Subsidiarity: Commission budget powers versus nations own determination of welfare state issues

Typical social security benefits include old age pension, survivor’s pension, disability benefits, sickness benefits, birth grant, unemployment benefits, family benefits or health care.

Member States set their own social security rules in line with their own circumstances. The EU coordinates social security rules (Regulations (EC) No 883/2004 and 987/2009) only to the extent necessary to ensure that EU citizens do not lose their social security rights when moving within the EU.

This means that the host country’s laws determine which benefits are provided for, under which conditions they are granted (such as taking into account the period of work), for how long and how much is paid. Benefit entitlement varies therefore in different EU countries.

(January 2014, found here)

I woke up with a thought this morning. From my studies at the University of Twente, I suddenly remembered the principle of subsidiarity and the relation between the EU and member states regarding social security – that is, social security is an issue that remains a national prerogative although, as can be seen from the quote above, the EU has policies (hard and soft law) regarding e.g. labour market equality, which to some extent all relate to the core ideas of the Single Market and free movement of workers etc.

Now, it kind of hit me like a brick, but:

How can this principle (of member states setting their own rules) be upheld while at the same time the Fiscal Compact and all those other budget rules now enable the Commission to reject national budgets, i.e. de facto give it power over how national governments spend their money?

Given that social security has a tendency to become a bigger budget post in times of economic crisis, not even thinking of the effects of aging populations, I have difficulty to see how it is still possible to claim that countries are anymore sovereign on the issue of social welfare states. In the face of the rules countries have to cut budgets either pre-emptively or as a corrective move. Maybe the Commission does not say exactly HOW to cut the budget but I don’t see any of this anymore as exclusive to the member state, as the Commission sets the limits to the budget. But then again it has to be remembered that the Eurozone member states themselves accepted these rules.

Is this the ultimate victory of ‘Down with the welfare-state’-neoliberalism? I have to read more details about this issue but I am not quite happy with what may be a consequence of these Fiscal Compacts and Six-Packs.

UPDATE: this Finnish blog post seems to argue broadly the same thing but more from the Finnish context, and in much more detail.

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