SocialEuropeReport	
Roadmap to a
Social Europe
Edited by Anne-Marie Grozelier, Björn Hacker,
Wolfgang Kowalsky, Jan Machnig,
Henning Meyer and Brigitte Unger
October
2013
	   i	  
Contents
Introduction 1
By Wolfgang Kowalsky and Henning Meyer
Part I – The European Crisis and Social Europe
Democracy, Solidarity And the European Crisis 4
By Jürgen Habermas
Europe Is Trapped Between Power And Politics 14
By Zygmunt Bauman
Pragmatism, Idealism And European Demoicracy 19
By Kalypso Nicoalidïs
What Is The Social Dimension Of The EU? 25
By Martin Seeleib-Kaiser
What Does A Social Europe Look Like Today? 29
By Jean-Paul Fitoussi and Xavier Timbeau
Social Policy Will Be Critical To A Sustainable EMU 31
By Simon Deakin
Social Europe Is The Only Solution 34
By Robin Wilson
Europe’s Democracy Deficit: Putting Some Meat On The Bones 37
Of Habermas’ Critique
By Steven Hill
The Euro-Dividend 44
By Philippe van Parijs
	   ii	  
Part II – European Trade Unions’ Vision Of A Social
Europe
Why We Need An Ambitious Social Europe 48
By Bernadette Ségol (ETUC)
A Social Europe Requires A Change Of Course For The Young Generation 51
By Berthold Huber (IG Metall)
The Social And Political Scope Of EU Reform Policy 54
By Ignacio Fernández Toxo (CC.OO; ETUC) And Cándido Méndez (UGT)
A Social Dimension For A Changing European Union: The Irish Case 57
By David Begg (ICTU)
A Concept For Deepening The Social Dimension Of The European Union 62
By Frank Bsirske (ver.di) and Klaus Busch
Towards A More Social Europe – A Change Of Course Is Necessary 71
By Anne Demelenne (FGTB), Claude Rolin (CSC) and Bernard Noël (CGSLB)
A Social Dimension For A Changing European Union 73
– The Bulgarian Perspective
By Plamen Dimitrov (CITUB)
A Social Dimension For A Changing European Union 76
– The British Perspective
By Frances O’Grady (TUC)
Austerity Destroys The European Social Model 78
By Yannis Panagopoulos (GSEE) and Kostas Tsikrikas (ADEDY)
The Italian Trade Unions’ Proposal For Inclusive Growth 80
In Italy And Europe
By Anna Rea (UIL), Fausto Durante (CGIL) and Raffaele Bonanni (CISL)
Europe Needs A Change Of Course 83
By Michael Sommer (DGB)
Proposal For A Real Social Dimension Of The EMU 86
By Bente Sorgenfrey (FTF) and Harald Børsting (LO-DK)
A Social Dimension For A Changing European Union 88
– The Czech Perspective
By Jaroslav Zavadil (CMKOS)
	   iii	  
Part III – Action For A Social Europe
A Change In Course Towards A Social Europe 92
By Martin Allespach and Jan Machnig
How To Finance A Social Europe? 95
By Brigitte Unger
Stop The Emergence Of A Liberal European Social Model! 98
By Björn Hacker
The Shock Therapy Applied To A Social Europe 101
By Anne-Marie Grozelier
What Can The Social Dimension Mean In Times Of Austerity? 104
By Wolfgang Kowalsky
A ‘Poldermodel’ For The EU? 108
By Frans van Waarden
A Social Europe For Euroland 113
By Joël Decaillon
Respect And Promote Wages And Collective Bargaining 116
By Ronald Janssen
Evolution Of Social Pacts And Bargaining Decentralisation 119
By Jacques Freyssinet
Wages And Competitiveness: The Need For Coordination 121
By Odile Chagny and Michel Husson
The 2012 White Paper On Pensions – A Building Block For EU Social Policy? 124
By Florian Blank
Questions Of Age Discrimination In Decisions Of The European 126
Court Of Justice
By Nadine Zeibig
Social Democracy: Trap, Utopia Or New Horizon For Europe? 129
By Pierre Héritier
Adapting European Governance To Meet the Social Imperative 131
By Christophe Degryse
	   iv	  
Is Job Creation Useful In Fighting Poverty And Social Exclusion? 134
By Eric Seils
ESM: European Social Model Or European Stability 136
Mechanism – Is There A Crash?
By Bela Galgoczi
A Social Dimension For A Changing European Union: Drifting 143
From The Primary Dividing Up Of Revenues, Inequalities And Crisis
By Joël Maurice
Social Issues Are Disappearing From The European Project 146
By Michel Fried
The European System Of Industrial Relations And The Dynamics Of 148
Transnational Company Agreements
By Udo Rehfeldt
Social Exchange In The Crisis – 2010 The Turning Point 151
By Jean-Marie Pernot
Trade Union Responses To The Attack Of The EU On Wages 153
By Anne Dufresne
1
Introduction
By Wolfgang Kowalsky and Henning Meyer
A roadmap to a Social Europe! That was the ambitious idea laid down in the conclusions of
the European Council in December 2012 to respond to the growing anger and frustration all
over Europe. The European Commission was supposed to come up with a social roadmap at
the European Council in June 2013. But we, and indeed many others, were waiting in vain.
Social Europe Journal, together with its partners for this project – the European Trade
Union Confederation (ETUC), the IG Metall, the Friedrich-Ebert-Stiftung, the Hans Böckler
Stiftung and the French institute Lasaire - seized the moment and started an ambitious
project. We did not want to wait any longer for an oﬃcial announcement and instead set
out to deﬁne what we think the core elements of a sustainable Social Europe should be.
Drawing on the best expert and practitioner knowledge, we started collecting views and
analyses from all over Europe. The result was a comprehensive online debate and this
eBook with 43 articles on diﬀerent aspects of the European social dimension written in
spring and summer 2013.
The book has three principal sections: In the ﬁrst part, some of Europe’s most prestigious
thinkers and analysts make the connection between the discussion about Social Europe
and the wider European malaise. One cannot discuss the social dimension in isolation but
has to link it to the wider debate about the future of European integration if you want to
be realistic, up-to-date and relevant.
Following this, the second part brings together trade union views ‘from the ground’ across
Europe. European political discussions are often perceived as detached from the real lives
of people in the member states and the discussion about Social Europe is no exception.
Therefore we collected the views of European and national trade union leaders and thus
added an important dimension that has often found too little appreciation.
In the third and ﬁnal part, some of the best experts in the ﬁeld address a series of more
speciﬁc issues related to the social dimension of the European Union and make
recommendations for how to tackle them.
Social Europe is at the heart of many controversies and of course not everybody agrees on
all aspects. But all the authors of this volume would like to contribute to the discourse
about a fairer, socially just and sustainable Europe. And we think they have made a very
important contribution.
Now, after the German election and with the European elections of 2014 already in sight,
the key question about the future of Europe is back on the agenda: What kind of Europe do
we want? Politicians struggling to convince reluctant electorates that they should be reelected
could do worse than having a look into this eBook to ﬁnd some ideas to make a
new case for Europe, a Social Europe that deserves the name.
On 2nd
October 2013, the Commission ﬁnally published its long awaited communication on
the social dimension proposing to create a new scoreboard to allow for better and earlier
identiﬁcation of major employment and social problems. The communication, quite frankly,
2
was disappointing. An initial discussion about an Euroarea unemployment insurance
scheme was expected to be part of it, but the Commission thinks – given the national
competence of member states – that a ‘substantial treaty change’ is necessary ﬁrst. The
communication also does not propose any new resources to tackle unemployment and
social problems in the European Monetary Union, which is also a big omission. The
Commission’s solution is to foster mobility, making it easier for people to move around the
EU for work. This alone cannot be the solution.
More and more, the question is if a social dimension is still compatible with the new
economic governance system now emerging in the wake of the Eurozone crisis. Internal
wage devaluation and ﬁnancial rescue packages as permanent new features are in
contradiction to a social dimension, whatever form it is meant to take. The core problem is
not one of too few indicators but the necessity to ﬁght unemployment more eﬃciently and
to establish a democratic economic governance system in line with the European Social
Model.
Europe deserves much better than those proposals from Brussels. A change of course is
needed and this eBook can hopefully inspire some new policy thinking by providing a
collective vision of a diﬀerent Europe, a real Social Europe.
Wolfgang Kowalsky is a policy adviser working in the trade union movement in
Brussels. Henning Meyer is Editor of Social Europe Journal and a Research Fellow at
the Public Policy Group at the London School of Economics and Political Science
(LSE).
Part I – The European Crisis and Social Europe
4
Democracy, Solidarity And The European Crisis
By Jürgen Habermas
The European Union owes its existence to the eﬀorts of political elites who could count on
the passive consent of their more or less indiﬀerent populations as long as the peoples
could regard the Union as also being in their economic interests, all things considered. The
Union has legitimized itself in the eyes of the citizens primarily through its outcomes and
not so much by the fact that it fulﬁlled the citizens’ political will. This state of aﬀairs is
explained not only by the history of its origins but also by the legal constitution of this
unique formation. The European Central Bank, the Commission, and the European Court of
Justice have intervened most profoundly in the everyday lives of European citizens over the
decades, even though these institutions are the least subject to democratic controls.
Moreover, the European Council, which has energetically taken the initiative during the
current crisis, is made up of heads of government whose role in the eyes of their citizens is
to represent their respective national interests in distant Brussels. Finally, at least the
European Parliament was supposed to construct a bridge between the political conﬂict of
opinions in the national arenas and the momentous decisions taken in Brussels – but this
bridge is almost devoid of traﬃc.
Thus, to the present day, there remains a gulf at the European level between the citizens’
opinion and will formation, on the one hand, and the policies actually adopted to solve the
pressing problems, on the other. This also explains why conceptions of the European Union
and ideas of its future development have remained diﬀuse among the general population.
Informed opinions and articulated positions are, for the most part, the monopoly of
professional politicians, economic elites, and scholars with relevant interests; not even
public intellectuals who generally participate in debates on burning issues have made this
issue their own.[1] What unites European citizens today is the Eurosceptic mindset that
has become more pronounced in all of the member countries during the crisis, albeit in
each country for diﬀerent and rather polarizing reasons. This trend may be an important
fact for the political elites to take into account; but the growing resistance is not really
decisive for the actual course of European policy-making which is largely decoupled from
the national arenas. The actual course of the crisis management is pushed and
implemented in the ﬁrst place by the large camp of pragmatic politicians who pursue an
incrementalist agenda but lack a comprehensive perspective. They are oriented towards
‘More Europe’ because they want to avoid the far more dramatic and presumably costly
alternative of abandoning the Euro.
Starting with the roadmap that the European institutions have designed for developing a
‘Genuine Economic and Monetary Union’, I will ﬁrst explain the technocratic dilemma in
which this project is likely to become entangled (I). In the second part I would like to
present alternative steps towards a supranational democracy in the core of Europe and the
obstacles we would have to overcome on that road (II). The major hindrance, the lack of
solidarity, leads me in the last and philosophical part to a clariﬁcation of this diﬃcult, yet
genuinely political concept (III).
5
I
The Commission, the Presidency of the Council, and the European Central Bank — known
in Brussels parlance as ‘the institutions’ – are least subject to legitimation pressures
because of their relative distance to national public spheres. So it was up to them to
present, in December 2012, the ﬁrst more detailed document in which the European Union
develops a perspective for reforms in the medium and long term that go beyond the
present, more or less dilatory, reactions to critical symptoms.[2] Within this expanded
timescale the attention is no longer focussed on the cluster of causes that, since 2010,
have connected the global banking crisis with the vicious circle of over-indebted European
states and undercapitalized banks reﬁnancing each other. The important and long overdue
‘Blueprint’, as it is called, directs attention to long-term structural causes inherent in the
Monetary Union itself.
The Economic and Monetary Union took shape during the 1990s in accordance with the
ordoliberal ideas of the Stability and Growth Pact. The Monetary Union was conceived as a
supporting pillar of an economic constitution that stimulates free competition among
market players across national borders, and it is organized in accordance with general rules
binding for all member states.[3] Even without the instrument of devaluing national
currencies, that is not available in a monetary union, the diﬀerences in levels of
competitiveness among the national economies were supposed to even out of their own
accord. But the assumption that permitting unrestrained competition in accordance with
fair rules would lead to similar unit labour costs and equal levels of prosperity, thereby
obviating the need for joint decision-making on ﬁnancial, economic and social policies, has
proved to be false. Because the optimal conditions for a single currency in the Eurozone are
not satisﬁed, the structural imbalances between national economies that existed from the
start have become more acute; and they will become even more acute as long as the
European policy pattern does not break with the principle that each member state takes
sovereign decisions within the relevant policy ﬁelds without taking other member states
into consideration; in other words, exclusively from its own national perspective.[4] In
spite of some concessions, however, until now the German federal government has clung
steadfastly to this dogma.
It is to the credit of the Commission and the Presidency of the Council that they have
addressed the actual cause of the crisis — namely the faulty design of a monetary union
that still holds fast to the political self-understanding of an alliance of sovereign states (as
the ‘Herren der Verträge’). According to the aforementioned reform proposal, the so-called
Blueprint, three essential, though vaguely deﬁned, objectives are to be realized at the end
of a path projected to last ﬁve years: First, joint political decision-making at the EU level
on ‘integrated guidelines’ for coordinating ﬁscal, budget, and economic policies of the
individual states.[5] This would call for an agreement that prevents the economic policy of
one member state from having negative external eﬀects on the economy of another
member state. Furthermore, an EU budget based on the right to levy taxes with a European
ﬁnancial administration is envisaged for the purpose of country-speciﬁc stimulus programs.
This would generate scope for selectively focussed public investments through which the
structural imbalances within the Monetary Union could be combated. Finally, Euro bonds
and a debt repayment fund are supposed to make possible a partial collectivization of state
debts. This would relieve the European Central Bank of the task of preventing speculation
against individual states in the Eurozone that it has currently assumed on an informal
6
basis.
These objectives can only be realized if cross-border transfer payments with the
corresponding transnational redistribution eﬀects were to be accepted. From the
perspective of the constitutionally required legitimation, therefore, the Monetary Union
would have to be expanded into a real political union. The report of the Commission
naturally proposes the European Parliament for this purpose and correctly states that
closer ‘inter-parliamentary cooperation as such does not ensure democratic legitimacy for
EU decisions.’[6] On the other hand, the Commission takes into consideration the
reservations of the heads of state and adheres so radically to the principle of exhausting
the present legal basis of the Lisbon Treaty that it conceives the transfer of competences
from the national to the European level as occurring only in a rather gradual and
inconspicuous way.[7]
The obvious aim is to postpone a revision of the Treaties to the very end. The Commission
accords the expansion of steering capacities priority in the short and the medium term over
a corresponding enlargement of the basis of legitimation. Thus the ultimate
democratization is presented as a promise, like a light at the end of the tunnel.
Supranational democracy remains the declared long-term goal on paper. But postponing
democracy is a rather dangerous move. If the economic constraints imposed by markets
happily meet the ﬂexibility of a free-ﬂoating European technocracy, there arises the
immediate risk that the gradual uniﬁcation process which is planned for, but not by, the
people will grind to a halt before the proclaimed goal of rebalancing the executive and the
parliamentary branches is achieved. Decoupled from democratically enacted law and
without feedback from the pressing dynamics of a mobilized political public sphere and
civil society, political management lacks the impulse and the strength to contain and
redirect the proﬁt-oriented imperatives of investment capital into socially compatible
channels. As we can already observe today, authorities would more and more yield to the
neoliberal pattern of politics. A technocracy without democratic roots would not have the
motivation to accord suﬃcient weight to the demands of the electorate for a just
distribution of income and property, for status security, public services, and collective
goods when these conﬂict with the systemic demands for competitiveness and economic
growth.[8]
Summarizing this analysis, we are trapped in the dilemma between, on the one side, the
economic policies required to preserve the Euro and, on the other, the political steps to
closer integration. The steps that are necessary to achieve this objective are unpopular and
meet with spontaneous popular resistance. The Commission’s plans reﬂect the temptation
to bridge, in a technocratic manner, this gulf between what is economically required and
what seems to be politically achievable, only apart from the people. This approach harbours
the danger of a growing gap between consolidating regulatory competences, on the one
hand, and the need to legitimize these increased powers in a democratic fashion, on the
other. Under the pull of this technocratic dynamic, the European Union would approach
the dubious ideal of a market-conforming democracy that would be even more helplessly
exposed to the imperatives of the markets because it lacked an anchor in a politically
irritable and excitable civil society. Instead, the steering capacities which are lacking at
present, though they are functionally necessary for any monetary union, could and should
be centralized only within the framework of an equally supranational and democratic
political community.
7
II   
But what is the alternative to further integration based on the present model of executive
federalism? Let us ﬁrst consider those path-breaking decisions that would have to be
taken at the very beginning of the route leading to a supranational democracy in Europe.
What is necessary in the ﬁrst place is a consistent decision to expand the European
Monetary Union into a Political Union (that would remain open, of course, to the accession
of other EU member states, in particular Poland). This step would, for the ﬁrst time, signify
a serious diﬀerentiation of the Union into a core and a periphery. The feasibility of
necessary changes in the European Treaties would depend essentially on the consent of
countries preferring to stay out. In the worst case a principled resistance could only be
overcome by a re-foundation of the Union (based on the existing institutions).
The decision for such a core Europe would amount to more than merely a further
evolutionary step in the transfer of particular sovereign rights. With the establishment of a
common economic government the red line of the classical understanding of sovereignty
would be crossed. The idea that nation states are ‘the sovereign subjects of the treaties’
would have to be abandoned. On the other hand, the step to supranational democracy does
not need to be conceived as a transition to a ‘United States of Europe.’ ‘Confederation’
versus ‘federal state’ is a false choice (and a speciﬁc legacy of the constitutional discussion
in 19th century Germany).[9] Nation states could well preserve their integrity as states
within a supranational democracy by retaining both their roles of the implementing
administration and the ﬁnal custodian of civil liberties.[10]
At the procedural level the de-thronement of the European Council would mean switching
over from intergovernmentalism to the community method. As long as the ordinary
legislative procedure, in which the Parliament and the Council participate on an equal
footing, has not become the general rule, the European Union shares a deﬁciency in
legitimation with all international organizations that are founded on treaties between
states. This deﬁciency is explained by the asymmetry between the scope of the democratic
mandate of each single member state and the encompassing reach of competences of the
organization exercised by all of member states in concert.[11] As national citizens see it,
their political fate is determined by foreign governments who represent the interests
of other nations, rather than by a government that is bound only by their own democratic
vote. This deﬁcit in accountability is intensiﬁed further by the fact that the negotiations of
the European Council are conducted out of the public eye.
The community method is preferable not only for this normative reason, but for the reason
of enhancing eﬃciency too. It helps to overcome national particularisms. In the Council,
but also in inter-parliamentary committees, representatives who are obligated to defend
national interests must bargain compromises between obstinate positions. By contrast,
the deputies in the European Parliament, which is divided up into parliamentary groups, are
elected from the perspective of party aﬃliation. This is why, to the extent that a European
party system is taking shape, political decision-making in the European Parliament can
already be conducted on the basis of interests that were generalized across national
borders.
These are the fundamental decisions necessary for transforming the Monetary Union into a
8
Political Union that will not fall into the trap of technocracy. That would require, however,
overcoming the high, almost insurmountable, institutional hurdle of a change in primary
law. The ﬁrst step, namely calling for a convention which is authorized to revise the
Treaties, must be expected from the European Council, hence from the very institution
that is least suited to developing smooth and cooperative resolutions. This would not be an
easy decision for the members of the European Council who are at the same time heads of
national governments. On the one hand, the thought of their re-election already leads
them to recoil before this unpopular step and, in addition, they do not have any interest in
disempowering themselves either. On the other hand, they will not be able to ignore
indeﬁnitely the economic constraints that will sooner or later require further integration or
at least a manifest choice between painful alternatives. For the time being, the German
government is insisting that priority should be accorded to stabilizing the budgets of
individual states by national administrations, mainly at the expense of their social security
systems, of public services and collective goods. Along with a handful of smaller ‘donor
countries’, it is vetoing the demand of the rest of the members for targeted investment
programs and for a form of joint ﬁnancial liability that would lower the interest rates on the
government bonds of the crisis-hit countries.
