The potentials and fragilities of Social Europe
Whither the fiscal state and the social state in the EU? Prof. Claire Kilpatrick, British Academy Global Professor at Queen’s University Belfast, explored this question in a lecture on 13 January in Munich. Her analysis contrasted the policies pursued during the first term of Commission President Ursula von der Leyen (2019-2024) with developments unfolding in her second term, which began in late 2024. The event formed part of the series “The future of the Fiscal State and the Social State in the European Union”, jointly organised by the Max Planck Institute for Social Law and Social Policy and the Max Planck Institute for Tax Law and Public Finance.
In her well-attended presentation, Prof. Kilpatrick – an expert in EU law and Senior Fellow of the European University Institute – carved out three key governance channels that have shaped the fiscal and social space of Europe: relevant legislation linked to the Social Pillar, EU funding and the socio-economic governance of the EU. Through this lens, she shed light on both the potentials and fragilities of Social Europe.
Has the Commission Turned Away from the Social Pillar?
During Ursula von der Leyen’s first term, the potentials appeared to be very promising. The Commission actively pursued important initiatives on social issues such as the Adequate Minimum Wages Directive, the Pay Transparency Directive, the Forced Labour Regulation and the Platform Work Directive. In her second term, however, against the backdrop of a markedly changed political landscape, the fragilities have become apparent. It might even seem as though the Commission has turned away from the Social Pillar, since hardly any major new initiatives are in progress. “The most important Social Europe development in this period so far”, Kilpatrick observed, “has been the Court of Justice of the European Union (CJEU) saving one of the key achievements of von der Leyen’s first term”. She was referring to the Adequate Minimum Wage Directive, the validity of which had been challenged by Denmark on the grounds that it exceeded EU competences. In its judgment of 11 November 2025, the Court rejected these concerns and upheld the Directive in principle.
The subordinate role that social issues now play in the European Union is also reflected in the proposed Multiannual Financial Framework (MFF) for the period 2028-2034, currently under negotiation among the Member States. As Prof. Kilpatrick noted, the traditional policy areas of cohesion and agriculture have been merged into a single large spending category – “the megafund”, as Prof. Kilpatrick put it. At the same time, funding allocated to cohesion and agriculture has been reduced from 65% to 45% of the total EU budget, whereas spending on competitiveness, prosperity and security has doubled to 30%. While the Covid-19 crisis provided a major boost to the social dimension of EU policy, notably through the creation of the financing tool Next Generation EU (NGEU), the new priorities are defense, prosperity and the tech economy.
Stability and Growth Pact Preserves Old Paradigms
With the new draft budget, the Commission has effectively returned to the status quo in terms of overall budget size: at around 1% of Gross National Income (GNI), it mirrors previous MFFs – to the disappointment of those who had hoped that NGEU would pave the way for a permanently expanded EU budget. The European Parliament has already warned that the significant reduction in funding for “cohesion and agriculture” threatens to undermine EU policies enshrined in the Treaties, as well as the Union’s objectives of strengthening its economic, social and territorial cohesion, and safeguarding social rights.
In addition, the EU’s socio-economic governance framework is unlikely to generate more public investment. In this respect, the recent reform of the Stability and Growth Pact (SGP), a set of rules designed to ensure sound public finances, largely preserves old paradigms by continuing to link fiscal discipline primarily to limits on net expenditure growth. After its suspension from 2020 to 2023 due to the pandemic, the revised SGP has been fully in force since January 2025. “The von der Leyen Commission is missing a chance with a timid approach”, Kilpatrick remarked. “Why not create a better investment climate?” As a result, public investment gaps in areas such as infrastructure, climate transition, digitalisation, but also in social services are likely.
“We should be pride of our social achievements”
The lively discussion that followed opened with a fundamental question: who benefits from this political realignment? According to Prof. Kilpatrick, the winners are mainly the Commission itself and the Member States, which gain sovereignty through, for example, developing the National and Regional Partnership Plans as part of the new megafund. “The losers”, she added, “are civil society and local authorities.” Also, the Pillar of Social Rights might continue to lose ground. In view of these rather worrying prospects, Prof. Kilpatrick concluded by emphasising the enduring importance of the European social model: “The Social Pillar sets Europe apart from anywhere in the world. It is absolutely a plus – and we should be pride of our social achievements.”