Analyses developments in Germany and emphasises the way in which the context of a corporatist welfare state settlement and a semi‐sovereign state shapes policy making. Reform is slow and depends on compromises between political actors. At the same time, the structure of old social risks policies pre‐empts available resources and creates powerful constituencies which resist change. Greater political party disagreement on welfare issues in the 1990s and the emergence of a reforming Red–Green coalition were important factors in change.