In this situation, the German government holds the key to the fate of the European Union
in its hand. If there is one government among the member states capable of taking the
initiative to revise the Treaties then it is the German government. Of course, the other
governments could demand assistance on grounds of solidarity only if they themselves
were ready to accept the complementary step of transferring required sovereignty rights to
the European level. Otherwise, any assistance founded on solidarity would violate the
democratic principle that the legislature that levies the taxes has also a say in the decision
on how to allocate the funds and for whose beneﬁt to use them. So the main question is,
whether Germany not only is in a position to take the initiative, but also whether it could
have an interest in doing so. In particular, I am looking for a speciﬁcally German interest
that goes beyond the kind of interests shared by all member states (such as the interest in
the economic beneﬁts of stabilizing the Monetary Union or the interest in preserving
European inﬂuence on the international political agenda in the emerging multicultural
world society, an inﬂuence which is diminishing in any case).[12]
In the wake of the shock of the defeat of 1945 and the moral catastrophe of the
Holocaust, prudential reasons of regaining the international reputation destroyed by its
own actions already made it imperative for the Federal Republic of Germany to promote an
alliance with France and to pursue European uniﬁcation. In addition, being embedded in a
context of neighbouring European countries under the hegemonic protection of the United
States provided the context in which the German population at large could develop a
liberal self-understanding for the ﬁrst time. This arduous transformation of a political
mentality, which in the old Federal Republic remained captive to fateful continuities for
decades, cannot be taken for granted. This shift in mindset occurred in tandem with a
cautiously cooperative promotion of European uniﬁcation. Moreover, the success of this
policy was an important precondition for solving a more long-standing historical problem
that I am concerned with in the ﬁrst place.
After the foundation of the German Empire in 1871, Germany assumed a fatal ‘semihegemonic
status’ in Europe — in Ludwig Dehios’s words, it was ‘too weak to dominate the
continent, but too strong to bring itself into line.’[13] It is in Germany’s interest to avoid a
9
revival of this dilemma that was overcome only thanks to European uniﬁcation. This is why
the European question, which has been intensiﬁed by the crisis, also involves a domestic
political challenge for Germans. The leadership role that falls to Germany today, for
demographic and economic reasons, is not only awakening historical ghosts all around us
but also tempts us to choose a unilateral national course, or even to succumb to power
fantasies of a ‘German Europe’ instead of a ‘Germany in Europe’. We Germans should have
learned from the catastrophes of the ﬁrst half of the twentieth century that it is in our
national interest to permanently avoid the dilemma of a semi-hegemonic status that can
hardly held up without sliding into conﬂicts. Helmut Kohl’s achievement is not the
reuniﬁcation and the re-establishment of a certain national normality per se, but the fact
that this happy event was coupled with the consistent promotion of a policy that binds
Germany tightly into Europe.
Germany has not only an interest in a policy of solidarity; I would suggest that it has even a
corresponding normative obligation. Claus Oﬀe tries to defend this thesis with three
contested arguments. To date, Germany has derived the greatest beneﬁt from the single
currency through the increase in its exports. Because of these export surpluses, Germany
furthermore contributes to aggravating the economic imbalances within the Monetary
Union and, in its role as a contributory cause, is part of the problem. Finally, Germany itself
is even beneﬁting from the crisis, because the increase in interest rates for government
bonds of the crisis-hit countries is matched by a decrease in the interest rates on German
government bonds.[14] Even if we accept these arguments, the normative premise that
these asymmetric eﬀects of the politically unregulated interdependencies between
national economies entail an obligation to act in solidarity is not quite so easy to explain.
III
This leads me to the ﬁnal and philosophical question: What does it mean to show
solidarity, and when are we entitled to appeal to solidarity? With a little exercise in
conceptual analysis I intend to exonerate appeals to solidarity of accusations of moral
stuﬃness or misplaced good intentions that the ‘realists’ want to level against them.
Moreover, showing solidarity is a political act and by no means a form of moral selﬂessness
that would be misplaced in political contexts. Solidarity loses the false appearance of being
unpolitical once we learn how to distinguish obligations to show solidarity from both moral
and legal obligations. ‘Solidarity’ is not synonymous with ‘justice’, be it in the moral or the
legal sense of the term.
We call moral and legal norms ‘just’ when they regulate practices that are in the equal
interest of all those aﬀected. Just norms secure equal freedoms for all and equal respect
for everyone. Of course, there are also special duties. Relatives, neighbours, or colleagues
can in certain situations expect more, or a diﬀerent kind of, help from each other than from
strangers. Such special duties also hold in general for certain social relations. For example,
parents violate their duty of care when they neglect the health of their children. The
extent of these positive duties is often indeterminate. Of course, it varies according to the
kind, frequency, and importance of the corresponding social relations. When a distant
relative contacts his surprised cousin once again after decades and confronts her with a
request for a large ﬁnancial contribution because he is facing an emergency situation, he
can hardly appeal to a moral obligation but at most to a tie of an ‘ethical’ kind founded on
family relations (in Hegel’s terminology one, rooted in ‘Sittlichkeit’ or ‘ethical life’).
10
Belonging to an extended family will justify prima facie a duty to help, but only in cases
when the actual relation gives rise to the expectation that e.g. the cousin can count on the
support of her relative in a similar situation.
Thus it is the trust-founding Sittlichkeit of informal social relations that, under the
condition of predictable reciprocity, requires that the one individual ‘vouches’ for the
others. Such ‘ethical’ obligations rooted in ties of an antecedently existing community,
typically family ties, exhibit three features. They ground exacting or supererogatory claims
that go beyond moral or legal obligations. On the other hand, when it comes to the
required motivation the claim to solidarity is less exacting than the categorical force of a
moral duty; nor does it coincide with the coercive character of law either. Moral
commands should be obeyed out of respect for the underlying norm itself, without regard
to the compliance of other persons, whereas the citizen’s obedience to the law is
conditional on the fact that the sanctioning power of the state ensures general
compliance. Fulﬁlling an ethical obligation, by contrast, can neither be enforced nor is it
categorically required. It depends instead on the expectations of reciprocal favours — and on
the conﬁdence in this reciprocity over time.
In this respect, unenforceable ethical behaviour also coincides with one’s own medium or
long-term interests. And it is precisely this aspect that Sittlichkeit shares
with solidarity. However, the latter cannot rely on pre-political communities such as the
family but only on political associations or shared political interests. Conduct based on
solidarity presupposes political contexts of life, hence contexts that are legally organized
and in this sense artiﬁcial ones.[15] This explains why the credit of trust presupposed by
solidarity is less robust than in the case of ethical conduct, because this credit is not
secured through the existence of a quasi-natural community. What is missing in the case
of solidarity is the moment of conventionality in antecedently existing ethical relations.
What lends solidarity moreover a special character is, second, the oﬀensive character of
pressing or even struggling for discharging the promise which is invested in the legitimacy
claim of any political order. This forward-looking character becomes particularly clear when
solidarity is required in the course of social and economic modernization, in order to adjust
the overstretched capacities of an existing political framework, that is to adjust eroding
political institutions to the indirect force of encompassing systemic, mainly economic,
interdependencies that are felt as constraints on what should be in the reach of the
political control of democratic citizens. This oﬀensive semantic feature of ‘solidarity’, over
and above the reference to politics, can be elucidated by turning from an unhistorical
conceptual clariﬁcation to the history of that concept.
The concept of solidarity ﬁrst appeared in a situation in which revolutionaries were suing
for solidarity in the sense of a redemptive reconstruction of relations of reciprocal support
that were familiar, but had become hollowed out by the surpassing processes of
modernization.[16] Whereas ‘justice’ and ‘injustice’ where already the focus of
controversies in the ﬁrst literate civilizations, the concept of solidarity is an astonishingly
recent one. Although the term can be traced back to the Roman law of debts, only since
the French Revolution of 1789 did it slowly acquire a political meaning, albeit initially in
connection with the slogan of ‘fraternity’.
The battle cry of ‘fraternité’ is a product of the humanist generalization of a speciﬁc
11
pattern of thought engendered by all of the major world religions – namely of the intuition
that one’s own local community is part of a universal community of all faithful believers.
This is the background of ‘fraternity’ as the key concept of the secularized religion of
humanity that was radicalized and fused with the concept of solidarity during the ﬁrst half
of the 19th century by early socialism and Catholic social teachings. Even Heinrich Heine
had still used the concepts ‘fraternity’ and ‘solidarity’ more or less synonymously.[17] The
two concepts became separated in the course of the social upheavals of approaching
industrial capitalism and the nascent workers movement. The legacy of the JudeoChristian
ethics of fraternity was fused, in the concept of solidarity, with the republicanism
of Roman origin. The orientation toward salvation or emancipation became amalgamated
with that toward legal and political freedom.[18]
In the midst of the 19th century, an accelerated functional diﬀerentiation of society gave
rise to extensive interdependencies behind the back of a paternalistic, still largely
corporative and occupationally stratiﬁed, every-day-world. Under the pressure of these
reciprocal functional dependencies the older forms of social integration broke down and led
to the rise of class antagonisms, which were ﬁnally contained only within the extended
forms of political integration of the nation state. The appeals to ‘solidarity’ had their
historical origin in the dynamic of the new class struggles. The organizations of the
workers’ movement, with their well-founded appeals to solidarity, reacted to the occasion
provided by the fact that the systemic, mainly economic, constraints had outstripped the
old relations of solidarity. The socially uprooted journeymen, workers, employees, and day
labourers were supposed to form an alliance beyond the systemically generated
competitive relations in the labour market. The opposition between the social classes of
industrial capitalism was ﬁnally institutionalized within the framework of the
democratically constituted nation states.
These European states assumed their present-day form of welfare states only after the
catastrophes of the two world wars. In the course of economic globalization, these states
ﬁnd themselves in turn exposed to the explosive pressure of economic interdependencies
that now tacitly permeate national borders. Systemic constraints again shatter the
established relations of solidarity and compel us to reconstruct the challenged forms of
political integration of the nation state. This time, the uncontrolled systemic contingencies
of a form of capitalism driven by unrestrained ﬁnancial markets are transformed into
tensions between the member states of the European Monetary Union. If one wants to
preserve the Monetary Union, it is no longer enough, given the structural imbalances
between the national economies, to provide loans to over-indebted states so that each
should improve its competitiveness by its own eﬀorts. What is required is solidarity
instead, a cooperative eﬀort from a shared political perspective to promote growth and
competitiveness in the Eurozone as a whole.
Such an eﬀort would require Germany and several other countries to accept short and
medium-term negative redistribution eﬀects in their own longer-term self-interest — a
classic example of solidarity, at least based on the conceptual analysis I have presented.
References
[1] Justine Lacroix and Kalypso Nicolaides, European Stories: Intellectual Debates on Europe
in National Contexts (Oxford: Oxford University Press, 2010).
12
[2] COM/2012/777/FINAL/2: ‘A Blueprint for a Deep and Genuine Economic and Monetary
Union: Launching a European Debate’ (cited in what follows as ‘Blueprint’).
[3] This state of aﬀairs is expressed politely in the ‘Blueprint’ (p. 2): ‘EMU is unique among
modern monetary unions in that it combines a centralised monetary policy with
decentralised responsibility for most economic policies.’
[4] This was already noted at an early stage by Henrik Enderlein, Nationale
Wirtschaftspolitik in der europäischen Währungsunion (Frankfurt am Main: Campus, 2004).
[5] To this corresponds the authority of the Commission ‘to require a revision of national
budgets in line with European commitments’ (‘Blueprint,’ p. 26); this competence is clearly
intended to go beyond the already existing obligations to exercise budgetary discipline.
[6] ’Blueprint,’ p. 35.
[7] The ‘Let me have my cake and eat it too’ strategy adopted by the proposal of the
Commission avoids the overdue decision (‘Blueprint,’ p. 13): ‘Its deepening should be done
within the Treaties, so as to avoid any fragmentation of the legal framework, which would
weaken the Union and question the paramount importance of EU law for the dynamics of
integration.’
[8] See the relevant works of Wolfgang Streeck, most recently: Gekaufte Zeit. Die vertagte
Krise des demokratischen Kapitalismus (Suhrkamp, Berlin 2013) and my review in: Blätter für
deutsche und internationale Politik  (Heft 5, 2013).
[9] Stefan Oeter, ‘Föderalismus und Demokratie,’ in Armin von Bogdandy and Jürgen Bast
(eds), Europäisches Verfassungsrecht (Heidelberg: Springer, 2009), pp. 73-120.
[10] Jürgen Habermas, The Crisis of the European Union, trans. Ciaran Cronin (Cambridge:
Polity, 2012).
[11] Christoph Möllers, Die drei Gewalten: Legitimation der Gewaltengliederung in
Verfassungsstaat, Europäischer Union und Internationalisierung (Wielerswist: Velbrück,
2008), pp. 158ﬀ.
[12] The fact that the ﬁnalité of the uniﬁcation process has not yet even been deﬁned
provides an opportunity to broaden the focus of the public discussion which has been
conﬁned to economic questions until now. The perception of the shift in global political
power from West to East and the realization that the relationship with the United States is
changing, for example, cast a diﬀerent light on the synergetic advantages of European
uniﬁcation. In the postcolonial world the role of Europe has changed not only when seen in
the light of the dubious reputation of former imperial powers, not to mention the
Holocaust. The statistically supported projections for the future also foresee for Europe the
fate of a continent with a shrinking population, decreasing economic weight, and
dwindling political importance. The European populations have to learn that only together
can they uphold their social welfare model of society and the diversity of their national
state cultures. They have to combine their forces if they are going to exercise any inﬂuence
13
at all over the agenda of international politics and the solution of global problems. To
renounce European uniﬁcation would also be to turn one’s back on world history.
[13] For an interesting analysis, though one still coloured by a national historical
perspective, see Andreas Rödder, ‘Dilemma und Strategie,’ Frankfurter Allgemeine Zeitung,
14 January 2013, p. 7.
[14] Claus Oﬀe, ‘Europa in der Falle,’ Blätter für deutsche und internationale Politik, (Heft1,
2013), p. 76.
[15] By the way, nationalism obscures this diﬀerence between political solidarity and prepolitical
bonds. It appeals without justiﬁcation to this kind of communitarian bond when it
assimilates the civic solidarity of Staatsbürger to the ‘national solidarity’ of Volksgenossen
(tying people of the same descent).
[16] Karl H. Metz, ‘Solidarität und Geschichte,’ in Kurt Bayertz (ed.), Solidarität, pp.
172-194; for a critical treatment, see Wildt, ibid., pp. 202ﬀ.
[17] See the entries in the subject index of the edition of Heine’s works by Klaus Briegleb
(Munich: Carl Hanser, 1976), vol.  6, II, p. 818.
[18] Hauke Brunkhorst, Solidarität: Von der Bürgerfreundschaft zur globalen
Rechtsgenossenschaft (Frankfurt am Main: Suhrkamp, 2002).
Jürgen Habermas is a German sociologist and philosopher.
14
Europe Is Trapped Between Power And Politics
By Zygmunt Bauman
That the disease which brought the European Union into the intensive-care ward and has
kept it there since, for quite a few years, is best diagnosed as a ‘democratic deﬁcit’ is fast
turning into a commonplace. Indeed, it is taken increasingly for granted and is hardly ever
seriously questioned. Some observers and analysts ascribe the illness to an inborn organic
defect, others seek carriers of the disease among the personalities of the European Council
and the constituencies they represent; some believe the disease has by now become
terminal and beyond treatment, other analysts trust that a bold and harsh surgical
intervention may yet save the patient from agony. But hardly anyone questions the
diagnosis. All, or nearly all, agree that the roots of the malaise lie in the breakdown of
communication between the holders of political oﬃces (policy-makers in Brussels and/or
the politicians of European Council) who call the tune and the people asked to follow the
set score with or without being consulted and oﬀering their consent.
At least there is no deﬁcit of arguments to support the diagnosis of the ‘deﬁcit of
democracy’ inside the European Union. The state of the Union, no doubt, calls for intensive
care, and its future – the very chance of its survival – lies in a balance. Such a condition
we describe, since the ancient beginnings of medical practice, as a ‘crisis’. The term was
coined to denote precisely such a moment – in which the doctor faces the necessity of
urgently deciding which of the known and available assortment of medical expedients to
resort, in order to nudge the patient onto the course to convalescence. When speaking of
crisis of whatever nature, including the economic, we convey ﬁrstly the feeling of
uncertainty, of our ignorance of the direction in which the aﬀairs are about to turn – and
secondly the urge to intervene: to select the right measures and decide to apply them
promptly. Describing a situation as ‘critical’, we mean just that: the conjunction of a
diagnosis and a call for action. And let me add that there is a hint of endemic contradiction
in such an idea: after all, the admission of the state of uncertainty/ignorance portends ill
for the chance of selecting the right measures and prompting the aﬀairs in the desired
direction.
Let’s focus on the most recent economic crisis largely responsible for laying bare the
critical state of the political union of Europe. The right point to start is to remember the
horrors of the 1920s-1930s by which all successive issues of the economy have tended to
be measured since – and ask whether the current, post-credit-collapse crisis can be seen
and described as their reiteration, throwing thereby some light on its likely sequel. While
admitting that there are numerous striking similarities between the two crises and their
manifestations (ﬁrst and foremost massive and prospectless unemployment and soaring
social inequality), there is, however, one crucial diﬀerence between the two that sets them
apart and renders comparing one to the other questionable, to say the least.
While horriﬁed by the sight of markets running wild and causing fortunes together with
workplaces to evaporate and while knocking oﬀ viable businesses into bankruptcy, victims
of the late 1920s stock-exchange collapse had little doubt as to where to look for rescue:
to the state – to a strong state, so strong as to be able to force the course of aﬀairs into
15
obedience with its will. Opinions as to the best way out of the predicament might have
diﬀered, even drastically, but there was virtually no disagreement as to who was ﬁt to
tackle the challenge. The state, being suﬃciently resourceful to push the aﬀairs the way
the opinion-makers eventually selected, was equipped with both resources indispensable
for the job: power (ability to have things done), and politics (ability to decide which ones of
the proposed things ought to be given priority). Alongside the overwhelming majority of the
informed or intuitive opinions of the time, John Maynard Keynes put his wager on the
resourcefulness of the state. His recommendations made sense in as far as the ‘really
existing’ states could rise to such popular expectations. And indeed, the aftermath of the
collapse stretched to its limits the same post-Westphalian model of a state armed with
absolute and indivisible sovereignty over its territory and on everything it contains – even
if in directions as diverse as the Soviet state-managed, the German state-regulated and
the US state-stimulated economies.
This post-Westphalian ideal type of an omnipotent territorial state emerged from the war
not only unscathed, but considerably expanded to match the comprehensive ambitions of
a ‘social state’ – a state insuring all its citizens against individual misfortune (selectively
striking caprices of fate) and the threat of indignity in whatever form (of poverty, negative
discrimination, unemployment, homelessness, social exclusion) that haunted pre-war
generations. It was also adopted, even if in a somewhat cut-down rendition, by numerous
new states and quasi-states emerging amidst the ruins of colonial empires. The ‘glorious
thirty’ years that followed the war were marked by rising expectations that all harrowing
social problems had been or were about to be resolved; and the tormenting memories of
pre-war poverty and mass unemployment were about to be buried once for all.
