Since the introduction of the Euro, it is becoming clear that EMU and the Internal Market strategy bring the principle of competition into every domain of the European social institutions, and compel the coordination conducted so far by the states and the other social institutions to be at the mercy of the market. Competition is now dominating the moment of the European integration instead of social solidarity. The Directives and Regulations enforced by the European Commission and Council aiming at leveling the playing field, the binding Stability and Growth Pact, and the tight monetary policy of the European Central Bank also accelerate this trend. As a result, accompanied by the influence of the globalization and the overwhelming spread of neo-liberalism, the traditional European social model is just on the edge of erosion, as the German case shows. The density of the trade unions is declining steadily. The membership of the employer association also is decreasing due to divergence of members' interests. German government cannot arbitrate between the trade union and employer association any more, as the deadlock of the negotiation aiming at job creation among trade union, employer association, and government (Bundnis für Arbeit) shows. Under the change of the social and economic environments, the capabilities of the states and traditional social institutions to coordinate have been declining, and the erosion of the social institutions is beginning. Nevertheless, there is not yet a sigh that the social institutions are reorganized or reunified at the European level. There is little progress concerning the solidarity among the trade unions of the member's countries, whereas many European companies act at the European and global scale. Indeed the integration of the markets is progressing in the European Union, but it doesn't become the community, in which each member and actors are bound together organically at the European level, based on the social cohesion and solidarity. It is the present stage of the European Integration that, despite of the completion of the monetary integration, the national economies faced with the erosion of the traditional social institutions coexist still. There is no sigh that a European national economy or a new social model capable of enhancing the competitiveness and social solidarity at the same time might emerge. In the foreseeable future the European Union is thus expected to remain as the association of nation states.