two key related issues. The first is the poor economic performance of the continental European economies and their failure to counter high - in some cases, rising - rates of unemployment. The second is the fact that boosting growth and job creation will require more than just tinkering with the SGP, but rather, as advocated by the EU's Lisbon Agenda, a far-reaching reform of regulatory systems, labour markets and welfare states as well. This short essay considers the insights into these issues provided by the recent literature on comparative political economy, and in particular that linked to the 'varieties of capitalism' (VoC) approach. © 2005 Taylor & Francis.