Something largely unforeseen happened, however, that jostled most Europeans oﬀ the
then selected track. In the 1970s the heretofore uninterrupted economic progress ground
to a halt and was supplanted by a seemingly unstoppable rise in unemployment, seemingly
unmanageable inﬂation and, above all, the growing and ever more evident inability of the
states to deliver on their promises of comprehensive insurance. Gradually yet ever more
starkly, states manifested their inability to deliver on their promises. In stages, the faith
and trust in the potency of the state started to erode. Functions claimed heretofore,
jealously guarded by the states as their monopoly, and widely considered by the public and
the most inﬂuential opinion makers as the state’s inalienable obligation and mission
seemed suddenly too heavy for nation states to carry. Peter Drucker famously declared
that people need, should and shortly will abandon hopes of salvation descending ‘from
above’ – from the state or society; the number of ears keen to absorb that message grew
at accelerating pace. In the popular perception, aided and abetted by the chorus of a fastgrowing
part of the learned and opinion-making public, the state was demoted from the
rank of the most powerful engine of universal well-being to that of the most obnoxious
and annoying obstacle to economic progress and indeed eﬃciency of human enterprise.
Just as during the Great Depression of the 1930s, opinion formers as well as the widening
circles of the general public deemed to know this time what kind of vehicles were called for
to replace the existing ones, not so long ago viewed as trusty, yet increasingly rusty, and
overdue for the scrap yard. Once more, it seemed to be obvious as well what kind of
powerful force was destined, willing and able to lead the way out of the crisis. This time,
however, public trust was all but withdrawn from the political state, only to be reinvested
in the ‘invisible hand of the market’. Indeed, as Milton Friedman, Ronald Reagan, Margaret
16
Thatcher and the fast expanding bevy of their enthusiastic acolytes kept hammering home,
it was the market ability for spotting proﬁt chances that would accomplish what the
ethics-inspired state bureaucrats abominably failed to achieve. ‘Deregulation’,
‘privatization’, ‘subsidiarization’ were to bring what regulation, nationalization and the
communal, state-guided undertakings so obviously failed to deliver. State functions had to
be shifted sideways, to the market, that admittedly ‘politics-free’ zone, or dropped
downwards, onto the shoulders of human individuals. These men and women were now
expected to accomplish individually, inspired and set in motion by their greed, what they
did not manage to produce collectively, inspired and moved by communal spirit.
The ‘glorious thirty’ were therefore followed by the ‘opulent thirty’; the years of a
consumerist orgy and continuous, seemingly unstoppable growth of GNP indices across
the board. The wager put on pursuit of proﬁts seemed to be paying oﬀ: its beneﬁts, as later
transpired, came into view much earlier than its costs. It took us twenty years or so to ﬁnd
out what fuelled the consumerist miracle: not so much the magic ‘invisible hand of the
market’, as the discovery by the banks and the credit card issuers of a vast virgin land open
to exploitation: a land populated by millions of people indoctrinated by the precepts of
‘saving-books culture’ and still in the throes of the puritan commandment to resist the
temptation of spending money, particularly its unearned variety. And it took a few years
more to awaken to the sombre truth that initially fabulous returns of investing in virgin
lands must soon reach their natural limits, slow down and eventually stop altogether.
When that ultimately happened, the bubble burst and the fata morgana of perpetual and
inﬁnitely expanding opulence vanished from view under a sky covered with dark clouds of
prospectless redundancy, bankruptcies, inﬁnite debt-repayment, drastically falling living
standards, the curtailing of life ambitions – and the social degradation of the upwardlooking
middle classes to the status of defenceless ‘precariat’.
Another crisis of another agency, then? A collapse of one more vehicle in which the hope
of the ‘economic progress’ perpetuum mobile had been invested? Yes, but this time with a
diﬀerence – and a fateful, seminal one. As in the previous cases, old vehicles of ‘progress’
appear today to be overdue for the scrap heap, but there is no promising invention in sight,
in which one could reinvest the hope of carrying the rudderless victims out of trouble. After
the loss of public trust in the wisdom and potency of the state, the turn has come for the
‘invisible hand of the market’ to lose credibility. While almost all the old ways of doing
things lie discredited, the new ways are – at best – on the drawing board or at an early
experimentation stage. No one can swear to, hand on heart, the eﬀectiveness of any of the
latter. Too well aware of the hopes that failed, we have no promising runners-up to bet on.
Crisis being the time of deciding what way of proceeding to choose, in the arsenal of
human experience there seem to be no trustworthy strategies left to choose from.
We are now painfully aware, at least for the moment and until the human, all-too-human,
forgetfulness therapy will have done its job, that if left to their own devices the proﬁtguided
markets lead to economic and social catastrophes. But should we – and above all
could we – return to the previously deployed devices of state supervision, control,
regulation and management? Whether we should, is obviously a moot question. What is
well-nigh certain, however, is that we couldn’t – whatever answer we choose to that
question. We couldn’t because the state is no longer what it was a hundred years ago, or
what it was believed/hoped then it soon would become. In its present condition, the state
lacks the means and resources to perform the task which eﬀective supervision and control
17
of the markets, not to mention their regulation and management, requires.
Trust in the state’s capacity to deliver rested on the supposition that both conditions of
eﬀective management of social realities – power and politics – are in the hands of states
assumed to be sovereign (exclusive and indivisible) within its territorial boundaries. By now,
however, the state has been expropriated of a large part of its past genuine or imputed
power, which has been captured by the supra-state, in practice exterritorial global forces
operating in a politically uncontrolled ‘space of ﬂows’ (Manuel Castells’ term). The eﬀective
reach of the existing political agencies does not progress beyond state boundaries. Which
means that ﬁnance, investment capital, labour markets and the circulation of commodities
are beyond the remit and reach of the only political agencies currently available to do the
job of supervision and regulation. It is the politics chronically aﬄicted with the deﬁcit of
power, and so also of coercion, that confronts the challenge of powers emancipated from
political control.
To cut a long story short: the present crisis diﬀers from its historical precedents in as far as
it is lived through in the situation of a divorce between power and politics. That divorce
results in the inability to do what every ‘crisis’ by deﬁnition requires: choose the way to
proceed and apply the therapy which that choice calls for. The absence, it seems, will
continue to paralyse the search for a viable solution until power and politics, now in the
state of divorce, are re-married. However, under conditions of global interdependence such
a remarriage is hardly conceivable inside one state, even if large and resourceful; or even
inside an aggregate of states, as long as power is free to abandon at will and without
notice any territory politically monitored and controlled by political units clutching to the
ghosts of post-Westphalian illusions. We are now facing the awesome yet imperative task
of raising politics and its institutions to the global level, on which a large part of eﬀective
power to have things done already resides. All pressures, from the brutally mundane to the
sublimely philosophical, whether derived from survival interests or dictated by ethical duty,
tend to point nowadays in the same direction – however little we have thus far advanced
on the road leading there. Inside the European Union, a half-way inn on that road, those
pressures feel more severe and painful than in any other area of the globalized planet.
Deﬁcit of democracy is by no means a unique aﬄiction of the European Union. Every single
democratic state – every political body that aims or pretends to a full sovereign rule over
its territory in the name of its citizens and not by the will of a Machiavellian Prince or
Schmittian Führer – ﬁnds itself currently in a double bind. It is exposed to the pressures of
extraterritorial powers immune to the political will and demands of the citizenship, which
it can’t meet anyway due to its chronic deﬁcit of power. With power and politics subject to
separate and mutually autonomous sets of interests, and state governments tussling
between two pressures impossible to reconcile, trust in the ability and will of the political
establishment to deliver on its promises is fast fading. Communication between ruling
elites and the hoi polloi is all but broken; in election after election, voters are guided by the
frustration of their past hopes invested in the currently ruling team – rather than by their
preference for a speciﬁc policy, or commitment and loyalty to a speciﬁc sector in the
spectrum of ideologies.
The European Union, as an aggregate of nation states charged statutorily with the
replacement of an inter-state competition with cooperation and sharing, ﬁnds itself in a
truly unenviable plight. It has a need to assume an incongruous mix of mutually
18
incompatible roles – of a protective shield or a lightning rod intercepting and arresting, or
at least attenuating, the impact of powers freely roaming the global ‘space of ﬂows’ but
also of an enforcer pressing its member states to absorb the remainder of the force of
impact that resisted interception and managed to break in through the outer circle of
trenches. No wonder that the attitudes of the member states’ populations to the Union’s
policies tend to be ambivalent, vacillating between the extremes of Hass and Liebe: an
attitude mirroring the persistent ambivalence of the two-in-one role which the Union is
bound to play, more by the stark necessity it cannot control than by a choice it is free to
make.
There is no doubt that there is much yearning for reform and improvement in the Union’s
ailing structures, struggling for a modicum of coherence under the condition of
unmitigated ambivalence. There is, however, only so much which the most ingenious
reforms can achieve as long as they are considered and handled as a solely internal
European aﬀair. The roots of Europe’s problems – lack of coordination of power and politics
brought about by the globality of powers confronting locally conﬁned and territorially
constricted politics – lie far beyond Europe’s control. The problems Europe faces can be
alleviated, but they can scarcely be fully resolved and prevented from rebounding unless
power and politics, presently separated, are brought back into wedlock and forced to work
in tandem.
And so, in the case of badly needed and urgently demanded constitutional adjustments,
quick ﬁxes – let alone ultimate and lasting solutions to the current problems – are unlikely
to be found and put in place. Whatever else the sought-after reform of the Union will be, it
can’t be a one-oﬀ deed, but only a process of perpetual reinvention. This is the reality we
have little choice but to accept and consider in our thoughts and actions.
And there is something else we need to consider and focus our thoughts and actions on.
Whether we are aware of it or not, and whether by design or by default, the European
Union is a laboratory (if not unique, then surely the currently most advanced on a global
scale) in which ways to deal with the outcomes of the present lack of coordination of
power and politics are designed, explored and put to the test. This is, arguably, the most
important and consequential among Europe’s current contributions to the condition and
prospects of the planet; indeed, to its chances of survival. Europe’s present quandary
anticipates the challenges which the rest of the planet – and all of its inhabitants – are
bound, sooner or later, to experience ﬁrst-hand, face up to and live through. Our present
pains may yet (are destined to?) prove to be the birth pangs of a humanity at ease with
itself and drawing proper conclusions from the demands of its new – irreversibly globalized
– condition. What presently feels like an unbearably painful squeeze of a vice may yet be
found in retrospect to have been a severe, yet transient aﬄiction caused by forceps
wresting salvation out of an impending doom.
To keep that in mind is our, Europeans, joint responsibility.
Zygmunt Bauman is Emeritus Professor at the University of Leeds and one of Europe’s
foremost sociologists. He is author of 'Liquid Modernity' (Polity 2000) and many other
books on contemporary society.
19
Pragmatism, Idealism And European Demoicracy
By Kalypso Nicolaïdis
Europe has never been so crowded with Cassandras than in the last three years since the
Eurocrisis began – pundits and politicians predicting that the Euro or even the European
Union would collapse if we did not at last achieve ‘unity’ while claiming that they
themselves were cursed with public disbelief in their predictions – predictions echoed on
the other side of the ideological divide by those heralding the end of national democracy as
we know it unless we got rid of the Euro.
Yet, neither the EU nor the Eurozone have disintegrated. Instead the muddlers through
have, well, muddled through, causing much damage to Europe’s social fabric in the process,
but nevertheless keeping the show on the road. Jürgen Habermas cogently names the main
culprit in his Leuven speech published here on Social Europe Journal: unfettered capitalism.
Absolutely. This is not just an abstract system, it is a bunch of people tainted by the greedy
and corrupt among them. The latter will hopefully be reigned in and we may yet one day
progress to a truly new kind of fairer and greener capitalism. Habermas is right, this is what
is at stake in Europe and around the world today.
As part of this vast agenda, the immediate question is whether EU politics as we know it
can help do the job. And here, Europe’s tragedy has been that the Cassandras in question
are false Cassandras with real agendas. False Cassandras, for their predictions are ﬂawed
and unfortunately believed by many. We must resist the idea that the only alternative
‘solutions’ be either the disintegration of the Eurozone or to turn the EU into a state-like
entity, turning coordinated national policies into common EU politics and adopting
democratic recipes aping national models at the EU level.
As Weiler has put it, the EU is still fuelled by the messianism of at least part of its elites
and the idea that the ends of integration per se justiﬁes the means, even if such means
involve overlooking publics everywhere. An unholy alliance between ‘market pressures’ and
messianic zeal – as Habermas puts it ‘when economic constraints imposed by markets
happily meet the ﬂexibility of a free-ﬂoating European technocracy’ – can be tremendously
powerful. With the crisis, those who see ‘more integration’ as an end in itself have found
their Messiah shrouded in veils of yields and spreads, one that will bring the project to their
desired end. But of course it is a false Messiah – as Messiahs always are – who might be
defeated but bring much despair upon the citizens of Europe in the process. Or maybe in
the end, the proﬂigacy of modern Greeks will have helped make the story crafted by their
ancestors come true: Europe kidnapped by a wild bull, the bull of ﬁnancial markets…
In this sense, the management of the Eurocrisis is simply a microcosmos of European
politics at large. Politicians are unsurprisingly a mixed bunch in this story, sometimes
decent, all too often complicit, always fallible. But whatever their relative merits, it is an
illusion to believe that there is some sort of revolutionary alternative to the art of muddle
through in the EU today. The issue is not that they muddle through but how. In debtor
countries, some have managed to create political space for democratically sustainable
reform – indeed the creation of temporary political space seems to be the ECB remit these
days. In creditor countries, some have managed to create political space for some eventual
20
degree of transnational redistribution – ready public opinions for transfers that have not
happened yet. To give her credit, if Angela Merkel follows through on current policy change
in Germany, she may be able to face the inevitable further debt restructurings awaiting
countries like Greece and Portugal. If and when this happens, we may well realise that
instead of doing ‘too little too late,’ she will have been pursuing a steady course of ‘just
enough, just in time’ in order to buy and keep that domestic political space she so much
needs to address external expectations. In the best of all world, next year could showcase
European incremental consensus at its best: a German sense of responsibility in spite of an
annoying dose of self-righteousness, a Greek sense of accountability in spite of a
frustrating dose of ineﬀectiveness, a French sense of reckoning in sense of continued
wishful thinking. That is in the best of all worlds.
And so, here is for me the tension, a tension that seems to live in many European minds at
the moment. On one hand, we must defend this European way against its detractors and
remain vigilant in preserving its main features. On the other, we must also aim for
something more radical, some kind of radical democratic transformation, if the EU is going
to acquire the kind democratic appeal that will ensure its sustainability in the years to
come.
Perils of federal Unity, promise of transnational Union: Why European demoicracy is
an ideal worth ﬁghting for
Can we reconcile these two imperatives? I have argued along with other like-minded
scholars that to start with we need a compass but not a destination point. This compass is
a certain understanding and valuing of the EU as a European demoicracy in the making,
deﬁned as a Union of peoples, understood both as states and as citizens, who govern
together but not as one. In contrast with the classic representation of the EU as an ‘inbetween’
an alliance and a federal state, this represents a third way against both these
alternatives which both equate democracy with a single demos – the ﬁrst, a Union of
democratic states as ‘sovereignists’ would have it, the second, a Union-as-a-democratic
state to be as ‘federalists’ would have it. In this sense, the EU is a truly unique political
experiment and should remain an open-ended process of transformation which seeks to
accommodate the tensions inherent in the pursuit of radical mutual opening between
separate peoples.
Is this also turning out to be a rather unstable equilibrium – as we would expect from the
history of federal unions turned federal states? In my view, while the EU seemed to
approximate such an understanding of demoicracy as far as its constitutional and
institutional features were concerned and evolved over time, the management of the
Eurocrisis has taken it oﬀ course as it were and we should be seeking a restoration, not a
revolution. At the same time, the crisis has also highlighted more than ever before the
distance between the praxis and demoicratic ideal.
It is important to stress that such a demoicratic understanding of the EU is both pragmatic
and idealist. This is, pragmatically, an argument from what Europe is. European integration
is demoicracy at its best when it accommodates the deep diversity of our national political
and economic systems, under a modus operandi that is multi-centred and not only multilevel.
Indeed, diversity is not a static factor but what we make of it. European diversity is
not a constraint that we must work around or try to overcome through the right kind of
21
pedagogy or the right kind of incentives for convergence at all cost. Each member state is
an arena for diﬀerent social bargains, state-society relationships as well as diﬀerent
debates which overlap and echo across borders but are also grounded in diﬀerent
‘languages’ in the full sense of the term (as discussed in European Stories). The role of the
EU should be to engineer their permanent compatibility and horizontal contagion, not their
homogeneity. And the prize here is of an inclusive EU that will keep all its member states
in, including Britain – albeit in a diﬀerentiated fashion – as well as embrace publics with
widely diﬀerent expectations of integration.
But our European demoicracy is also about what Europe should be, an ideal worth
nurturing, in fact a post-war ideal which translate ‘peace’ into its component, its long term
preconditions, a kind of political ethics. For one, this Union shall abide by the imperative of
transnational non-domination as an anti-hegemonic, not an anti-national, project. The
idea was and still is that the peoples of France or Germany qua states would never again be
allowed to subjugate others on the continent thanks to a system of institutionalized
balance of power between states. But nor should this happen through a new kind of
domination. In this sense, Germany today cannot simply address its hegemonic dilemma
(how not to turn desired responsibility into undesired coercion) by replacing horizontal
power from Berlin by vertical domination from ‘Brussels.’ Instead, the second imperative for
running a peace union is that of true and genuine transnational mutual recognition
between its peoples who in an ideal world would engage in deep and demanding mutual
recognition if they are to persevere in ‘governing together but not as one.’ It is an
understatement to note that such a political ethics is greatly lacking in today’s crisisridden
EU.
There is no ready blue print on how to translate such a broad ethos into a litmus test for
the changing pattern of European integration under the EU crisis. Indeed, as Luuk Van
Middlelaar would argue, the spirit of open-ended transformation is to recover the
contingent and unpredictable nature of genuine politics. This is true wherever politics
takes place, in capitals, in cities, in assemblies, or in subterranean politics. Moreover, it
seems crucial not to confuse today’s exceptional circumstances dictated by the imperative
of ‘saving the Euro’ (whether or not this is a good thing is a separate question) with the
required long term structural changes required to manage the Eurozone as well as the EU
democratically. In short, European demoicracy should not be hostage to ‘legacy measures.’
Instead, the question is how to improve it qua demoicracy without then crossing the
rubicon to a classical federal form of multilevel democracy. Again, we are back to the
challenge of combining conservation with radical transformation. In order to continue to
walk this ﬁne line, judgements ought to be made in three realms.
• The ﬁrst is that of national democratic self-government. European demoicracy
starts with and rests on the health and integrity of national democracies, the
‘cratos’ of individual demoi. The crisis has led us to ask with ever greater urgency
what are the minimum requirements for each of the member state polities to
maintain their own democratic integrity. This is an agenda shared by many scholars
these days including Damian Chalmers, Ben Crum, Christian Joerges, Peter
Lindseth, Giandomenico Majone, Andrew Moravcsik or Fritz Scharpf. In my view, the
EU ought to adopt a ‘do no harm’ principle and test its planned interventions in
domestic arena against it, thus weeding out interventions that are democratically
counterproductive or actions with other aims that have democratic negative
22
spillover eﬀects.
• Crucially, demoicracy is above all a transnational democracy: the demoi so
protected ought not to be considered as any old demoi if demoicracy means
governing together. Demoicracy is about the common ‘cratos’ even if such cratos is
itself a fragmented and diﬀuse creature. So the type and extent of delegation of
power to the EU level ought also to be determined by the need to manage not only
economic but also democratic interdependence – which implies that the EU should
nurture and maximize positive externalities and discipline certain negative
externalities between national democracies. Especially because we value member
states as the sites where democracy and social justice have been progressively and
imperfectly shaped historically implies that states should interact on fair term and
their actions be demoicratically compatible. Addressing democratic failings in a
member state can only be sustained if done democratically.
