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This chapter attempts to explain the divergent adaptive dynamics to welfare reform and focuses on causes and mechanisms of the political responses to the welfare without work crisis in Germany and the Netherlands. The response to the crisis of the welfare state in Germany and the Netherlands--at least initially--was very similar. In both countries socioeconomic response patterns, particularly towards unemployment, were characterised by the attempt to reduce the supply of labour via early retirement, relatively generous disability pensions and the discouragement of female labour force participation. The predicament of these continental welfare states could be correctly epitomised as welfare without work. However, since roughly the mid-1980s the adjustment paths of both countries have started to diverge considerably. After justifying the German-Dutch comparison, a stylised account of the welfare without work pathology in the continental welfare state will be given. The divergent paths of adjustment in both countries is then illustrated. Then it will be argued that both welfare states are characterised by an intimate link between various social and economic policy domains; they are tightly coupled. The main issue for welfare reform under conditions of tight coupling is how the various interdependencies are politically managed. Here, crucial differences between the Netherlands and Germany are found. In two separate case analyses the findings are elaborated.
