5 Foreword and Acknowledgement The present study was prepared from 2003 to 2006 as a dissertation at the Jean- Monnet Chair for Political Science at the University of Cologne. It is based on the research project ‘Employment policies in Germany and the United Kingdom–The impact of Europeanisation’ that was funded by the Anglo-German Foundation for the Study of the Industrial Society (AGF). Research conducted from 2002 to 2003 within this project laid the ground for this dissertation. It benefited from the very productive and co-operative collaboration with the project partners at London South Bank University. Moreover, the amicable and inspiring co-operation with all my colleagues at the Jean-Monnet Chair in Cologne truly enriched the ‘biography’ of this dissertation. I would like to thank my Ph.D. supervisor, Prof. Dr. Wolfgang Wessels. Working together with him offered me a profound and inspiring in-depth insight into a vibrant research field full of different approaches and a multitude of interesting research topics. Our collaboration and joint research helped me to extent and deepen my academic expertise as well as to define my own research interests. This experience formed the basis for the development of this dissertation. It let the study grow and mature. Thanks go also out to my second Ph.D. supervisor, Prof. Dr. Frank Schulz- Nieswandt. Our academic exchange again assured me of the ever-growing relevance of the research topic as a policy field close to the functional and political heart of modern societies. It helped me to further develop and improve this dissertation’s research design. In view of content-related feedback, I would like to express my deep gratitude to Jana Fleschenberg, Carlo Masala, and Thomas Traguth for their truly constructive and knowledgeable remarks on different parts of this dissertation. Warmest thanks belong to my family and especially to my mother, Ursula Umbach, for being there during a demanding period of my academic life and for heartening as well as encouraging me to believe in my potential and to ‘keep on running’. Finally, very special and heartfelt thanks go out to Alexa Cöln, Jana Fleschenberg, Jutta Krautscheid (also for cross-checking parts of this publication), Carlo Masala, Pia Schröder, Funda Tekin, and Thomas Traguth for their mental as well as pratical support and help throughout the genesis of both this dissertation and book (including motivation, distraction, and sometimes even food…). Sincere thanks for believing in this project in times, in which I–to tell you the truth–found it a ‘teeny tiny little bit’ more challenging to do so. This book owes a lot to you all!! Cologne, August 2008 Gaby Umbach 7 Contents Foreword and Acknowledgement 5 Contents 7 List of Graphs and Tables 15 List of Abbreviations 19 1. Introduction – A First Snapshot of the Research Subject 27 1.1 Research Focus: Key Aspects, Core Questions, and Most Distant Cases as Spine of Analysis 27 1.2 Research Design: Variables, Theses, and Methodology 31 1.3 Structure and Division: The Road Map for the Train of Thought 35 2. Theoretico-Empirical Frame of Reference: The Conceptual Backbone of Analysis 38 2.1 Europeanisation through the OMC within European Multilevel Governance?: The Supranational  and A of Domestic Change through European Provisions 38 2.1.1 European Multilevel Governance: Rapprochement to the Systemic Background of Europeanisation 39 2.1.1.1 The Governance Concept: Development and Surplus of an Analytical Approach 39 2.1.1.2 European Multilevel Governance: Co-ordination and Steering Processes within a Multilayered