Below is an extract from a presentation given on 15 February 2008 in Brussels by Erkki Liikanen. Click here for the full presentation.

There is no such thing as “the Single European Social Model”. Owing to historical reasons and differences in local circumstances, these models differ considerably across Europe.

Some argue that, while laudable, the European values are no longer compatible with the harsh realities of the modern world and the social models need urgent reform. The modern world is characterized by ever intensifying competition brought up by globalization. At same time the ageing of population sets pressure on the labour market and public finances.

So, is the distinctly European combination of social values and economic policies an issue of the past, a promise that can no longer be fulfilled? Or is it possible to reconcile it with the forces of globalization and demographic change without stifling economic dynamism? Should it be seen as an asset or as a liability?

Indeed, we can find examples that show how some features of a traditional welfare state have acted as a drag on economic growth. On the other hand the Nordic countries provide for many an example on how collective risk sharing has promoted opening of economies and adjusting to globalisation.