This chapter explores the relationship between the ‘European’ and the German models of social policy. It analyses the direction of social policy reform in Germany since the 1990s. The chapter also examines the official responses to several EU initiatives. The chapter shows the difference between the European ‘third way’ social model as promoted by scholars such as Giddens and Esping-Andersen, and the German approach to a social market economy. While in general Germany welcomes an EU role in social policy and has already moved to some degree to the EU's ‘third way’ model, politicians in Germany are not generally prepared to accept the complete shift and are reluctant to further extend EU competencies in social policy.