Political System 45 2.1.1.2.1 Systemic Premises: A Political System of Increasing Interweavement 48 2.1.1.2.2 Functional Characteristics: Policy-Making under the Conditions of Interdependence 50 2.1.1.2.3 Structural and Procedural Features: European Multilevel Policy Networks and Policy-Making 51 2.1.1.3 New Modes of Governance: Multilevel Policy Co-ordination through the Open Method of Co-ordination 62 2.1.1.3.1 Emergence and Expansion: A New Policy Instrument Rooting in National Reluctance to Transfer Sovereignty 62 7 List of Graphs and Tables 15 List of Abbreviations 19 1. Introduction – A First Snapshot of the Research Subject 27 1.1 Research Focus: Key Aspects, Core Questions, and Most Distant Cases as Spine of Analysis 27 1.2 esearch Design: Variables, Theses, and Methodology 31 1.3 Structure and Division: The Road Map for the Train of Thought 35 2. Theoretico-Empirical Frame of Reference: The Conceptual Backbone of Analysis 38 2.1 Europeanisation through the OMC within European Multilevel Governance?: The Supranational  and A of Domestic Change through European Provisions 38 2.1.1 European Multilevel Governance: Rapprochement to the Systemic Background of Europeanisation 39 2.1.1.1 The Governance Concept: Development and Surplus of an Analytical Approach 39 2.1.1.2 European Multilevel Governance: Co-ordination and Steering Processes within a Multilayered Political System 45 2.1.1.2.1 Systemic Premises: A Political System of Increasing Interweavement 48 2.1.1.2.2 Functional Characteristics: Policy-Making under the Conditions of Interdependence 50 2.1.1.2.3 Structural and Procedural Features: European Multilevel Policy Networks and Policy-Making 51 2.1.1.3 New Modes of Governance: Multilevel Policy Co-ordination through the Open Method of Co-ordination 62 2.1.1.3.1 Emergence and Expansion: A New Policy Instrument Rooting in National Reluctance to Transfer Sovereignty 62 Contents 8 2.1.1.3.2 Characteristic Features: ‘Let’s Co-ordinate’ – Achieving Better Practice by Exchanging Best Practice 67 2.1.1.3.3 Restrictions and Benefits: ‘Much Talk about Nothing’ or ‘Change through Exchange’? 74 2.1.2 The Concept of Europeanisation: Why ‘Brussels’ Matters, Why ‘Back Home’ Matters and Why It Is a Matter of Perspective 79 2.1.2.1 Multiple Definitions and Latent Concept Stretching – An Analytical ‘Wunderkind’ within a Conceptual ‘Tower of Babel’ 80 2.1.2.2 Central Characteristics: ‘Up and Down and Cross’ – Scores of Ways to Impact 86 2.1.2.2.1 Domains of Europeanisation: Domestic Targets of Adaptation Pressure – Increasing Complexity to Enhance Conceptual Lucidity 91 2.1.2.2.2 Categories of Europeanisation: Domestic Change between Retrenchment and Transformation 93 2.1.2.3 Europeanisation and Domestic Change: Cause and Effect of Policy Change and Institutional Isomorphism – Different Sides of a Multi-Dimensional Coin? 95 2.1.2.3.1 Europeanisation of Public Policies: Means and Results of Policy Change in-between Policy Diffusion, Transfer, and Convergence 97 2.1.2.3.2 Europeanisation and Institutional Change: Institutional Isomorphism on the Winning Track? 102 2.1.2.4 The ‘Whole Picture’ of Europeanisation: Key Elements Boosting or Blocking Domestic Change 105 2.2 Intervening Variables Boosting or Blocking Domestic Change caused by Europeanisation 111 2.2.1 Domestic and Cognitive/Normative Structures: National Institutional Capacity and Veto Points – Central Characteristics of the UK and Germany 112 2.2.1.1 The United Kingdom: Integrated Leadership, Centralised Polity, ‘Trimmed’ Pluralism, Few Veto Points 112 2.2.1.2 Germany: Fragmented Leadership, De-centralised Polity, ‘Corporatist Style’ Pluralism, Several Veto Points 122 2.2.2 Domestic Public Policy and Timing of the EES: British and German Welfare State and Employment Policy Traditions – Fringes of a Gamut? 