The 1990s have been a decade of fundamental challenges to the European welfare states. Rising unemployment has put them under growing financial pressure, while unrestricted international capital mobility and intensified international competition have rendered existing welfare state commitments increasingly costly. Moreover, the legally binding criteria of the Maastricht Treaty have forced most European governments to adopt tight budgetary policies. The ageing of the population in virtually all European countries over the next decades will reinforce these pressures even further.

Due to these developments, the reform of the welfare state figures prominently on the political agenda of all European governments. As Bonoli (2000) has argued, welfare retrenchment is no longer an Anglo-Saxon idiosyncrasy. However, the process of welfare state restructuring has been accompanied by severe political and societal conflicts. Powerful pressures for cost containment collide with equally powerful forces defending existing welfare state arrangements. This struggle also left its imprint on the scholarly debate about the welfare state. One strand of current welfare state research emphasises the profound alteration of traditional social policy programmes in response to the above-mentioned pressures and points to the inevitability of welfare retrenchment under changed economic conditions. Another strand diagnoses a remarkable resilience of the welfare state and highlights the political difficulties of carrying out retrenchment policies.

This academic dispute is unlikely to be settled at a general level. In recent years, numerous authors have contributed to this debate and put forward a variety of theoretical propositions about the factors which facilitate or impede welfare retrenchment. While the empirical findings emerging from this body of literature are still rather inconclusive, a strong case can be made that the degree of social policy retrenchment and welfare restructuring appears to be highly contingent. In this respect, we can divide the existing explanatory approaches in the retrenchment literature into at least three broad categories. One strand of explanation focuses on the strength of adaptational pressures arising from external constraints on welfare state policy as the most important predictor for the degree of retrenchment. Another line of argumentation points to differences in the institutional design of social policy programmes which will determine the degree of political and societal resistance to retrenchment arising from the structure of affected interests in distinct social policy areas.