• So thirdly, the way in which the ﬁrst two realms are to be balanced is in turn
dependent on what happens at the center. The supranational locus of democracy in
a demoicracy ought to remain a consensus democracy within the bounds of
‘reasonable disagreements. ‘ The pooling of sovereignty –eg how member states
decide together – must respect national self determination, small states cannot be
bullied into submission when Council decides on Treaty change; and crucially, the
delegation of sovereignty – how the Commission, ECJ, ECB and EP are empowered
to act ought not to break ombilical cord with some sort of genuine politics – be it
through its own way of functioning (EP) or its legitimacy as a mediator or enabler of
political action (Commission, ECB). If what Peter Lindseth calls the ‘postwar
constitutional settlement of administrative governance,’ is to remain compatible
with European integration, the architects of the latter must keep in mind that the
separation of norm-production by the state apparatus from institutions that
embody the capacity of historical political communities to rule themselves in a
strongly legitimated fashion was compensated domestically through mechanisms of
political control whether in the US or in European states. Hence, the crucial issue if
we want to recover the spirit of the Community method is not about each locus of
power individually but about their relationship. How the European Council
delegates to the Commission and how it works with the EP to do so. And crucially
that the democratic control of supranational rule making includes durable
mechanisms of collective oversight form national executives, national high courts
and increased recourse to national parliamentary scrutiny.
Sustaining Europe’s demoicratic third way: The political art of crabbing in a political
union
Many questions arise from this crude characterisation of European demoicracy and the
eﬀects of the crisis which cannot be explored here. The current impetus for so-called
‘political union’ amounts to pouring old wines into new bottles. The EU from its inception
was fueled by the wine of politics where the three realms above are brought into tension–
struggle between political visions of Europe, political ﬁghts and compromises between
states and governments of the moment, resistance to attempts at political bypass by
supranational bodies, political indoctrination or cooptation of passive citizenries into the
European project followed by continued attempts to placate discontent, political agency in
23
the rest of the world. Political union may be a fact of the matter but its renewed
invocation today is a response to the heightened degree of democratic interdependence –
and corollary perceptions of ‘democratic disconnect’ in the formulation of the Transatlantic
Academy. So everyone is looking for new bottles but to serve diﬀerent aims.
To put it bluntly, at a time of crisis, creditor states want mechanisms to control how
debtor states (or their banks) use of their money and the latter want the control how the
former craft the conditions for such control. There is compatibility there: creditor countries
think of political union as a way of legitimizing their dictate, while debtors thinks of
political union as a way of co-shaping them. In a European demoicracy, these national
concerns, obsessions, predicaments, must be respected and mutually accommodated. The
problem is that the new kind of EU governance envisaged to repair EMU is now shaped by
an emergency led old fashion IMF type struggle. Can conditionality modus operandi truly
shape a polity like the EU? Is it right to legitimise a deeply interventionist droit de regard
by the Commission (albeit stamped by the Council) over the composition of budgets which
cover close to 50% of national GDPs in the name of budget deﬁcits? Instead of
accommodating the politics of conditionality, EU governance must remain faithful to the
tenets of demoicracy –a balancing act which entails a light touch on the part of EU bodies.
In the end, member states must expect more of each other through mutual trust-cumspying
according to the art of political crabbing (in ﬂight lingua, overshooting your target
destination when confronted with side winds). As holocaust survivor and psychiatrist
Viktor Frankl argued in the post-68 era of political optimism, we need to recover Goethe’s
belief that ‘if we take man as he is we make him worse but if we take man as he should be
we make him capable of becoming what he can be.’ Should this old wisdom not guide our
European demoicracy today? Can European peoples as national and European citizens not
learn to over-estimate each other? For this, we need to energise all ﬁelds of democracies
and accountability at the same time. As Heather Grabbe recently argued our new global era
of protest is part much bigger battle between ‘leader knows best’ politics and modern
social participation. If the art of crabbing means that idealism adapted to changing winds is
true realism, we can rely on such social participation to renew and reenergise the European
process of reconciling national, transnational and supranational democracy.
Whatever else the sought-after reform of the Union will be, as Zygmunt Bauman argues
here on Social Europe Journal, it can’t be a one-oﬀ deed, but only a process of perpetual
reinvention. Not only must we insist that no one can ‘force the end’ today in the EU, but
that there is no such end to be contemplated, divorced from a process of deeper and
sustained democratic political experimentation within and across member states and their
politics and socio-economic contracts. More than ever, the EU may succumb to its demon,
its obsession with Oneness, at its peril. But if it doesn’t, it may still come out of this crisis
stronger in its capacity to manage rather than negate diﬀerences among its peoples.
References
Seyla Benhabid et al, ‘The democratic Disconnect’ (Transatlantic Academy, April 2013).
Damian Chalmers, ‘Democratic Self-Government in Europe: Domestic Solutions to the EU
Legitimacy Crisis’ (Policy Network Paper, May 2013).
24
Francis Cheneval and Frank Schimmelfennig, ‘The Case for Demoicracy in the European
Union,’ JCMS: Journal of Common Market Studies (vol. 51, no. 2, 2012), pp. 334–350.
Justince Lacroix and Kalypso Nicolaïdis, European Stories: Intellectual Debates on Europe in
National Contexts, (Oxford: Oxford University Press, 2010).
J.-W. Müller, ‘The Promise of Demoi-cracy: Diversity and Domination in the European
Public Order,’ in J. Neyer and A. Wiener (eds) The Political Theory of the European Union
(Oxford: Oxford University Press, 2010).
Kalypso Nicolaïdis, ‘We, the Peoples of Europe …,’ Foreign Aﬀairs (vol. 83, no. 6, 2004), pp.
97–110.
Kalypso Nicolaïdis, ‘Germany as Europe: How the Constitutional Court Unwittingly
Embraced EU Demoi-cracy: A Comment on Franz Mayer,’ International Journal of
Constitutional Law (vol. 9, no. 3–4, 2011), pp. 786–792.
Kalypso Nicolaïdis, ‘The Idea of European Demoicracy,’ in Julie Dickson and Pavlos
Eleftheriadis (ed.) Philosophical Foundations of European Union Law (Oxford: Oxford
University Press, 2012).
Kalypso Nicolaïdis, ‘European Demoicracy and Its Crisis,’ JCMS: Journal of Common Market
Studies (vol. 51, no. 2, 2013), pp. 351–369.
Samantha Besson, ‘Deliberative Demoi-cracy in the European Union: Towards the
Deterritorialization of Democracy,’ in Samantha Besson and José Luis Marti (ed.)
Deliberative Democracy And Its Discontents (Ashgate Publishing, Ltd., 2006).
Fritz Scharpf, ‘Legitimacy in the Multilevel European Polity,’ European Political Science
Review (vol. 1, No. 2, 2009), pp. 173–204.
Luuk Van Middlelaar, Le Passage a L’Europe: Histoire d’un commencement (Gallimard, 2012).
Kalypso Nicolaïdis is Professor of International Relations at the University of Oxford.
25
What Is The Social Dimension Of The EU?
Edited Interview with Martin Seeleib-Kaiser (16th
May 2013)
Against the backdrop of the current crisis, what is a social dimension for the EU?
Core to our understanding of the current crisis should be the acknowledgement that we
are facing economic and public ﬁnancing problems and not problems that are the result of
‘overextended’ welfare states in the European Union. What we also have to understand is
that comprehensive welfare states and the social dimension are not only here for good
times but for bad times. If welfare states and social cohesion within the Eurozone are not
viable in bad times, we have a big problem with the legitimacy of European integration.
The crucial issue is not whether technocratically we can achieve a Social Europe, it is
whether politically we can achieve greater solidarity within the European Union, which
cuts across nation states and integrates Europe.
The social dimension of the EU needs to focus on increased redistribution between
member states. Building on current systems of transfers within the EU, here I just want to
mention the agricultural and structural funds. We should be in a position to establish a
more comprehensive transfer union. One way to Europeanise the welfare state or social
policy elements, whilst at the same time increasing the viability of the monetary union,
would be to have an automatic trigger for redistribution between member states in times
of economic crisis. Once unemployment in a member state reaches a certain limit, or once
we witness a pronounced economic recession, the EU Commission would automatically
transfer funds to the member states suﬀering from asymmetric economic shocks and high
unemployment.
Political questions that need to be answered are, how do we fund such redistribution and
what should be the level? The big underlying issue is not whether technocratically we can
design or devise such mechanisms, but whether we can achieve political support for such a
policy. A precondition for a compromise among member states, and support by its peoples,
must be increased trust in government institutions and policies of member states beyond
national boundaries.
In other words, the key question we are faced with is, who is ‘us’? The deﬁnition of ‘us’ is
crucial for any conceptualisation of solidarity. If we go back in history and analyze the
historical development of national welfare states, we have to acknowledge that newly
formed nation states at times have used social policy for nation building. Solidarity within
the nation state is not ‘natural’, but had to be established. So the question we are facing
right now is, can the EU mobilize social policies to build solidarity beyond national borders
within the European Union?
In addition to the issue of solidarity beyond national borders, we seem to have increasing
diﬃculties in achieving solidarity within nation states due to what we have called the
‘dualization’ of labour markets and social protection. That is why we increasingly seem to
be confronted with a core workforce and a growing group of labour market outsiders – call
it precarious or atypical employment –, who are not suﬃciently covered through the
various social protection systems. If we consider support for unemployment insurance
programmes, we are witnessing a signiﬁcant drop in public support within some countries.
This might be associated with the fact that labour market insiders face a very low
26
likelihood of becoming unemployed or labour market outsiders even in an economic crisis.
Moreover, unemployment seems to be increasingly perceived in a number of European
countries as a consequence of individual behaviour.
Has solidarity eroded over recent years?
Solidarity is indeed eroding within Europe. However, we have to ask, why is solidarity, and
especially solidarity within the European Union, declining? At least partly the decline in
solidarity would seem to be a consequence of the dominant political discourse among
elites. We are at a crossroads and could potentially once again enter a nationalistic era. As
people increasingly become sceptical about the European Union and further European
integration, pushing for greater solidarity between countries might be an uphill battle,
although surely not impossible to achieve. We need the political leadership to think beyond
the short-term gains and the next election. A disintegrating European Union might lead to
political crises and conﬂicts between nation states. Solidarity is not natural, but is always
contested.
Social democratic parties and unions face a political dilemma, due to the increasing
dualization of labour markets and social protection systems, as well as ﬁscal pressures in
an ‘era of austerity’. However, every crisis also entails opportunities. From an organisational
perspective, it will be key for social democratic parties and unions to reinvigorate and
develop (new) approaches to solidarity in Europe.
How do you judge current European politics?
The current situation is not only bleak – the European Union oﬀers its citizens the freedom
of movement. And during the current economic crisis, European citizens are on the move.
People take advantage of their (social) right, as citizens of the European Union, which is
the result of previous European integration. People migrate to Britain, to Germany or other
places – countries with labour markets that are currently not in such dire straits, compared
to those in some countries of the EU periphery. The freedom of movement is something
positive that we in Europe should cherish as a great achievement and core element of the
social dimension within the EU. 20 or 30 years ago it was much harder to move within
Europe, and social rights were not automatically granted to citizens of other EU member
states.
High levels of migration are often considered a double-edged sword. Where do you see
the limits?
Well, we have to be really careful with numbers, as very often we do not have reliable
numbers. The overall positive eﬀects of migration within the European Union or a nation
state might coincide with negative consequences at the local or regional level, as public
services might be severely burdened in areas which have seen a particular rapid increase in
immigration. The limits of migration are determined by the political legitimacy of the
migration regime. From an economic perspective we might yet not have seen enough
migration, as we are still faced with signiﬁcant regional labour market imbalances within
the European Union. Germany, for instance, is still faced with relatively high levels of skill
shortages, despite the fact that net migration into Germany during the last year was
approximately more than 300,000. People do not migrate to take away jobs from others.
They migrate because there are opportunities of jobs - that cannot be ﬁlled by the local
population - and for various other reasons such as family uniﬁcation.
27
Furthermore, migration ﬂows and patterns vary over time and space, i.e. it’s not always the
same countries that witness processes of net immigration. If you think a couple of years
back, Germany was exporting workers. So one might imagine that in a couple of years’
time, new regional clusters develop in certain areas, whereby let’s say Thessaloniki might
become a hub of rapid economic development and people migrate there.
One needs to put current migration ﬂows into a longer time perspective. Over the long
term increased migration within the European Union could lead not only to a more
integrated labour market, but also to higher levels of solidarity beyond national boundaries.
If you were an EU policy-maker what would be your top priorities?
First, a precondition to any prioritization of policy measures would be to acknowledge that
we are not primarily Greeks, Germans, Spaniards, Brits or whatever, but that we are
Europeans. We’re united in diversity and in this together. Second, the European Social
Model is an achievement ─ culturally, politically and socially ─ that should be protected.
There are regional diﬀerences, and diﬀerences between nation states; but what we should
really understand is that European integration is about a social model. If we don’t think of
the European Social Model as an integral part of European integration, we are bound to lose
the support of the European citizens.
In terms of immediate policy responses, there are two elements that we need to rethink.
As I mentioned at the beginning of this interview, we should think about European-wide
automatic stabilisers and a transfer union. The threshold that triggers the transfers as well
as the level of the transfers need to be determined politically. But no one should doubt
that within a monetary union such transfers are a necessity, if one wants to preserve the
social dimension of Europe!
The second element that we need to think about is a minimum European pension. This is
important, especially as we are witnessing increased labour migration within the EU. If you
imagine that you migrate from a low-wage country into a high-wage country in your mid to
late thirties - even if your accrued pension rights from the low-wage country are portable you
will face poverty in retirement, should you decide to stay in the ‘high-wage’ country
during old age.
A minimum European pension could be one element of a common European approach to
providing a minimum level of income security across Europe. In addition to addressing the
issue of inadequate old-age income among migrants, it could be something – even if it is
relatively modest at the beginning – that could eventually foster greater labour market
integration and solidarity across national boundaries. From a macro-economic perspective
such a minimum European pension might function as a stabilizer during asymmetric
shocks.
What about European wages?
One could imagine a European minimum wage level that is related to the respective
median national wage levels. However, one needs to be extremely careful and be aware of
the possibility of ratchet-down eﬀects, as a European minimum wage might undermine
national collective bargaining agreements.
To conclude: Key for a Social Europe of the future is the establishment of a transfer union,
28
which entails elements of direct redistribution between member states in times of
economic crisis and transfers at the individual level!
Martin Seeleib-Kaiser is Professor of Social Policy at Oxford University.
29
What Does A Social Europe Look Like Today?
By Jean-Paul Fitoussi and Xavier Timbeau
The crisis that began in 2008 is still ongoing. It is therefore tempting to consider that
something that has now lasted for ﬁve years is no longer a crisis, but rather a new world
that has taken hold. The rise in unemployment, which since 2008 has increased by more
than 8 million in the Eurozone alone, and the increase in long-term unemployment,
aﬀecting almost 10% of the active population in Spain for example demonstrates, if at all
necessary, that the Eurozone economy is sinking into recession.
In 2012, there was a new turning point in the crisis. In the countries of southern Europe,
where the recession has hit hardest, a movement towards salary reduction began. The
decrease in average salaries reached more than 7% in Spain, something that has never been
seen in modern times in a developed country. This reduction was in part deliberate, given
that the pay of civil servants was reduced, but it was mainly the high level of
unemployment that led to this decrease in remuneration. This means that employees who
still have a job fear that they might lose it and thus are forced to accept a reduction in pay.
Unemployment is not limited to those who have lost their jobs or people newly arriving on
the labour market, but in this recession it also aﬀects those who thought that they would
escape unemployment because of their status.
This decrease in salaries leads to an improvement of the current account balance.
Combined with a drop in demand, the recovery of the external accounts has been
spectacular in the southern countries. Spain, which had registered a record current account
deﬁcit of more than 7% of GDP, was in balance by the end of 2012. Thus, one could see in
this the necessary adjustment of a situation that was totally unsustainable. The brutality
of the correction, it seems, was the direct result of the totally casual manner in which the
problem had been considered beforehand.
Given all the circumstances, this view is not acceptable. And it is precisely here that a
Social Europe should play its part. It depends on the way in which we reduce the series of
macroeconomic disequilibria and encourage a diﬀerent pathway from that of recession and
unemployment, whether we will be able to emerge from this crisis with less inequality, less
poverty and less injustice. A Social Europe cannot be reduced to a mere project of
macroeconomic equilibrium.
The ﬁrst argument is that, at the end of the day, a reduction of wages resolves nothing.
Sandwiched between the southern countries whose competitiveness is increasing very
rapidly and northern Europe, which has an excellent and resilient production system,
France and Italy are today the only countries in the Eurozone to show a current account
deﬁcit. The path to higher productivity demands long-term investment, but now Italy and
France are going to adopt the policy of wage reduction. The case of Germany, looking at
the labour market reforms of the 2000s, indicates what will happen: for those sectors
outside traditional industry, that contribute to the costs of industry and thus to German
competitiveness, the pressure is on reducing wages.
There are three major consequences of this. The ﬁrst one is that macroeconomic re-
30
balancing is built on the quicksand of the zeal with which wage reduction is being
implemented. This is an old argument, used countless times in the past, for example, when
Laval introduced deﬂation or the policies introduced by Schacht and Brüning in Germany.
Wage reduction does not produce adjustment of relative competitiveness, wage reduction
only produces deﬂation.
The second consequence is macroeconomic. Wage reduction aﬀects households that are
indebted and whose real debt (or to be more exact, the debt related to income) increases in
line with the prolongation of deﬂation. After ﬁve years of crisis, an increase in real debt at
best means prolonging the recession. More than likely, it will be deepened through new
defaults on private debt, building up the pressure in the banking system, and, ﬁnally, a
collectivisation of these private debts. But in Spain and in other southern countries, more
public debt means being one step closer to public default and thus the break-up of the
Eurozone.
The third consequence encompasses the whole scenario. Deﬂation is not the solution to
macroeconomic disequilibrium, but it is the process through which inequalities will
explode. The German lesson is exemplary for seeing that the decrease in unemployment
since 2000 corresponds point by point with an increase in the poverty rate. This is what
deﬂation has in store for the entire Eurozone. This is also what will make it unbearable
socially and politically, as was the case in Europe in the 1930s.
In order to get out of this spiral, we need a Social Europe. A new proposal for a Social
Europe must be associated with a rapid exit from the recession and a decrease in
unemployment. The essential elements of this are the pace of budgetary adjustment and
monetary policy. Yet there is another element that could also be put on the table: a
minimum wage for Europe, with national variations, that respects the collective bargaining
practices dear to diﬀerent countries. A minimum wage would be a relevant bulwark against
deﬂation (it should be noted that the minimum wage has been reduced in Greece). Such a
minimum wage would be diﬀerent in each country. The relative levels would express the
diﬀerences in productivity and progress of each country. They would thus follow the
increases in productivity by adding the inﬂation target of the European Central Bank.
This would cure the anticipated inﬂation and limit the devastating eﬀect of unemployment
on inequality. It would also ensure a more stable distribution of added value between
employees and shareholders. And by expressing the surplus or deﬁcit in the current
account in terms of the relative levels of the minimum wage, such a device could be a
powerful corrective for macroeconomic disequilibrium. In Germany today, it would lead to a
more dynamic increase, all other things being equal, of the minimum wage than in France
or Italy. The dynamic of inequality would only be partially solved by this mechanism, as
high incomes are escaping control and intermediate incomes are running the risk of lower
incomes catching up with them. And yet this is something that would make Europe more
stable because it would be more social and more just.
Jean-Paul Fitoussi is Professor at Sciences Po in Paris. Xavier Timbeau is Director of
the Analysis and Forecasting Department at OFCE.
31
Social Policy Will Be Critical To A Sustainable EMU
By Simon Deakin
European policy-makers have some vitally important decisions to make in the coming
weeks. The June meeting of the European Council is due to consider the role of social
policy in the wider context of economic and monetary union (‘EMU’). The background to
this process consists, ﬁrstly, of the adoption in November 2012 of the Blueprint for a deep
and genuine EMU, which referred to the need for greater policy coordination in the ‘ﬁeld of
employment’. Then, in May 2013, the Commission Vice-President and Commissioner for
Monetary Aﬀairs informed the European Parliament that he was ‘working on preparing
proposals to strengthen the social dimension of EMU’ and on ‘ﬁnding ways to better
integrate the social dimension in the current structures for economic governance’,
including ‘strengthening the surveillance of employment and social developments within
the European Semester framework.’