136 2.2.2.1 The United Kingdom: Beveridge, De-regulation Thatcherite Style, and Blatcherism – Fast Track towards ‘New Labour’ Doing it the ‘Third Way’ 138 2.2.2.2 Germany: Bismarckian System, ORDO-Liberalism, Neo-liberalist Monetarism, Re-Unification – The Path towards ‘Neue Mitte’ Hunting for Growth 146 Contents 9 2.2.2.3 The Constraints of Supranationalisation and Internationalisation: The Impact of European Economic and Monetary Integration, OECD, and IMF 156 2.3 Guiding Assumptions and Theses: Harvesting the Conceptual Vineyard 158 2.3.1 Europeanisation of Domestic Employment Policy Co-ordination Structures: Adaptation and Change Leading to Institutional Isomorphism? 160 2.3.2 Europeanisation of Employment Policies: Policy Transfer and Diffusion Leading to ?-Convergence? 165 2.3.3 Applicability of the Europeanisation Approach: Misfit and Adaptation Pressure – Omnipotent Concepts To Explain Change Instigated by the OMC? 168 3. The Why, When, How, What, and In How Far of European Employment Policy Co-ordination: Genesis, Characteristics, and Limits 171 3.1 Why and When?: The Path towards the EES – From Supplementing the Single Market towards the Lisbon Strategy 171 3.1.1 From Rome to Essen: The Long Way from Supplementing the Single Market towards the Headstone of the Luxembourg Process 172 3.1.2 From Essen to Lisbon and beyond: Path-Dependent Formal Emancipation Arriving at the Luxembourg Process, the EES and the Lisbon Strategy 178 3.1.2.1 From Essen to Amsterdam: The Formal Constitutionalisation of the EES 178 3.1.2.2 From Amsterdam to Luxembourg: The Pre-Ratification Kick-Off of the Luxembourg Process 184 3.1.2.3 From the Luxembourg Process to Lisbon and Beyond: The Lisbon Strategy Putting the EES into the Sustainability Context 186 3.2 How and What?: Structural-Procedural Aspects and Policy Paradigm of European Employment Policy Co-ordination – The ‘Letters’ and the ‘Practice’ 189 3.2.1 The ‘Legal Constitution’ of the Luxembourg Process: Structural-Procedural Aspects of the Written Proto-Type OMC 189 3.2.2 The Underlying ‘Policy ID’: Spotlight at the Initial What of the EES 195 3.2.3 Adaptation to the ‘Practice’: The Official Interim Assessment and the Streamlining of the EES – A Re-Interpretation of the ‘Legal Constitution’ 199 Contents 10 3.2.3.1 The First Five Years: Positive Interim Assessment, Rocketing Complexity – The EES Achieving Better Practice by Exchange of Best Practice? 199 3.2.3.2 The ‘New’ EES: The 2003 Streamlining of Supranational Socio-Economic Policy Co-ordination 205 3.2.3.2.1 Structural-Procedural Adaptation Aiming at Enhanced Synergy and Coherence: ‘Slimlining’ the EES? 205 3.2.3.2.2 The 2003 New ‘Policy ID’ of the EES: From Four Pillars to Three Overarching Targets 209 3.2.3.3 The 2003 and 2004 ‘Kok Reports’: Initiating the Re-Launch of the EES and the Lisbon Strategy – Re-Energising Implementation, Re-Calibrating Priorities 212 3.2.3.4 The 2005 Renewal of the Lisbon Strategy: Welding EGs and BEPG – Integrated Guidelines for Growth and Jobs 217 3.3 In How Far?: European Employment Policy Co-ordination and the Constraints of Supra- and International Economic Integration 218 3.4 Interim Assessment: The Impact of the EES – Potential to Europeanise or ‘Fettered’ New Mode of Governance? 