Welfare state research tends to assume strong and enduring public support for welfare state institutions. We challenge this assumption and show that in times of economic crisis, positive welfare state attitudes are confronted with conflicting preferences for improvement of labour market performance. We argue that such movements in public opinion have led to issue competition among major political parties and subsequent radical reform of unemployment insurance in two least-likely cases. In both Germany and Sweden, incumbent governments were losing voters' confidence as a result of high and persistent unemployment. In Germany, the social democratic government saw falling competence ratings at the same time as the issue of unemployment was highly salient among voters. In order to win back confidence, the party shifted its policy stance and introduced reforms which reshaped the unemployment insurance system. In Sweden, the situation was similar with falling ratings for the social democratic government and high levels of salience for the issue of unemployment among voters. When the government did not introduce reforms, the opposition moved in and won issue ownership, and subsequently the election, on an agenda of radical reform.