It is clear what this could mean: a renewed eﬀort to impose deregulatory policies on the
member states, of the kind put forward by the Troika in its dealings with Greece, Portugal
and Ireland. The logic of this approach is that ‘structural reforms’ in labour markets, by
cutting nominal wages and enhancing ﬂexibility in hiring and ﬁring, will restore
competitiveness in the states and regions adversely aﬀected by the crisis.
This approach is consistent with the new economic governance which has been developing
since 2010 around measures including the ‘six pack’, the Euro Plus Pact and the Treaty on
Stability, Coordination and Governance (TSCG). These measures are based on the premise
that if a stricter regime of macroeconomic surveillance had been in place during the 2000s,
the ﬁscal imbalances which threatened the stability of the single currency and the wider
Eurozone after 2008 could have been avoided. This is a false premise. Prior to the onset of
the crisis, all the Eurozone states with the exception of Greece were in compliance with
the convergence criteria.
The problem was that their real economies were far from aligned. The future debtor states
were mostly pursuing policies of ﬁnancially-driven growth, which were dependent on an
expansion of private credit and on increasing asset prices in the markets for commercial
and residential property. Thanks in part to loose arrangements for wage determination,
wages in these states rose faster than productivity (Johnston and Hancké, 2009). The
future creditor states, by contrast, were mostly following policies of ‘endogenous’ or
industry-led growth, which depended on targeted investment in capital goods, public
support for training and labour force upgrading, and wage moderation supported by
coordinated collective bargaining. They were better placed to deal with the shock induced
by the ﬁnancial crisis when it arrived in 2008, but it must be remembered that their
competitive advantage was, in part, the result of policies in the ‘core’ which were, in eﬀect,
exporting wage and price inﬂation to the faster-growing ‘periphery’ (Armingeon and
Baccaro, 2012).
The policy of enforced austerity, administered at ﬁrst through the interventions of the
Troika and subsequently through the ‘new economic governance’, does not address these
fundamental imbalances. The TSCG, in its attempt to embed a pro-cyclical ﬁscal policy at
32
the level of constitutional governance, is in danger of becoming a dead letter within
months of its implementation. Wage cuts and casualisation of employment are inducing
depression-type conditions in the indebted states, but in the absence of productivity
improvements they cannot address the underlying causes of the competitiveness gap, as
the IMF has recently acknowledged in its assessment of the response to the Greek crisis
(IMF, 2013).
The question now facing the European institutions is whether they can demonstrate the
ﬂexibility needed to eﬀect a change of course. The debate over the ‘social dimension’ of
EMU is to be welcomed for at least putting the relationship between social policy and
monetary policy on the agenda. A ‘deep and sustainable EMU’ can only be one which
promotes sustainable growth and social cohesion. To get to this point, a deepening of
eﬀorts at economic and social policy coordination will be needed. But this cannot plausibly
take the form of the socially divisive and economically counter-productive policies which
have been pursued to this point.
What would a sustainable EMU look like? To begin with, it would acknowledge that the
most successful countries and regions within the single currency area during the past
decade have been those that combined investment in human capital with strong welfare
states and coordinated wage bargaining. Egalitarian policies in labour and social security
law, designed to narrow earnings inequalities while promoting labour-market access, help
to build a stable tax base. Active labour-market policies, coupled with legally-mandated
vocational-training systems, enable economies to adapt to global competitive pressures
and the ‘creative destruction’ associated with technological change. Solidaristic wage
bargaining, based on the principle of maintaining a ﬂoor to wages and conditions at
sectoral and national level, has helped to ensure eﬀective demand for locally produced
goods and services in the face of recessionary conditions.
The EU already has in place the institutional mechanisms needed to promote learning
around ‘what works’ in economic and social policy. To this extent, the new economic
governance marks a step forward. A shift of emphasis within EMU, towards a growthorientated
and egalitarian form of economic union, does not have to wait for Treaty
revisions.
The European institutions have shown a high degree of adaptability in the face of the crisis.
This is most clearly so in the case of the ECB, which has overcome supposed limitations on
its mandate to become an eﬀective line of defence against the destabilising eﬀects of
currency speculation, through its outright market transactions programme. The Court, in
the Pringle Judgment, also demonstrated ﬂexibility in ﬁnding a solution to the
constitutional issues surrounding the adoption of the European Stability Mechanism Treaty,
at the same time validating the central bank’s interventions in the market for sovereign
debt.
It is now down to the other institutions to show similar ﬂexibility. The June European
Council provides the ideal moment.
References
K. Armingeon and L. Baccaro, L., ‘Political economy of the sovereign debt crisis: the limits
33
of internal devaluation,’ Industrial Law Journal (vol. 41, 2012), pp. 254-275.
IMF, ‘Greece. Ex-post Evaluation of Exceptional Access under the 2010 Stand-by
Agreement’ (Washington, DC: IMF, 2013) available at: http://www.imf.org/external/pubs/
ft/scr/2013/cr13153.pdf.
A. Johnston and R. Hancké, ‘Wage inﬂation and labour unions in EMU,’ Journal of European
Public Policy (vol. 16, 2009), pp. 601-622.
Simon Deakin is Professor of Law at the University of Cambridge. He is a member of
the European Trade Union Institute’s expert group on Transnational Trade Union
Rights (TTUR) and in 2013 was an original signatory of the TTUR’s manifesto calling
on the European Union to respect fundamental social rights in the context of the
current economic crisis.
34
Social Europe Is The Only Solution
By Robin Wilson
The current crisis of legitimacy of the EU can be traced in a path-dependent fashion to its
roots in the aftermath of World War II. Subsequent historical distance has elided together
the anti-fascist popular consensus across the continent after the defeat and
delegitimisation of Nazism with the elite integration ‘project’ which came to fruition in the
1957 Treaty of Rome.
In fact that consensus would have been much better expressed in the post-war plans of
radicals like Altiero Spinelli for a federal Europe. Antonio Gramsci, victim of Italian fascism,
had envisaged an integrated Europe in which the ‘nation-state’ would be reduced to local
government.
What defeated the progressives in the wake of war turned on the reconstruction of the
word liberty. From the obverse pole to fascist dictatorship, ‘freedom’ became attached not
to actual human agents united across the devastated continent in hope of a secure future
but to capital and commodities, anthropomorphised into the bearers of ‘free movement’.
Indeed the only actual human beings which the Treaty of Rome was to address were the
workers who were, with a jaundiced eye, to enjoy ‘free movement’ too—an afterthought
added at the behest of the Italian Christian Democrat government, anxious to ensure that
it could oﬄoad its surplus labour to northern Europe.
The theory was that a Common Market, by outlawing protectionism, would somehow
dissolve the nationalistic antagonisms that had led to war. The problem with this theory, of
course, is that it was more economically reductionist than the most vulgar Marxism.
Moreover, it would be known only to its founders and sponsors, so to speak, who assumed
it merely required a ‘permissive consensus’ to progress. It was the Marshall Plan and
national Keynesianism which actually engendered the trentes glorieuses, but the
coincidence of post-war reconstruction made the theory, at that time, seem to work.
In fact, the Council of Europe, established in 1949, said a much more eﬀective ‘never again’
to fascism (and Stalinism) by its overt promotion of universal norms, which conﬁned
nationalistic particularism and xenophobia to the margins of the post-war continent
(Northern Ireland, Cyprus and the Basque Country) for decades, until the wars of the
Yugoslav succession. The council now dwarfs the European Union, with 47 members, and
its much more intrusive human-rights interventions rarely excite the ‘Eurosceptic’ response
which the EU has increasingly faced in recent years.
Euroscepticism ﬁrst emerged on the political stage with the 1991 Treaty of Maastricht,
when the ‘no’ from Denmark in the subsequent referendum—many Danes feared for their
universal welfare state in the Big Market—indicated that the ‘project’ was incompatible
with a no-longer deferential citizenry. The Christian-Socialist European Commission
president Jacques Delors tried to ensure that the ﬁnal phase of national market
deregulation was accompanied by a ‘Social Europe’. But this was merely an oﬀsetting,
compensatory project which did not challenge the fundamental opening towards a further
concentration and centralisation of capital in Europe, from which growing social inequality
35
—as the Gulliver of capital escaped its Lilliputian national constraints—and core-periphery
tensions could only follow. Even the social democratic pioneer, Sweden, saw its income
Gini coeﬃcient soar as ‘social democracy in one country’ became increasingly impossible in
subsequent decades.
The crisis of legitimacy was consolidated in 2005 with the Dutch and French popular votes
against the draft constitution—at least in part because of its neo-liberal inﬂections. The
accession in 2004 of states for whom ‘actually existing socialism’ had been abhorrent and
a series of European Court of Justice rulings enforcing further deregulation of the labour
market deeply entrenched the neo-liberal outlook in the European institutions, particularly
the Commission.
In other words, the crisis was in long gestation before its current manifestations. Lenin
once deﬁned socialism in the USSR (hardly persuasively) as = soviet power + electriﬁcation.
And the fundamental European contradiction is this: if markets can only work to the
degree that they are socially embedded in a dense network of appropriate institutions and
norms, then the idea of Europe as = deregulation of markets + a supervisory technocracy
could only mean a Europe in which the movement of capital is fundamentally destabilising,
and ever more so. The origins of the Eurozone crisis, let us not forget, lay in banks,
including German banks, placing hot money in the poor periphery as asset bubbles were
inﬂated – not (outside of Greece), in ﬁscal proﬂigacy by individual member states.
For a young generation for whom the war is sepia-tinted history and neo-liberalism oﬀers
only insecurity—including in some countries a more than even chance of being unemployed
—‘Europe’ therefore now holds no meaning except Erasmus programmes for the educated
elite. This is the real reason behind the ever-declining turnout in EP elections, often seen
as paradoxical given the parliament’s somewhat enhanced powers, as each new cohort
ﬁnds the process ever-more ‘second-order’.
It can only be if Europe is seen to be the site of collective solutions to global challenges,
challenges far too large to cope with on the national level—such as stemming climate
change or re-regulating the continent-wide labour market—that it can acquire a new
legitimacy. Indeed, outside of the oil-buttressed exception of Norway, there is no other
site where solutions can adequately be found.
So Social Europe becomes the question of the institutional and normative elaboration of
the embedding of markets, which can also be the potential of a ‘social pact’ (as the
Foundation for European Progressive Studies and the European Trade Union Confederation
have advocated) to engage the social partners and NGOs beyond the institutional arena.
The successful Party of European Socialists campaign for a youth guarantee shows this can
be rendered meaningful in practice. The next campaign should be for a Europe-wide
minimum wage.
Before the crisis, Vivien Schmidt could apparently reasonably claim that the EU suﬀered
from a challenge of ‘output’ rather than ‘input’ legitimacy. Her argument[1] was that really
the problem was national elites anxious to blame ‘Brussels’ for everything emanating from
the union they didn’t like, while claiming national credit for everything they did. But it is
clear now that the EU has entered a chronic crisis on the ‘input’ side, as citizens in Greece,
Italy and Cyprus in particular ﬁnd themselves victims of neo-liberal dogma, facing punitive
36
social recessions regardless of how they might actually have voted in national elections.
Social Democrats should be at the heart of resolving this crisis of legitimacy, by
articulating a popular and progressive project for Europe, in alliance with Greens, social
liberals and progressive NGOs. It is crucial that the PES manifesto for the 2014 EP
elections sets out that project in crystal-clear fashion. A lowest-common-denominator
campaign with little traction across the continent as national issues are allowed to
predominate could see not just a further plummeting of turnout but, worse, real victories
for the authoritarian radical right—despite the echoes of the 1930s–who have been much
more eﬀective than Social Democrats in tapping popular despair.
There is an old Irish joke about an American, driving round the narrow roads of the west of
Ireland, who stops a passer-by to ask the quickest way to Dublin—‘I wouldn’t start from
here’ is the terse response. The European liberal-left has no other place to start apart from
the one in which it ﬁnds itself. A break-up of the Euro, with the inevitable beggar-thyneighbour
competitive devaluations that would follow, would be no answer. The way has
to be charted to a Social Europe which can tame the capitalist tiger in the only way it now
can be tamed after decades of neo-liberal globalization - on a European and ultimately a
global scale.
I have set out before the elements of the architecture of a genuinely Social Europe, which
is not merely a palliative but a new social model which can provide an inspiration to others
struggling across the world—where, since the demise of ‘actually existing socialism’, Islam,
utterly counter-intuitively, has provided the main adversary pole. These are by no means
original and have indeed been widely rehearsed by others.
The problem is not a dearth of concrete policies and proposals. The key question is whether
next year Europe’s Social Democratic family can act as a suﬃciently coherent and
compelling political force to redeﬁne anew the basic discourse of Europe, so that the left’s
core values, of liberty, equality and solidarity, trump the neo-liberal narrative of ‘free
markets’ that has triumphed for so long—to, we now know, disastrous eﬀect.
References
[1] Vivien Schmidt, Democracy in Europe: The EU and National Polities (Oxford: Oxford
University Press, 2006).
Robin Wilson is an independent researcher specialising in intercultural dialogue,
particularly its expression through football.
37
Europe’s Democracy Deﬁcit: Putting Some Meat On The
Bones Of Habermas’ Critique
By Steven Hill
A Blueprint for Redesigning European Democracy
The renowned German philosopher and sociologist Jürgen Habermas has been one of the
foremost advocates of ‘more Europe’; he also has been one of the most visible critics of the
perceived ‘democracy deﬁcit’ that has resulted from the European Union’s and the
Eurozone’s ad hoc policy responses to the economic crisis. In a recent address to the
University Leuven - introduced by the President of the European Council, Herman Van
Rompuy – Professor Habermas took a ﬁrm stance against Euroscepticism, even as he
voiced some of his own scepticisms. He mounted a passionate defense of the European
‘workfare system’ as a crucial form of social insurance against the disruptive whirlwinds of
globalization; he also reiterated his long-standing support for supra-national institutions
like the EU as the best hedge for preserving a distinctive ‘European way’ in the face of
powerful global forces.
But at the same time, Habermas was sternly critical of the growing gap between these
supra-national institutions and the European public. On the one hand, he said, ‘It is to the
credit of the Commission and the Presidency of the Council that they have addressed the
actual cause of the crisis – namely, the faulty design of a monetary union that
nevertheless holds fast to the political self-understanding of an alliance of sovereign
states.’ On the other hand, he was impatient with the pace at which political evolution has
kept pace with this economic transformation. ‘The ultimate democratization,’ said
Habermas ‘is presented as a promise like a light at the end of the tunnel. Supranational
democracy remains the declared long-term goal on paper. But postponing democracy is a
rather dangerous move.’
Habermas’ lecture amounted to a plea for a quick evolution toward transnational forms of
solidarity and continental democracy that would rebalance the politics of Europe with the
economics. But what would a Habermasian design for a European-level democracy look
like? Here, the venerable philosopher was disappointingly light on the details. Even when
prompted by an audience member to provide some basic elements he declined, saying,
‘That is not my competence.’
Unfortunately, most of the advocates of ‘more Europe’ who are also critics of the
democracy deﬁcit have been similarly vague on the details of their proposed institutional
redesign. Yet ‘democracy’ is more than a warm, fuzzy, feel-good catchphrase that one can
print on a bumper sticker or toss oﬀ in a lecture. If it is to amount to more than an
academic value or principle, it must be designed and constructed with speciﬁc institutions
and practices. If ever there was a case in which ‘the devil is in the details,’ this is one of
them.
And yet so many of the ‘more Europe’ critics of the democracy deﬁcit never get past their
surface critique to the point of rolling up their sleeves and designing what the New Europe
might look like. Certainly many ideas have been tossed around in the public sphere, yet to
38
date these have not gone much past the point of parlor discussions and op-ed rants. No
leader or organization, for example, has stepped forward with the outlines of their proposed
new political redesign for Europe; no serious convenings have even attempted such a task.
Yet if Europe is ever to reduce its democracy deﬁcit, then this discussion needs to progress
to a much deeper and broader level where a blueprint with speciﬁc details begins to
emerge.
And it’s urgent that the advocates of ‘more Europe’ address this task, because the
opposition that would like to see ‘less Europe’ is organizing and fomenting to enact its own
regressive vision. British Foreign Secretary William Hague recently gave a speech in
Berlin calling for a new ‘red card’ system that would allow national parliaments to block
unwelcome laws from Brussels, which would surely lead to the unraveling of the EU as well
as the Eurozone. One can imagine what the ‘United’ States of America would have
amounted to if each member state had been allowed to cherry pick which federal laws
passed by Washington DC to obey. Yet interestingly, Hague and his allies are arguing for
their proposal under the guise that it will ‘restore the democracy deﬁcit.’ They argue that
only by clawing back greater powers to national MPs, rather than MEPs in the European
Parliament, will Europe be able to close the gap between European-level governance and
the public. Mats Persson, director of the eurosceptic Open Europe piled on this subterfuge
by saying that ‘Allowing national parliaments to block unwanted EU laws would go a long
way to bring back democratic accountability over EU decisions.’
So it’s clear that there is a battle going on over what the ‘democracy deﬁcit’ means, what
its causes are, and how to close the gap. Yet the battle has been a fairly one-sided one,
because the ‘less Europe’ side is better organized and has more money for its campaign,
supported by wealthy elites like Lord Rodney Leach, a Conservative life peer in the British
House of Lords, who is a climate change sceptic and opponent of political reform in the
UK. And the ‘less Europe’ sceptics have an easier task, since all they have to do is spread
‘F-U-D’ – fear, uncertainty and doubt – to derail the European project.
So proponents of ‘more Europe’ have their work cut out for them. While Professor
Habermas enjoys great esteem among many across Europe and Germany, his and others’
lack of details over how to tackle this democracy deﬁcit is ultimately disempowering. His
forceful message only serves to add to the general malaise of dissatisfaction, but oﬀers
little substance as a solution and therefore allows the likes of William Hague and Open
Europe to ﬁll that void.
In the hopes of putting some meat on the bones of the Habermasian critique, I oﬀer the
following basic blueprint for redesigning European-level democracy. This design has to do
with the structure of government, and less to do with the function and speciﬁc powers
attached to this structure, which requires a separate but parallel conversation too long for
this short article. But as we have seen again and again during this Eurozone crisis, function
in many ways follows from form, so it’s important to get the structure right.
If you don’t like this structure, or disagree with some elements, what’s yours? The time for
fuzziness is past. To build a proper Social Europe a functioning European democracy is
needed that will empower the public to have a say in European aﬀairs.
39
Europe 2.0 – A Redesign for the Future
As a ﬁrst step toward outlining the details of a political union, we must place the
democracy deﬁcit under a microscope so that we can be clear about what isn’t working.
Much vigorous debate, as well as some major steps in response to the Eurozone crisis,
already have sketched the outline of the necessary foundations for a more integrated
economic union. But much less discussion has been devoted to how to redesign Europeanlevel
political institutions. So it’s important to develop a more precise analysis of the
current system.
There’s no doubt that Europe’s political institutions are inadequate. Frankly, they are as
messy as a scrambled egg. As one small example, only the most ardent Europhile can tell
the diﬀerence between the European Council, the Council of the European Union (also
known as the Council of Ministers, or simply ‘the Council’) and the Council of Europe. All of
them have their own president, as does the European Commission and the European
Parliament. Presidents and councils, everywhere you look, with names so similar that few
can tell them apart. Beyond that, lines of authority are vague and esoteric and the public
hardly knows who does what. To the public it all looks like a tangled mess of bureaucrats
nestled in Brussels. At the most basic level, more imagination needs to put into naming
these important bodies and leadership positions with distinctive titles that make them
easily distinguishable.