228 3.4.1 Why and When?: The Slow Path of Bottom-up Europeanisation – Economic Mal-Performance Accelerating Up-Loading Processes 228 3.4.2 How?: New Ways of Europeanisation – Networking, Mutual Exchange and Learning as the Key to Domestic Change 230 3.4.3 What?: A New ‘Policy ID’ to Europeanise National Employment Policies – The Activation Paradigm’s Potential to Attain ?-Convergence 235 3.4.4 In How Far?: A New Mode of Governance Constrained by the Supranational Macro-Economic Integration Paradigm 239 4. Structural-Procedural Aspects in Practice: The ‘Living Constitution’ of the Proto-Type OMC – The Political Reality of the EES-PCN 241 4.1 The Supranational Part of the EES-PCN: Cards Re-Shuffled Revealing a New Integrated Approach? 241 4.1.1 The European Commission: The ‘Primary Administrator’ of the EES – Analysing, Preparing, Evaluating, Negotiating, and Drafting 243 4.1.2 The Council of the EU: Multilevel Switchboard of the New ‘Third Wayism’ Co-ordination Structure – The EES-PCN Going ‘A Little’ Public 250 4.1.3 The ‘Others’: The European Council, EP, ECOSOC, and CoR – The Eagle of Processes and the Mere ‘Also-Rans’? 255 Contents 11 4.1.4 The Social Partners: The EES-related Supranational Social Dialogue – Real Integration or Just Friendly Lip Service? 256 4.1.5 Interim Assessment: The Supranational Part of the EES-PCN – A New Integrated PCN Interlinking Socio-Economic Policy Co-ordination Processes? 263 4.2 The National Ends of the EES-PCN: Bypassing Domestic Paths or Resilient Traditions at Work – Adaptation Leading to Institutional Isomorphism? 270 4.2.1 British Employment Policy Co-ordination: Integrated Leadership, Centralised Polity, ‘Trimmed Pluralism’, Few Veto Points, and the EES – ‘Strangers in the Night’? 270 4.2.1.1 The Department for Work and Pensions: Pilotage of the British Part of the EES-PCN – Guiding, Steering, and Compiling the UK NAP 271 4.2.1.2 The Department of Trade and Industry: Channelling the Social Partners – Business as Usual? 273 4.2.1.3 Her Majesty’s Treasury: Paramount Economic Overlook – Who Pays, Surveys 274 4.2.1.4 The ‘Others’: No. 10, the DfES, Parliament and the Devolved Administrations – Additional Protagonists or the Play’s Extras? 276 4.2.1.5 The Social Partners: British Social Dialogue Traditions and the UK Part of the EES-PCN – Strait-Jacket for New Ways of Policy Co-ordination? 277 4.2.1.6 Interim Assessment: The UK Part of the EES-PCN – ‘Doing it the British Way’ in the Shadow of Centralisation 283 4.2.2 German Employment Policy Co-ordination: Fragmented Leadership, De-Centralised Polity, ‘Corporatist Style’ Pluralism, Several Veto Points, and the EES – ‘Brothers in Mind’? 286 4.2.2.1 The Ministry of Finance: Pulling the Strings – Technical Lead as a Matter of Principle 288 4.2.2.2 The Ministry of Economics and Labour: The ‘Window to the Outside World’ – Keeping an Eye on Policy Contents 290 4.2.2.3 The ‘Others’: Inter-ministerial Co-ordination, the Subnational Level, and Parliament – Just Small Cogwheels within the German Part of the EES-PCN? 291 4.2.2.4 The Social Partners: German Social Dialogue Traditions and the Domestic Part of the EES-PCN – The Hare and the Hedgehog? 294 4.2.2.5 Interim Assessment: The German Part of the EES-PCN – De-centralisation as Process-Guiding Principle – ‘If it Works for Us it also Works for Brussels’ 300 Contents 12 5. Domestic Adaptation to the ‘Policy ID’ of the EES: Policy Transfer and Diffusion Leading to h-Convergence in the UK and Germany? 305 5.1 British Employment Policies under the EES: Deviating from Beveridge, Thatcherite De-regulation, and Blatcherism while ‘Building Up’ Domestic Employment Policies? 306 5.1.1 The ‘Stand-Alone’ EES (1997/98-2002): Autonomous Europeanisation Power and Embeddedness of the EES’s ‘Policy ID’ into British Traditions? 307 5.1.1.1 ‘Building the Base’ in 1997/98: The ‘New Deal’ and the EES – Fraternal Twins See the Light of Day? 309 5.1.1.2 Further ‘Constructing the House’ in 1999: The Extension of the New Deals – Tending to All-embrace the Workforce 315 5.1.1.3 Taking Care of ‘Interior Fittings’ in 2000: Consolidating Domestic Policies in the Light of Good Performance 320 5.1.1.4 ‘Corralling the Plot’ and ‘Unshuttering the Windows’ in 2001: Defending and Fine-Tuning Policy Choices For a More Inclusive Labour Market 326 5.1.1.5 ‘Outbuilding the House’ and ‘Designing the Grounds’ in 2002: Keeping to the Domestic Approach and Adapting Structurally to Devolution 331 5.1.2 ‘Extending the Driveway’: Expanding Existing Policy Approaches under the Streamlined EES (2003-2005) – Europeanisation Impact Intensified or Blurred? 339 5.1.3 Interim Assessment: The EES’s Impact on British Employment Policy Priorities – Policy Transfer and Diffusion leading to h-Convergence? 348 5.2 German Employment Policies under the EES: Deviating from the Bismarckian System, ORDO-Liberalism, ‘Global Guidance’, Neo-liberalist Monetarism, and the ‘Neue Mitte’ under the Burdens of Re-Unification? 356 5.2.1 The ‘Stand-Alone’ EES (1997/98-2002): Autonomous Europeanisation Power and Embeddedness of its ‘Policy ID’ into German Traditions? 357 5.2.1.1 Adapting the ‘Old Edifice’ to New Functions in 1998: The Conservative-Liberal Coalition Government’s Remedies and the First German NAP 357 5.2.1.2 ‘Tearing down Old Walls’ and ‘Building the Base’ in 1999: The ‘Neue Mitte’ and the Start of Its Socio-Economic Reforms 363 5.2.1.3 Cost Control to Continue Re-Construction in 2000: Laying the Budgetary Grounds for Further Socio-Economic Reforms 369 5.2.1.4 Waiting for the ‘Blueprint’ to be Designed in 2001: Evaluating Existing Approaches Instead of Launching New Activities 375 Contents 13 5.2.1.5 The Start of ‘Fast-Track Construction’ in 2002: Reform Boost after Years of ‘Dawdling over’ Substantial Modernisation 382 5.2.2 ‘Speeding up the Construction Process’: Post Reform Boost Trends under the Streamlined EES (2003-2005) – Europeanisation Impact Intensified or Blurred? 392 5.2.3 Interim Assessment: The EES’s Impact on German Employment Policy Priorities – Policy Transfer and Diffusion leading to ?-Convergence? 405 6. Final conclusions: Guiding Assumptions and Theses Re-visited 413 6.1 The EES’s Europeanisation Impact on the UK and Germany – ‘Get Together’ or ‘Mind the Gap’? 413 6.1.1 Europeanisation of British and German Policy Co-ordination Structures and the Supranational EES-PCN: Interactions Becoming an Integrated Approach? 413 6.1.1.1 The National Level: Domestic Institutional Paths and Interactions Running into the EES-PCN – Europeanisation Leading to Institutional Isomorphism? 413 6.1.1.2 The Impact of the EES on European Multilevel Policy Network Structures: A Lock, Stock, and Barrel New Performance or New Lyrics in Old Sceneries? 421 6.1.2 British and German Employment Policies under the EES: Proximity and Rapprochement to its ‘Policy ID’ – Converging Trends, Remaining Differences 429 6.2 The Europeanisation Approach, the EES, and the OMC: Theoretico-Analytical Mission Accomplished? 438 6.2.1 The EES, the OMC, and Europeanisation: Impact without Analytical Grounds or a Case of ‘Phantom’ Adaptation Pressure? 439 6.2.2 Explanative Benefits and the Need to Broaden the Analytical View in order to Explain Domestic Change and Persistence 441 7. Annex 444 8. References 449 8.1 Interviews 449 8.2 Sources 449 8.3 Literature 458