But that’s just the beginning. A huge contributor to the democracy deﬁcit is the fact that
the average voter is stupeﬁed by being four times removed from the chief legislative and
executive body of the European Union, which is the European Commission. The
Commission is a powerful body, increasingly so in reaction to the economic crisis, endowed
to be both the enforcement arm as well as the only body that is permitted to initiate
European-level legislation. Yet it is not even remotely elected directly by ‘We the People.’
Instead, voters directly elect their national members of Parliament, who in turn elect the
27 national heads of government, who in turn sit on the European Council; this body then
nominates the European Commission and its President, subject to the approval of the
European Parliament (whose members at least are directly elected). So national
parliaments, which are the closest to the voters in each member state, are reduced to the
role of a kind of electoral college while the heads of state who actually select the chief
executive of the EU comprise an ‘electorate’ of a mere 27 voters. Sorry, but that’s not very
democratic.
Despite the recent Lisbon Treaty endowing it with a bit more power, the European
Parliament is still less than a full legislature, as it can only pass, amend or reject the
Commission’s legislation, not initiate it. So unlike the American model, which has a clear
separation of powers between the executive and legislative branches, the European Union
has invested the functions of both the executive and legislative branches into the hands of
the Commission, with the Parliament – the only body that is elected directly – very much
a miniature partner.
Another miniature partner in this odd European tricameralism is the Council of Ministers.
Similarly restricted to passing, amending or rejecting the Commission’s legislation, this
council is composed of 27 national ministers, one for each of the member states. But to
40
confuse the public further, the exact membership of the Council depends upon the topic.
When discussing foreign, economic or agricultural policy, for example, the Council is
composed of the 27 national ministers who oversee that competence area for their
member state. On the one hand, this structure is kind of innovative, or at least diﬀerent in
its quirkiness, compared to how most other representative governments have always been
structured. On the other hand, it means this Council has a constantly rotating
conﬁguration of ‘representatives,’ each siloed in their respective issue, with connection to
only the narrowest of constituencies that cares about their single issue. This further
undermines transparency, accountability and coherence across issues, or a focus on the big
picture. Nice try, but this is a deeply ﬂawed design if the goal is to reduce the democracy
deﬁcit.
From the time of Montesquieu and Madison, the theory of democratic governance has been
grounded in noble values that often conﬂict, such as separation of powers, authentic
representation, transparency, accountability and eﬃciency of outcomes. US economist
Kenneth Arrow won a Nobel Prize for proving that a well-designed government could
attain many of these values, but never all of them. The problem with the European political
system is that, in trying to prevent a strong centralized government that could undermine
member state sovereignty, it leans so far toward an enshrinement of a hyper separation of
powers that it has given too short shrift to the other democratic values. Confusion and
incoherence can’t help but result, tragically so. Students of US history will recognize the
similarities to America’s Articles of Confederation era, which eventually gave way by
necessity to the drafting of a new structure of federal government.
That’s not to say that the track record of European governance has all been one of bungling
and miscues. Until the American-instigated economic collapse in 2008, followed by the
Eurozone crisis of 2010, the Commission and other governance bodies had displayed
competent leadership, and the European Union had progressed along its expected
trajectory, including adding twelve new member states from 2004-2007 and becoming a
global force in a short time following its ‘birthquake.’ When European governance works
well it’s like a majestic ﬂock of birds, diving and swooping in colorful blue-and-gold unison;
when it’s not working well, it’s a ﬂock of birds ﬂying oﬀ in too many directions. The
Eurozone crisis has stretched EU governance capacities to its limits because the EU’s
current political institutions are mostly adequate for a loose confederation of member
states – but a loose confederation is inadequate for a monetary union.
As more and more powers have been transferred to the Commission, giving it
unprecedented ability to intervene in national economic policies, these structural defects
matter more. Electorates are used to voting directly for or against their national
government and its policy proposals, playing a decisive role in national politics. But when it
comes to European governance they can only vote to change the electors which
themselves only nominate the members of the Commission. Contrary to what its harshest
critics say, the Commission actually is accountable to lots of bodies and people — but it’s
not directly accountable to ‘We the Voters.’ There are too many degrees of separation
between the governed and those doing the governing. And that must change.
At this point Europe’s political institutions are looking like a strange, mangled beast that
has emerged after being tossed in a clothes dryer. If you compare European political
institutions to those of most national governments the problem is plain to see. Whether
41
the nation is Germany, the United Kingdom, France, Japan, Brazil or the United States,
there is a directly elected legislature and a more or less popularly declared and in some
cases directly elected chief executive. It’s fairly simple, structure-wise. And simpler is
better, as a foundation for fulﬁlling the goals of transparency, accountability and
representation.
Yet simplicity has proven to be elusive at the European level. And now with the Eurozone
crisis and the prospect of a ‘two speed Europe,’ where the Eurozone appears to be carving
out its own governance separate from the EU, things have become even more complex.
A New Parliament for a New Europe
So here’s my back-of-the-napkin proposal for redesigning European-level political
institutions. As a starting point, Europe can learn something from the political and
economic structures that America originally designed at the federal level, and how they
evolved over two centuries.
Initially America empowered member states’ legislatures as well as individual voters, both
because each member state was suﬃciently diverse to have legitimate state-based
interests, but also because they needed buy-in from the political elites of each member
state (and many political elites, like Washington, Jay and Hamilton, truly didn’t trust the
average voter, much more so than European elites today). So while voters directly elected
the federal House of Representatives, the member states’ legislatures were given the
mandate to elect the powerful upper chamber of the Senate, as well as to elect
presidential electors that chose the national president. For decades after the ﬁrst
government in 1789, both the member states and the elites played a signiﬁcant role in
selecting the political leadership of the federal government.
Eventually, America amended its constitutional structures to empower individual voters
over the state legislatures, both with popular direct election of US Senators (starting in
1916, a full 127 years after the founding) and with state legislatures agreeing to abide by
each state’s popular vote in selecting presidential electors who now are mostly bound by
custom (and in some cases state law) to vote for their state’s winning candidate.
So in drafting a more federalized political structure for Europe, it would be wise if initially
both a direct popular vote as well as member states’ legislatures were empowered in the
European legislature. German statesman Joschka Fischer and others have sensibly
proposed such a design. This structure also has the virtue of turning on its head the
proposal from William Hague to close the democracy gap by giving greater powers to
national MPs over MEPs.
How would this look in practice? A more democratic European governance would have a
parliament with two chambers, one directly elected like the current European Parliament
by voters using a system of proportional representation, with the number of
representatives per member state a close reﬂection of each state’s population (so the more
populous member states would have more representatives). The second chamber would be
selected by member state legislatures (as the European Council and Council of Ministers
sort of are now), with the number of representatives being mostly proportional to the
population of each member state, but with a few additional representatives granted to the
42
low population states so that they are not easily overrun by bigger member states
(WARNING: do not make the mistake that the US made by granting equal representation
per member state in this second chamber; that has allowed conservative, low-population
American states to strangle legislation supported by popular majorities in the Senate and
created perverse incentives for minority rule). It would be additionally wise to establish a
process for amendment that would allow the second chamber to evolve over time into
direct popular election as a pan-European political consciousness and culture takes root.
The lower chamber of this European legislature would then select a Prime Minister of
Europe, who would in turn nominate her or his cabinet, with one cabinet member each
from a member state (similar to the current selection process for the Commission), to be
approved by the upper legislative chamber. In addition, a largely ceremonial post of
President of Europe would be directly elected on a continent-wide basis (as German
chancellor Angela Merkel and French President François Hollande have jointly proposed).
At some point down the road, this directly elected president could be invested with more
power via the amendment process if that better matched the zeitgeist.
This kind of streamlined structure – a two chamber parliament that provides direct
representation to voters as well as to member states, and empowers an executive branch
selected by both types of representatives, as well as a directly-elected ﬁgurehead – would
do much to simplify continental governance for European citizens, as well as to clarify lines
of authority, make decision-making more eﬃcient and transparent, and better connect the
public with their continental government.
The Reality of Two-Speed Europe
In addition to the inherent challenges of such an evolution, we have to deal with the
current realities of a two-speed Europe. It seems most likely that a 17 (or so) member core
would be the entity that adopts this sort of federal structure initially, as the momentum of
monetary union drives the need for a more streamlined political union. This more
federalized entity – whether it’s called a United States of Europe or some other name –
would have its own set of laws, political institutions, budgetary agreements, banking union
and tax policies. It also would institutionalize economic assistance ﬂowing from better oﬀ
member states to the more struggling states – much like California, New York and Illinois
today annually subsidize Mississippi, Alabama and Alaska – through an ongoing federal
appropriations process. This core would have merged their political economies and bound
their destinies together in a way that is irreversible. Clearly, that is a big step, especially
considering Europe’s bitter history between current member states, still not that distant in
the rearview mirror. Yet at this point it’s clear that the demands of a monetary union
require it.
But an additional advantage is that this Eurozone-based entity could co-exist with a more
loosely confederated European Union of the current 28 member states. This structure
would allow the EU to retain its present governance, with the European Commission
continuing as the executive of the EU along with the European Parliament and the Council
of Ministers. The EU would be able to retain its degree of confederation but operate under
much less pressure to integrate more than its disparate members are capable or willing.
And those who want to use the Euro currency would be able to forge ahead not only with a
ﬁscal and monetary union but also with the political institutions that are necessary to
43
properly regulate a monetary union and to maintain democratic legitimacy. They could do
this without being slowed down by reluctant foot-draggers like the UK. Just as important,
this two-tiered structure should be constructed so there is the possibility of individual
member states migrating from the EU into the Eurozone when it made sense.
There are historical precedents for such an inside-outside arrangement, such as the early
British Commonwealth or even the current United Kingdom, where there is a core Great
Britain and other ‘members’ (like Northern Ireland and some islands) that are more loosely
confederated.
Europeans, whether they realize it or not, have passed only the ﬁrst few bends in the road
of a years-long journey to overhaul their key economic and political institutions. It is
important to understand that Europe today is in its own Articles of Confederation stage,
entangled by many contradictions and tensions as it tries to fashion its union and decide
how integrated it wants to be. This process took decades for a young United States of
America, which fought a civil war over not just slavery but states’ rights and member
states’ sovereignty a full 70 years after its founding. The tensions pulling at Europe are not
nearly as severe as those America faced, and it might not take as long to resolve them
given the reach and power of modern communications. But the road toward union is a long
and winding one because it takes time for people and cultures to adapt. It may take a
change of generations, at least.
Many of the ‘less Europe’ critics of the democracy deﬁcit are scared to death that European
governance actually might become more democratic, since that would confer greater
legitimacy, and what they really want is for each European country to retreat further inside
its own castle walls. This would be a mistake, given the economic rise of population
behemoths like China and India that are increasingly assertive in global markets and
putting pressure on Europe’s much smaller member states to band together or become less
relevant and secure. Nevertheless, many of the criticisms advanced by the sceptics are
correct, and those who want ‘more Europe’ should respond in a way that makes Europeanlevel
governance more democratic, representative, transparent, accountable, responsive,
and eﬀective.
To redeﬁne Social Europe, the advocates of ‘more Europe’ should engage with their
opponents on the rhetorical battleﬁeld armed with a clear blueprint for political-economic
governance that will allow the European audience to envision what a New Europe will look
like. During the ﬁrst few years of the Eurozone crisis, it was understandable that advocates
would remain vague in their institutional remedies. But the opponents are using this
vagueness now to spread their pernicious brand of F-U-D. It’s time to put some meat on
the bones of the Habermasian ‘more Europe’ critique of the democracy deﬁcit in order to
counter the Hagueian ‘less Europe’ critique.  The time for vagueness and abstraction is
over. Social Europe needs a functioning democracy, so let the debate begin about what
that should look like.
Steven Hill is a political writer and former director of the Political Reform Program at
the New America Foundation. His most recent book, Europe’s Promise: Why the
European Way Is the Best Hope for an Insecure Age (www.EuropesPromise.org), was
published in January 2010.
44
The Euro-Dividend
By Philippe van Parijs
Criticizing is easy. Making proposals is harder. Here is one, simple and radical, yet — I shall
argue — reasonable and urgent.
Euro-dividend is what I shall call it. It consists of paying a modest basic income to every
legal resident of the European Union, or at least of the subset of member states that either
have adopted the Euro or are committed to doing so soon. This income provides each
resident with a universal and unconditional ﬂoor that can be supplemented at will by
labour income, capital income and social beneﬁts. Its level can vary from country to
country to track the cost of living, and it can be lower for the young and higher for the
elderly. It is to be ﬁnanced by the Value Added Tax. To fund a Euro-dividend averaging 200
Euros per month for all EU residents, one needs to tax the EU’s harmonized VAT-base at a
rate of about 20%, which amounts to nearly 10% of the EU’s GDP.
Why do we need such an unprecedented scheme? For four reasons. The most urgent one
has to do with the crisis in the Eurozone. Why is it that the US has been managing for
many decennia with a single currency, despite the diversity of its ﬁfty states and their
divergent economic fates, whereas the Eurozone is in deep trouble after just one decade?
From Milton Friedman to Amartya Sen, economists have kept warning us: Europe lacks two
buﬀering mechanisms that serve in the US as powerful substitutes for exchange rate
adjustments by individual states.
One of them is inter-state migration. The proportion of US residents who move to another
state in any given period is about six times higher than the proportion of EU residents who
move to another member state. Europeans may become somewhat more mobile. But our
entrenched linguistic diversity imposes very strict limits on how far we can expect — or
indeed hope — to amplify this ﬁrst mechanism. Athens’ unemployed will never migrate as
smoothly to Munich as Detroit’s to Austin.
The Dollar zone’s second powerful buﬀering mechanism consists of automatic inter-state
transfers, essentially through the working of a welfare state largely organized and funded
at the federal level. If Michigan or Missouri suﬀer economically, they do not sink into a
downward spiral. Not only is their unemployment tempered by emigration. In addition,
owing to tax liabilities shrinking and beneﬁt payments swelling, a growing part of their
social expenditures is de facto funded by the rest of the country. Depending on the
methodology used, the estimates of the extent of this automatic compensation vary
between 20% and 40%. In the EU, by contrast, the dampening of a member’s state
downturn through adjustments of net transfers across states amounts to less than 1%.
Given the poor prospects of the migration mechanism, the Eurozone simply cannot aﬀord
to neglect this second one. What form should it take? We shall not nor should we ever
have an EU-wide mega welfare state. Something more modest, far rougher, namely a
lump-sum, and therefore more compatible with the EU’s subsidiarity principle, is what we
need. If it is to be viable, our monetary union needs to equip itself with a number of new
tools. One of them is a buﬀering mechanism which can only be something like a Euro-
dividend.
45
The second reason why we need such a transnational transfer scheme applies to the EU as
a whole. The linguistic and cultural diversity of the European continent does not only make
inter-state migration more costly and therefore less likely for the individuals involved. It
also reduces the beneﬁts and increases the costs for the communities involved. Integration
into the new environment, both economic and social, takes more time, requires more
administrative and educational resources, creates more lasting tensions than is the case
with inter-state migration in the US. As migrants from poorer countries ﬂock into the more
aﬄuent metropolitan areas, the feeling of being invaded by indigestible crowds feeds the
drive to reinstate thick boundaries and repudiate both free movement and nondiscrimination.
There is an alternative, however: organized systematic transfers from the
centre to the periphery. People will no longer need to be uprooted and driven away from
their relatives and communities by the sheer need to survive. Instead, populations will be
suﬃciently stabilized to make immigration digestible in the magnet areas and to stop
emigration being badly debilitating in the peripheral areas. If it is to be politically
sustainable and socio-economically eﬃcient, a European Union with free internal
migration must introduce something along the lines of a Euro-dividend.
Thirdly and most fundamentally, the free movement of capital, human capital, goods and
services across the borders of member states erodes the capacity of each of these to
perform the redistributive tasks they discharged well in the past. Member states are no
longer sovereign states able to set their own priorities and to realize solidarity among their
citizens. They are more and more compelled to behave as if they were ﬁrms, obsessed by
their competitiveness, anxious to attract or keep their capital and their human capital,
eager to eradicate any social expenditure that cannot be sold as an investment and to
phase out any scheme likely to attract welfare tourists and other unproductive people. It is
no longer democracy that imposes its rules on markets and uses them for its purposes. It is
the single market that imposes its laws on democracies and forces them to give
competitiveness top priority. If our diverse ways of organizing social solidarity are to be
saved from the grip of ﬁscal and social competition, part of it must be lifted to a higher
level. The power and diversity of our welfare states will not survive the murderous pressure
of competitiveness unless the united European market operates on the foundation of
something like a Euro-dividend.
Finally, it is important for all dimensions of the functioning of the European Union that its
decisions should be regarded as legitimate, so that governments and citizens will not feel
entitled to circumvent them in all sorts of ways. One important factor turns on whether
citizens perceive very tangibly that the Union does something for all of them, not only for
the elites, for the inﬂuential, for those who are in a position to seize the new opportunities,
but also for the underdogs, those left out or the stay-at-homes. Bismarck helped secure
the shaky legitimacy of his uniﬁed Germany by creating the world’s ﬁrst public pension
system. If the Union is to be more in people’s eyes than a heartless bureaucracy, if it is to
be perceived as a caring Europe with which all can identify, it will need to ﬁnd a way of
bringing about something totally unprecedented: a universal Euro-dividend.
Are there any reasonable objections to this proposal? Of course there are. Some, for
example, may question the wisdom of using VAT to fund the scheme. True, VAT is the most
Europeanized of all major forms of taxation. But would it not make more sense to use a
Tobin tax or a carbon tax instead? We can do so, but what these taxes could fund, under
46
quite optimistic assumptions, is an EU-wide monthly Euro-dividend of between 10 and 14
Euros. Why not the more progressive personal income tax then? Because the deﬁnition of
the income tax base varies greatly from country to country and is highly sensitive
politically. Moreover, today’s income tax is de facto hardly more progressive than VAT.
When added to national rates, would a 20% rate of VAT not be unsustainable? It does not
need to be added to unchanged VAT rates: the member states’ social expenditures can and
should be adjusted downward and the revenues of the income tax upward, as a
straightforward implication of the sheer presence of the Euro-dividend.
Others are likely to object that each of the four functions listed above could be served
better through some more complicated, more sophisticated device. Most of these
arguments will be correct. My claim is simply that no other manageable mechanism would
serve all four functions as well while being intelligible to the ordinary European citizen.
A more fundamental objection is that however desirable the expected eﬀects, it would be
unfair to give everyone something for nothing. This objection rests on a misperception. A
Euro-dividend does not amount to an unfair redistribution of the fruits of somebody’s hard
work. It rather amounts to sharing among all European residents, in the form of a modest
basic income, part of the beneﬁts of European integration. How much did we save as a
result of not having to conduct or prepare war with our neighbours? How much did we gain
as a result of having increased competition between our ﬁrms or of having allowed factors
of production to move wherever in Europe they are most productive? No one knows and no
one will ever know. But what is certain is that these beneﬁts are distributed very unequally
in the European population, depending on whether they are resourceful or unemployed,
depending on whether or not the situation created by European integration happened to
make their consumption cheaper or their skills more valuable. A modest Euro-dividend is
simply a straightforward and eﬃcient means of guaranteeing that some of these beneﬁts
will reach each European in a tangible way.
Is this not utopian? Of course it is, in the sense in which the European Union itself was
utopian until not so long ago, and also in the sense in which the social security system was
utopian before Bismarck put together its ﬁrst building blocks. But Otto von Bismarck did
not create his pension system from kindness. He did so because people started mobilizing
in favour of radical reforms across the whole of the Reich he was trying to unify. What are
we waiting for?
Philippe van Parijs is Professor at the Faculty of Economic, Social and Political
Sciences of the University of Louvain (UCL), where he has directed the Hoover Chair
of Economic and Social Ethics since its creation in 1991.
Part II – European Trade Unions’ Vision Of A Social
Europe
48
Why We Need An Ambitious Social Europe
By Bernadette Ségol
The European Trade Union Confederation (ETUC) has, for many reasons, always been
supportive of the European project, but primarily because this regional integration model
aimed not only at economic integration but was also meant to foster social progress and
full employment. We have stressed this point on many occasions over the years. The
response from the Institutions has been worse than disappointing and, we fear, for reasons
that are based on ideology rather than sound economics.
One year ago we presented our Social Compact for Europe. It was obvious to us - and
indeed many others - that the policies chosen to deal with the crisis were dismantling the
European social model instead of strengthening it, thereby undermining popular support.
Why is that support undermined?
Over the recent period there has been no social initiative from the EU, no serious eﬀort to
stop wage and social dumping and no demand made to Member States to promote an
eﬀective social dialogue. Political leaders view social regulation as an obstacle to
competitiveness. Here are a few examples: No social program in recent years, no health
and safety program, no initiative on restructuring – although requested by the European
Parliament. Essential directives on subjects such as information and consultation, parental
leave or posting of workers are considered to be costly burdens. By anticipating the
Council’s negative reaction, the European Commission is giving up any social initiative. This
is not the way forward.
Do they not see that the EU’s social foundation is being eroded to a vanishing point?
Minimum social standards should be an integral part of EU’s social dimension. And why
else is trade union and popular support for the EU dwindling? Because the policies imposed
by the Troika on Greece, Spain, Ireland and Portugal and, generally, the famous ‘six-pack’ of
macroeconomic policies have a single objective, namely structural reform. These reforms
have made ordinary people carry the whole weight of economic adjustment. Inequalities as
well as poverty have increased. Public services have been weakened and so has social
protection. And we have not seen any meaningful initiative in favour of growth or
employment.
In that very negative context, we welcomed the European Council decision of December
2012 to put the question of Social Europe on the table. We see this as an echo – albeit
faint – to our claims. It is essential that the roadmap on the social dimension of EMU,
which will be published in June, is more than just a gimmick, more than just a ﬁg leaf
hiding the nudity of Social Europe.
The roadmap must address the social dimension of EMU. We know that a single monetary
area requires coordination and convergence which will have a considerable impact on
working conditions. But where exactly does EMU start and where does it end? Austerity
does not stop at the Euro area’s borders. Macroeconomic policies implemented under the
ﬁscal compact will be felt well beyond it.
49
For us, the EMU social dimension should result in a positive social process for all EU
countries. We oppose the repatriation of social rights to the national level by those
countries not members of the Euro area, which we know is what the British Prime Minister
wants and others may follow.
Current policies threaten our social fabric. There will be no serious roadmap on the social
dimension of EMU without a clear indication that these policies will change. It should be
clearly said that the number one priority is to ﬁght unemployment by way of a moratorium
on austerity policies and an investment program for growth and jobs amounting to 1 to 2%
of Europe’s GDP. We have not seen the implementation of the growth plan as decided in
June 2012. We know that the capital of the EIB was increased by 10 billion Euros with
leverage eﬀect. But where are the projects? Who will they beneﬁt and how? That amount
will in any case hardly be suﬃcient for growth to pick up again in Europe.
We are told that no public money is available. But public money was there to save the
banks. And it was ordinary people who forked out. Working people and their families do not
understand why it was considered acceptable to increase public debts and deﬁcits to save
the banks and why no eﬀort is being made to save jobs. And what about mobilising private
funds? What about ﬁghting tax evasion or tax avoidance? Every year, one thousand billion
Euros escape tax collection. It is time to stop this scandal.
We welcome the attention given to the social dialogue at European level. But, let us be
clear, this dialogue must bear fruit. We will not be taken hostage in the process. And the
European dialogue depends on a strong dialogue at the national level. Weakening or
destroying industrial relations at national level goes against EU fundamentals. What
happened in Greece is against basic rights as deﬁned by the ILO. In Romania and in
Hungary, trade union rights and social dialogue are being ﬂouted. What will the roadmap
say about that?
It is ﬁrst at the national level, in the negotiation of recovery programs, that the social
dialogue must take place. In many countries, the conditions are just not there, simply
because the right to negotiate is being denied. The roadmap cannot ignore that. Talking
about the European social dialogue without looking at what is happening at the national
level would be a waste of time. Likewise, the very raison d’être of the social dialogue will be
lost if the necessary follow-up to the sectoral social dialogue at European level, as
provided for by the Treaties, is disregarded. But this is happening now.
Then there is the question of the ETUC’s participation in the economic governance
process. We are ready to get involved in deﬁning the broad lines of the European Semester.
But will our participation contribute to changing the direction of current policies? Could
the tripartite social dialogue or macroeconomic dialogue be turned into platforms going
beyond interesting and polite exchange of views? The answer to those questions is of
course of paramount importance. The ETUC will not be hostage to participation in
economic governance for the sake of it.
We are fully aware that, in the EMU convergence process, national comparisons of unit
labour costs are looked at and discussed at length by ﬁnance and employment ministers.
And we do know that wages are an important element of unit labour costs. This is a highly
50
sensitive issue, a red line. Wage-setting systems are outside EU or EMU competences. The
autonomy of social partners must be guaranteed in that area.
We support the inclusion of social indicators such as unemployment, poverty, inequalities
or active labour market policies in the country-speciﬁc recommendations. The
implementation of the youth guarantee should also be included in these recommendations.
Social indicators should weigh as much as economic indicators and not just serve as an
excuse or occasional option. If indeed social indicators are taken seriously, they will have
an inﬂuence on macroeconomic policies.
Now, a few words about social and wage dumping: It exists almost everywhere in the EU
and it sets people against the EU. The damage caused by the decisions of the European
Court of Justice in the Laval, Rüﬀert, Viking and Luxembourg cases has not been repaired.
As long as the EU allows social dumping, it will be viewed as an instrument working
against the people’s interests and as a socially negative factor.
Our position on the social dimension of the EU must be taken very seriously. Pressure is
high to limit the debate on the social dimension to some secondary aspects. It would be
extremely regrettable if, at the end of June, the Council were to adopt an unambitious
roadmap. Unfortunately, trade union support for European integration could well disappear
in this case.
Bernadette Ségol is the Secretary General of the European Trade Union Confederation
(ETUC).
51
A Social Europe Requires A Change Of Course For The
Young Generation
By Berthold Huber
A social Europe does not come about on the drawing board – only a concerted eﬀort will
allow it to develop. The path to another Europe, a social one, therefore has to start with
the concrete needs and concerns of its citizens. The current crisis is showing the people of
Europe just how great an impact Europe has on them like never before. This especially
holds true for Europe’s younger generation.
It is indeed the case that Europe’s young people are bearing the brunt of the crisis, and the
unilateral belt-tightening measures being taken by the Euro states. Soaring unemployment
among youth in Europe has assumed massive proportions, and is thus one of the
fundamental problems faced by European societies.
Europe can only legitimise itself over the long haul if it banishes the problem of youth
unemployment. It is time for a social Europe meriting the name instead of merely paying lip
service to it to by once again oﬀering young people in Europe prospects for social and
economic progress. Social and economic fears and anxieties on the part of the young
generation have to be taken seriously. A mounting number of young people in Europe think
that EU policy above all panders to business enterprises and lobbyists. As a result, the
European Union’s policies are frequently perceived as dire threats. This tarnishes the
attractiveness of the ‘European Project’.
It is without a doubt one of the most blatant contradictions of our age that the besteducated
younger generation in the history of Europe either does not have any work or is
only employed in poorly paid, insecure jobs. The youth unemployment rate averages 23.4%
in the 27 EU countries at present, and is thus roughly twice the rate as for adults. 7.5
million young people between the ages of 15 and 24 as well as another 6.5 million young
people between 25 and 29 were either out of work or were undergoing vocational training
in schools in 2012. In some southern European countries such as Spain or Greece, for
instance, more than one out of every two persons between 15 and 24 does not have a job.
Even in Sweden, considered to be a shining example of a modern welfare state down to the
present, almost one in every four young persons does not have work.
Never before have Europe’s youth faced such dismal future prospects. It is becoming ever
more diﬃcult to get a foothold in working life, while young employees with atypical or
precarious jobs are fast becoming nothing more than a ﬂexible labour pool to be hired and
ﬁred at will. Europe’s youth thus face the peril of becoming a lost generation. This is
undermining trust and conﬁdence in one of Europe’s key pledges – that each generation
will have the possibility of employment and economic advancement. Not only does this
jeopardize the social cohesion of our societies. European uniﬁcation may also suﬀer
setbacks if especially young people, who are supposed to carry the ideal of a united Europe
into the future, associate Europe above all with unemployment and an erosion of social
standards.
The problem of unemployment among youth is putting the very essence of the European
52
Project to the test. When millions of talented people are ﬁghting against a bleak future,
the very foundations of the European welfare state are at stake.
We know from many scholarly studies that the beginning of a lifetime of gainful
employment is frequently the stage where young adults establish the foundations for the
level of self-determination, prosperity, or conversely relative poverty (in old age) and social
marginalization they will face over the course of their lives. A resolute, comprehensive
political response addressing both youth unemployment and the precarious nature of
existing jobs is therefore absolutely imperative for a Social Europe, a healthy society and
social systems which are viable in the long term. Young people whose periods of gainful
employment are interrupted generally earn a lower income during their entire working lives.
The risk of renewed unemployment is moreover considerably greater. Unemployment today
is thus frequently followed by a precarious situation tomorrow. On top of this, young
people need a certain degree of planning security and ﬁnancial security if they are to
establish autonomous lives or have a family. When a signiﬁcant percentage of the young
generation continues to be excluded from a society based on the principle of solidarity, and
as a result lacks the ﬁnancial means to make a contribution to the social system of this
very society, youth employment is undermining the very foundations of the European
welfare state.
To confront this desolate situation, the EU is only planning on making €6 billion available
over the next 7 years. By way of comparison, the EU was willing to fork out over € 700
billion to bail out insolvent banks. The President of the EU Parliament, Martin Schulz, was
therefore completely right when he stressed that the young generation is just as ‘systemcritical
as banks’.
We cannot aﬀord to sacriﬁce the young generation, otherwise the realization of our ‘vision’
for a social and just Europe will become more elusive than ever. That is why combating
alarmingly high youth unemployment must be made one of the common strategic priorities
of the European Union’s and its member states’ policies. The objective must be to slash
youth unemployment in Europe over the next few years. To this end, binding targets and
goals need to be agreed without delay.
Anyone who is serious about combating youth unemployment in Europe must above all
reform the labour markets with their deep rifts and bring about a new order. To achieve this
requires regulation and limits on atypical and precarious jobs as well as low wages. Normal,
permanent employment agreements must become the norm once again. Beyond this,
measures need to be taken to curb wage discrimination. The principle of ‘the same wage
for the same work at the same place’ must apply throughout Europe.
In addition to labour-market policy, additional binding measures must be agreed in order to
turn the tide on youth unemployment. At the heart of this are the following:
• a European program to start up immediately aimed at combating youth
unemployment and providing ﬁnancial resources to make the EU’s ‘youth guarantee’
a reality. This means to guarantee the right to initial or further training within a
period of 4 months after receiving a secondary school graduation certiﬁcate.
• a growth program for Europe instead of one-sided austerity policies.
• a change in course in educational policy characterised by:
53
higher levels of investment in education and training, job-creation and further
training measures for the period of at least one year, fostering and expanding the
dual training system.
Young people are the most important capital the European Union has. They are Europe’s
societal and economic foundations for the future. It is only through a resolute change in
course towards a Social Europe based on solidarity that we will be successful in improving
economic and social prospects for young Europeans and getting them back on board
behind the European Project.
Berthold Huber is Chairman of the German trade union IG Metall and President of the
International Metalworkers' Federation.
54
The Social And Political Scope Of EU Reform Policy
By Ignacio Fernández Toxo and Cándido Méndez
At the end of next June the European Council summit will debate a proposal to reform the
Economic and Monetary Union (EMU) based on the roadmap approved last December. The
debate and decisions adopted will discuss the worst crisis faced by the EU since its birth in
1957. The nature of this crisis is, at present, not only economic, but also social and
political. It is, to a great degree, the result of the incapacity of European political oﬃcers to
face up to the second stage of the international ﬁnancial and economic crisis, as well as
that of the EU ‘periphery’ countries.
Austerity and structural policies – in other words, the undermining of social and labour
rights – as imposed by the European Council starting in May 2010, have resulted not only
in an absolute failure in economic terms, but have also brought about devastating social
and political results. This particularly refers to debtor countries, but also has a bearing on
the EU as a whole and its future, understood as a political project.
This analysis reﬂects not only the trade-union view in facing up to the severe deterioration
of the European Social Model, but also highlights the de facto disappearance of the social
contract in which, after World War II, a long-standing period of peace and economic
progress ﬂourished, based on welfare and social justice, and recognized as the undeniable
hallmark of the EU. The more rigorous economic and political analysts today believe that
austerity and relinquished social beneﬁt policies have now failed, as do international
economic institutions such as the IMF and the non-European G20, in spite of the
contradictions and ambiguities which are part of the diplomatic language. The only agents
who seem to not be aware of this are Angela Merkel and those governments who support
her, the only real political power, and Olli Rehn.
Austerity policies have driven Europe into a new recession, unlike other regions of the
world that did not apply such measures. There are currently 27 million jobless workers, and
countries such as Spain or Greece now face an unemployment rate of 27% (as was the case
in the US during the Great Depression). European economies have thus fallen into a vicious
circle of austerity-recession. The increase in poverty and inequality rates has reached a
level unseen since 1945, together with a severe deterioration in social and basic public
services, especially so in debtor countries, but felt at varying levels of intensity throughout
almost the entire EU. Not only that, but the result is a deep lack of conﬁdence and a delegitimization
of national democratic institutions and, beyond that, of European
institutions. Populism, Euro-scepticism, and anti-system movements continue to grow,
while the political and cultural gap widens between northern and southern states.
How can the roadmap proposals help in facing such a deep and extensive crisis? Barely, if
at all. On the one hand, regarding the social dimension, the role of social dialogue and the
democratization of European institutions, the Council document provides nothing new,
only the usual observations. On the other hand, there is no single social dimension
compatible with those austerity and structural reform policies that continue to be the
oﬃcial Council doctrine for a solution to the crisis.
55
What credibility can we award to the wishful statements made by oﬃcials such as Mr Van
Rompuy and Mr Barroso? They claim that reforms will include elements to evidence their
social awareness, or else a purported strengthening of social dialogue, while
simultaneously continuing to inﬂict adversary policies. In many European countries they
impose, by means of non-democratic systems, salary and pension cuts, changes in labour
legislation resulting in the elimination of rights, a weakening of collective bargaining
procedures, and a general reduction of social rights. At the end of the day, all these issues
are not even within the purview of the EU’s authority. The answer is evident – there is no
credibility whatsoever.
The ETUC Executive Committee has recently approved several proposals concerning the
social dimension of the reforms under discussion. However, it is our opinion that the most
severe political situation now facing Europe requires further eﬀorts: we are bound to ensure
that basic social rights, which must be included in the New European Social Contract
defended by the ETUC, are in fact guaranteed in the text of future treaties; that the
economic government of Europe is democratic; and to include measures aimed at
rebuilding European workers’ and citizens’ trust in a new EU political project.
The philosophy and speciﬁc measures included in the ‘six-pack’, as well as those of the
‘Agreement for a Euro-plus’ and the ‘European Semester’ and its executive instrument, the
new Treaty or ‘Fiscal Compact’, are only seen as a means to impose upon Eurozone debtor
countries a domestic devaluation of wages, social outlays, and prices, without upholding
basic democratic norms nor providing authority of any sort, neither to the European
Parliament nor to national parliaments.
This is the reverse of the opposition of those who truly rule in the EU and in the Eurogroup
to accepting what now appears to be obvious: a common currency requires a central bank
working with clear inﬂation and growth targets, and operating as the lender of last resort –
a single Treasury with the authority to issue common debt instruments, manage ﬁscal
harmonization, and set solid bases for economic governance.
Reforms in economic governance leading beyond a limited banking union and guaranteeing
a social dimension for the EU, with real democracy, must necessarily rely on an in-depth
reform of European Treaties. CCOO and UGT called for this in the joint document
submitted to internal ETUC debates, entitled ‘Political Reform in Europe’. The proposal
included three pillars: economic government, with a harmonized ﬁscal system and a true
central bank for the Eurozone; democratic governance in all European institutions; and a
strengthened social dimension including basic labour and social rights as guaranteed in the
Treaties. In order to achieve these aims, we believe it indispensable to approve a
convention for a true democratic debate involving social counterparts and civil society
institutions and organizations.
It will only be by means of a proposal of this nature, based on democracy, transparency,
cooperation, solidarity and social justice – values which lead to political action within
nations and among European nations – that European workers and citizens may once again
believe in Europe as a common project. The Europe which has resulted from crisis and bad
governance has run its course. We must now build a new Europe.
56
Ignacio Fernández Toxo is Secretary General of the Spanish Workers’ Commissions
(CC.OO). Cándido Méndez is Secretary General of Spanish trade union UGT.
57
A Social Dimension For A Changing European Union: The
Irish Case
By David Begg
The problem with the concept of ‘Social Europe’ is that there is no one social model that
applies. Moreover, there is a collective action problem for member states even if they wish
to achieve a single model – a point discussed later. But without a social dimension as a
counterfoil to monetary and economic integration, the European project will increasingly
lose the support of the people as recent research by the Pew Centre (2013) suggests.
There is an extensive literature outlining a typology of social models in Europe (EspingAndersen,
1990; Huber and Stephens, 2001; Pontusson, 2005). The seminal work in this
area is that of Gøsta Esping-Andersen (ibid) in which the degree of decommodiﬁcation –
the extent to which social security systems allow a person to survive outside the labour
market – is the principal criterion for judging welfare regimes. There is broad agreement on
categorising the Nordic countries as having a social democratic model with a high degree
of universality of beneﬁts and public services delivered by the public sector. Continental
countries are characterised by an insurance-based, male breadwinner type model based on
Christian Democratic values. As liberal market economies, Ireland and Britain have lower
levels of universality and rely on means testing for many beneﬁts with attendant lower
decommodiﬁcation achievement.
In Ireland’s case particularly, welfare eﬀort tends to compare unfavourably with the Nordic
and continental models not least because public spending is lower.
58
Ireland also has what is sometimes described as a ‘mixed economy of welfare’ meaning
that a high percentage of services in health and education, although funded and regulated
by government, are delivered by the community and voluntary sector. This is mainly for
historical reasons associated with the role of the Catholic Church.
There are a number of challenges to the sustainability of Ireland’s welfare regime. The most
formidable is an unemployment level of 14.2% overall and a youth unemployment
component of 30%. The structural element is particularly worrying as long-term
unemployment now stands at 62%. The construction industry in particular was badly
aﬀected by the onset of the recession, with employment falling from a peak of 286,000 in
2006 to 102,000 in 2013. Employment trends for the diﬀerent economic sectors are set
out in table 2 below:
59
Although the demographic proﬁle of Ireland’s population is generally more favourable than
the rest of Europe, the country is still facing an increasing population of over 65s, living
longer, with implications for pensions, health and care for the elderly. Even now the
country’s occupational pension funds are in tatters with 80 per cent of deﬁned beneﬁt
schemes being underfunded.
Childcare is regulated and subsidised by grants to parents to a limited extent, but is totally
provided by the private sector. Recent investigative journalism has revealed serious
shortcomings in the quality of care provided and in the standards of regulation. Care of the
elderly is being progressively privatised and similar problems have arisen in this sector. In a
nutshell, the state decided on market solutions to care as female labour force participation
increased in the ‘Celtic Tiger’ years (1994-2008). It is not a successful model.
With regard to labour-market institutions, Ireland pioneered a very sophisticated and
inclusive model of social partnership from 1987 to 2009. A discussion of this model and the
reasons for its collapse would be beyond the scope of this article. Unfortunately, judicial
activism at Supreme Court level has, since the onset of the recession, more or less
unravelled all the labour-market institutions for wage setting, apart from the Labour Court
itself. It did this by declaring a 1946 Industrial Relations Act ultra vires the constitution in
important respects. Taken in conjunction with the fact that unions have no legal right to
collective bargaining, this further erosion of rights is highly debilitating to the achievement
of equality in society through collective bargaining.
This course of events cannot be realistically separated from the fact that Ireland is a
60
programme country under the control of the EU/ECB/IMF Troika. The policy pursued has
been to engineer an internal wage devaluation to restore ‘competitiveness’. The social
consequences of this programme, especially its impact on public services, have been very
severe.
The truth about EMU is that without the ability to devalue the currency and in the event of
a macroeconomic shock, the whole burden of adjustment falls on labour markets.
For Europe this poses some dilemmas. Because there is no social institution to match the
power and independence of the ECB, there is no balance between the social and the
economic. Yet globalisation constantly throws up new social risks. The further European
economic integration progresses, the more it infringes upon the basic rights, provisions,
and redistributive functions of national welfare states. At the same time, member states
are collectively unable to further social integration in return. It is a dilemma well captured
in the following passage from a recent publication:
‘The more European economic integration deepens and widens, the more it infringes upon
the basic protective and redistributive functions of national welfare states. Moreover, as
price stability and sound ﬁscal policy are constitutive pillars of the EMU architecture,
economic and monetary integration have been granted institutional privilege, through the
Maastricht Treaty, over national and supranational social policy repertories. In other words,
European economic integration is not just about a ‘functional decoupling’ between EU
economic integration and national welfare states but also about ‘hierarchical
subordination’. Even if EU member governments would wish to collectively step up EU
social policy integration to counterbalance market and monetary integration, their hugely
diﬀerent levels of economic development, variation in development generosity, ﬁnancing
and service provision make it extremely diﬃcult to ﬁnd appropriate solutions for all
twenty-seven member states to agree upon. Moreover, following the Treaty, any expansion
in the scope of ‘positive’ social policy interaction critically depends on unanimity (or
qualiﬁed majorities) within the Council of Ministers. Unanimity, in the shadow of extreme
diversity and divergent political preferences, thus conjures up a situation of ‘joint-decision
trap’.’ (Hemerijck, 2013:294)
One solution would be to change the remit of the ECB to require it to focus on issues such
as employment and not just on the narrow focus of price stability and inﬂation below 2 per
cent. In other words, to make it more like the Federal Reserve Board in the United States.
Actually without making that kind of institutional adjustment, it is hard to see how social
Europe will ever become a reality.
But here is another dilemma. Changing the remit of the ECB requires Treaty change. It can
be argued that the decision to engage in Outright Monetary Transactions (OMT) is already
pushing the boundaries of the ECB’s remit. Indeed that is what the Bundesbank is currently
arguing before Germany’s Constitutional Court. So a willingness to change the Treaty to
make ECB more like the Fed would possibly prompt the German Government to seek to
speciﬁcally limit its powers to engage in OMT (Steen, 2013).
The ﬁnal dilemma for Europe is that to resolve the ﬁnancial crisis it must complete the
institutional architecture of EMU, thus embarking on the most ambitious phase of
integration at a time when Europe’s citizens don’t want it. And they are unlikely ever again
61
to want more integration until they see it brings social progress, not just economic
hardship.
References
David Duﬀy and Kevin Timoney, ‘Quarterly Economic Commentary’ (ESRI, 2013).
Gøsta Esping-Andersen, The Three Worlds of Welfare Capitalism (Cambridge: Polity Press,
1990).
Anton Hemerijck, Changing Welfare States (Oxford: Oxford University Press, 2013).
E. Humber and J.D. Stephens, Development and Crisis of the Welfare State: Parties and
Policies in Global Markets (Chicago: University of Chicago Press, 2001).
Jonas Pontusson, Inequality and Prosperity: Social Europe versus Liberal America (New York:
Cornell University Press, 2005).
Michael Steen, 'BundesBank Chief Backs Further Curbs on ECB Powers!’, The Financial
Times, 13 June 2013,
p. 6.
‘The New Sick Man of Europe: The European Union’, Pew Research Centre, 13 May 2013.
David Begg became General Secretary of the Irish Congress of Trade Unions in 2001.
For ﬁve years prior to that he was Chief Executive of Concern Worldwide, an
international humanitarian organisation working in 27 countries and with oﬃces in
Dublin, London, Belfast, New York and Chicago.
62
A Concept For Deepening The Social Dimension Of The
European Union
By Frank Bsirske and Klaus Busch
The aim of this article is to put forward a proposal for deepening the social dimension
within the European Union and thus to contribute to the debate surrounding the future of
Europe’s Economic and Monetary Union. In doing so, we are, on the one hand, following on
from our ‘European Policy Manifesto’ (Verdi 2010), which we submitted back in 2010, and,
on the other, from ideas that emerged from the EU Commissioner for Social Aﬀairs, László
Andor, in March of this year. Given that these ideas distance themselves from neoliberalism
they unfortunately have little chance of seeing the light of day as a European
Commission communication. It is our objective to submit the most comprehensive concept
possible for how the Union’s social dimension can be further developed, as we consider this
to be the decisive desideratum in the current debate.
We perceive social policy not just as the policies relating to social security systems
(pensions, health care, family, unemployment), i.e. social policy in the narrow sense, but
also encompassing all policies pertaining to the social situation of dependent employees.
These people are largely dependent on three aspects: A) the labour market situation, B)
wage and income developments, and C) the protection provided by welfare state systems
(pensions, health care, etc.). Social policy in its broader sense therefore includes labour
market and employment policy, wage and income policy as well as welfare state policy.
European social policy aims to eliminate inequalities and disparities in existence in Europe’s
labour market, in wage and income developments at the EU level, and in European social
security systems. By striving to overcome the aforementioned inequalities and disparities,
European social policy is, above all, taking on a social stabilisation function.
Our proposed consolidation of the social dimension of the European Union involves all
three policy areas. This proposal comprises two dimensions across all three areas:
1. a set of indicators that provide details of inequalities and disparities in the labour
market, in wage and income development, and in social security systems, and
2. a set of instruments suited to eliminating the respective inequalities and disparities.
As regards the indicators and instruments, we further diﬀerentiate between main
parameters and supplementary parameters. This diﬀerentiation serves to establish priority
levels for political action and thus also priority levels for deepening the social dimension
within the European Union. By way of example: loan and income policy has one main
indicator, ‘share of the low-wage sector’, which indicates disparities in wage and income
developments, plus one main instrument for eliminating these disparities: coordination of
national minimum wages at the European level. In addition there is the ‘Gini coeﬃcient’
indicator in this area, which measures the extent of inequality in the income distribution,
plus the supplementary instrument of ‘tax policy’ to overcome the income distribution
disparities. European solutions are required, above all, with respect to the main instrument
‘minimum wage’, plus, during a later phase, the supplementary instrument of ‘tax policy’.
63
With respect to all of these indicators, we believe that analyses should be submitted every
year in which, for each individual member state, the development of the indicators, their
current deviations from the historical trend in each respective country, and their deviations
from the mean value across the EU states and/or the member states of the Eurozone are
examined. Threshold values should be established for deviations, which would trigger
preventive measures. On top of this, threshold values should be set which result in
sanction-related corrective measures. Based on such analyses, the European Commission
would then need to submit an annual report on ‘The development of the social situation in
the EU’. In turn, the member states would each need to draft a national action plan
describing the envisaged preventive and corrective measures and discussing the
achievements and failures recorded to date in implementing the agreed European
instruments.
European labour market and employment policy
Since the beginning of the global ﬁnancial crisis in 2008, a rise in unemployment rates has
been observed within the EU, as has a dramatic hike in youth unemployment rates and a
signiﬁcant increase in precarious employment. Historically speaking, the inequalities and
disparities in the labour market are at an all-time high.
There should be three main indicators in this policy area: the unemployment rate, the
youth NEET rate (Not in Employment, Education or Training) and the share of precarious
employment. These parameters shed light on labour-market inequalities, on the share of
young people not in employment, education or training as well as on the number of people
in part-time employment, temporary work, on ﬁxed-term contracts, contracts for work and
services as well as in mini and midi jobs (labour market disparities). Since the statistics on
precarious employment in the EU are incomplete, the share of employment in the lowwage
sector could be used as an auxiliary parameter. These indicators should be recorded
over a period of ten years, with national and European mean values being established and
threshold values for national and European deviations being set. National and European
reports should analyse the causes of such developments and deviations: cyclical
development, impact of austerity policy, potential shifts in the country’s competitiveness,
exogenous inﬂuences of the global market, etc.
The main instruments for combating inequalities and disparities are a national and
European macroeconomic policy designed to overcome unemployment, a coordinated
European youth guarantee as well as a set of European labour market regulations to
combat precarious employment, e.g. equal pay for permanent and temporary workers,
strict limitation of contracts for work and services, plus stringent controls of posted
workers within the EU, based on the principle of ‘equal pay for equal work at the same
location’ (host country principle). By establishing an indicator for the labour-market
situation (unemployment rate) and an expansive macroeconomic policy for overcoming the
labour market crisis, European social policy would consciously be providing a contrast to
the macroeconomic policy that prevails in the EU. If such a European social policy were to
be taken seriously, and if it were set on the same pedestal as economic policy, the EU
would be forced to end its neoliberal austerity policy and focus on a new economic policy
paradigm.
64
The supplementary indicators for labour and employment policy could include: the number
of long-term unemployed, the average duration of unemployment, the share of hidden
unemployment as well as the employment rates for various groups (men, women, young
people, older employees).
The supplementary instruments would be an increase in the share of active labour-market
policies, the number of people employed with secondary and tertiary qualiﬁcations;
investments in primary, secondary and tertiary education as a percentage of GDP, as well
as investments in further education/training and preventive health care as a percentage of
GDP.
European wage and income policy
Wage and income development within the EU has also been characterised by signiﬁcant
inequalities and disparities for over a decade: virtually everywhere, income has been
redistributed in favour of capital income, no country more so than Germany. At the same
65
time, many countries have seen a dramatic growth in the low-wage sector and poverty
rates.
The main indicators in this policy area are: real unit labour costs, the share of the low-wage
sector, and poverty rates. These indicators show the change in the share of labour and
capital in total income (income distribution), the degree to which the low-wage sector has
expanded, and the number of people having an income of up to 60% of the mean
equivalent income. Here, too, the development of these parameters should be examined
over a period of ten years and the causes of the potential income distribution inequalities
analysed. By the same token, any diverging developments among the EU member states
should be recorded and explained. National and European threshold values could be
established for the share of the low-wage sector and poverty rates. Deviation margins
could be agreed for income distribution, which would indicate when redistributions
detrimental to wages and salary incomes necessitate corrective measures.
In this area, the main instruments for avoiding inequalities and combating disparities are:
Europe-wide coordination of national collective bargaining policies, based on the rule
‘inﬂation rate plus productivity growth’; European rules for national minimum wages as
well as European rules for national minimum income (social welfare standards). Whilst the
parties involved in collective bargaining would be vested with the task of coordinating
collective wages, the rules for minimum wages and minimum income would need to be
agreed upon by the legislators. One major stumbling block is the current weakness of
European trade unions, which, for various reasons, are frequently no longer in a position to
assert pay increases on the basis of the aforementioned rule. The supplementary
instruments (see below) are of great signiﬁcance here.
The supplementary indicators of inequalities and disparities in wage and income
development within the EU could be: the development of real wages (coupled with a
reduction in real unit labour costs, countries can record signiﬁcant diﬀerences in the
development of real wages due to their diﬀering productivity advances, e.g. Sweden and
Germany); collective bargaining coverage rates; the Gini coeﬃcient; income replacement
rates in retirement and of unemployment beneﬁt. The supplementary instruments would
be: measures to strengthen the collective bargaining systems (e.g. rules for the general
implementation of collective wage agreements; precedence given to industry-wide
agreements); regulations aimed at restricting precarious employment (see labour and
employment policy); European rules for replacement rates in retirement and for
unemployment beneﬁt; redistributive tax policies. (To be able to introduce indicators and
instruments at the EU level which seek to correct wealth inequality, the comparative
statistics used for the development and distribution of the various types of wealth in the
member states must be improved signiﬁcantly).
66
European rules for coordinating social security systems
Until 2007, the year preceding the crisis, the levels of social protection expenditure among
member states and their economic development bore a close statistical relationship. The
higher the per capita income, the higher the per capita social protection expenditure. The
coeﬃcient of determination stood at over 90%. The variation in social protection
expenditure therefore ‘avowed’ itself to be 90% derived from the per capita income
variation of the countries. Even in the years preceding the crisis, however, some states had
rates below this ﬁgure – in other words, they were spending less on social protection than
beﬁtted their level of development. This was, above all, true of Ireland, but could also be
found in Estonia, Latvia, Lithuania, the United Kingdom and Spain. It is to be expected
that, due to austerity policies pursued in Southern European countries, which have also
resulted in drastic cuts in welfare state spending, the negative deviations will have
increased again within the EU (cf. Busch/Hermann/Hinrichs/Schulten 2013). Prior to the
crisis, a very close connection could be observed between total social protection
expenditure and the level of development. But no such connection existed between
individual areas of social protection and per capita income. Hence, the coeﬃcient of
determination for pensions in relation to per capita income was a mere 60%. Therefore, EU
member states set diﬀerent priorities when it came to allocating social protection
expenditure to individual functions (pensions, health care, families, unemployment
beneﬁt). Countries in Southern Europe preferred pension schemes and spent less on
families and the unemployed in relative terms, unlike countries in Central and Northern
Europe, where, in relative terms, more funds were ploughed into families and
67
unemployment.
These observations give rise to two conclusions:
1. In order to maintain the close connection between social protection expenditure
and the level of development, and to suppress the negative deviations found in
certain countries and thus to avoid social dumping, it is expedient to agree on
coordination rules at the EU level.
2. The regulatory approach should not relate to the individual social protection
functions but apply to overall social protection expenditure (neither absolute nor
relative minimum standard rules make any sense in the light of the empirical
knowledge). The corridor model proposed below takes these prerequisites into
account. It is a quantitative regulation approach, which can be supplemented by
qualitative regulations at the additional instrument level.
The main indicator in this policy area would be the social protection expenditure per capita
in purchasing power standards (PPS) since the year 2000. The main instrument would be a
corridor of 5%, 10% or 15% around the regression of social protection expenditure in PPS
per capita in relation to per capita income in PPS (see graph). Given the very close
relationship between social protection expenditure per capita and income per capita, the
corridor model can be very easily presented with the help of the indicator ‘social protection
expenditure per capita in PPS’ (cf. Busch 2011; 4f). For each value of per capita income in
PPS a range of variation could be established for per capita social protection expenditure in
PPS to which individual states would have to adhere. A point on the y-axis can now be
assigned to every point on the x-axis using the formula given above the regression lines: y
68
= 0.3672x – 2.9719. The regression line is the locus of the intersection of the y-target
values for social protection expenditure per capita and the x-actual values for GDP per
capita for the various countries. For each y-target value for individual states, two points
are calculated which are 5% (7.5%, 10% …) higher or lower than the y-target value (the
exact percentages would be decided on politically). In this way, a range of variation would
be laid down for each member state for the values of social protection expenditure per
capita which mid-point is represented by the value on the regression lines. The distance of
the two lines of deviation from the regression lines would increase as per capita income
grows, because the absolute amounts of deviation increase with higher incomes at the
same percentage of deviation.
Using the supplementary indicators for the key social security functions (see table below),
supplementary instruments could be developed at a later stage of the deepening of the
social dimension within the EU, which would be heavily geared towards the quality of
services. With respect to pensions policy, these could be European minimum replacement
rates as well as health care and further education/training measures which help raise the
de facto retirement age. In the health care sector, these could be minimum standards for
the quality of the services, which would deviate according to the level of economic
development of the individual countries. A case in point would, for example, be data on life
expectancy, infant mortality, heart disease, strokes and cancer survival rates. The quality
of the labour-market measures should be improved through European standards for
minimum replacement rates among passive services, as well as a relative increase in
expenditure for active labour market policies. In the mid-term (and also for economic
reasons), the possibility of a European supplementary unemployment insurance plan could
be considered. In family policy, the main focus would be on measures to raise the level of
employment among women.
69
Outlook
The concept for deepening the social dimension within the European Union put forward
here breaks with the prevailing neoliberal EU policies. It calls for a policy of sustainable
growth as well as European regulations to eliminate precarious employment in order to
overcome the labour market crisis. With respect to wage and income policy, the concept
above all advocates measures which will ensure that ruinous wage competition and wage
dumping in Europe are overcome. Regarding social security, the development of the welfare
state should be pegged to the economic eﬃciency of the respective countries so as to
prevent social dumping.
Our proposal should be seen as an enhancement and substantiation of the Social Compact
for Europe, which the ETUC published in June 2012 (ETUC 2012). By catering to all three
70
policy areas, i.e. labour and employment policy, wage and income policy as well as social
security policy, the concept already represents a very comprehensive approach. It could be
completed by considering further enhancing the instruments of European economic
democracy (works councils, co-determination, social dialogue) as well as the European
dimension of services for the common good (services of general interest).
References
Klaus Busch, ‘The corridor model – relaunched. Short version. International Policy
Analysis,’ (Friedrich Ebert Foundation, Berlin, 2011).
Klaus Bush (eds), ‘Euro Crisis, Austerity Policy and the European Social
Model,’ (International Policy Analysis, Friedrich Ebert Foundation, Berlin, 2013).
ETUC, A Social Compact for Europe (Brussels, 2012).
Verdi, European Policy Manifesto, (Berlin, 2010).
Frank Bsirske is Chairman of the German trade union ver.di. Klaus Busch is Professor
of Politics and European Adviser to Verdi.
71
Towards A More Social Europe – A Change Of Course Is
Necessary
By Anne Demelenne, Claude Rolin and Bernard Noël
Recently, hundreds of lawyers specialised in social and labour law have signed a manifesto
to protest against the systematic attacks on social dialogue and social justice of the
European Union; an attack that could lead to the disappearance of the European Social
Model.
The European Social Model is not doing well. In the past, some have even announced its
demise. However, it remains the element of value that still distinguishes us from the
United States or China. It is our asset. Social dialogue and collective bargaining are the
markers of the European Social Model. There was hope to see the model restored to the
taste of the day at the time when the EU, in its conﬁguration limited to the EMU, asked
itself whether it would be useful to rethink and to promote ‘the social dimension of the
European Economic and Monetary Union’. In the meantime, the model undergoes
unprecedented attacks. Social and wage inequalities are increasing between member
states and within individual countries. The fear is real that the European Commission
sacriﬁces 60 million workers on the altar of the sacred economic governance. Can Europe
survive while being indiﬀerent to workers ?
So there is urgency. Even in Belgium, recognised as a country that is traditionally very
supportive of the European construction, scepticism is growing especially in the world of
labour. And that is understandable. Europe is increasingly seen as a threat. As it was shown
by the latest Eurobarometer, the two principal concerns of Europeans, and Belgium is no
exception, are unemployment and the current economic situation. And yet Europe remains
largely deaf to these appeals. Conﬁned to what we could call a real autism in favour of
austerity policies and structural reforms, she does not want to, or is incapable of hearing
the increasing number of voices of reason that call out to loosen the budgetary straitjacket
and to invest in favour of employment. The IMF has recognized its errors. The ILO
continues to talk about the risks of social instability and Europe agrees to talk about it, but
acts far too timidly. Where are the achievements of the pact for the recovery of
employment that was adopted in June 2012 by the European Council? Where are the
eﬀects of the decisions, ever so loudly announced, on youth employment, the package of
measures for social investments or the ﬁght against tax evasion?
Meanwhile, the social situation has become intolerable. Unemployment and job insecurity
increase, especially among young people. Will we accept to speak of a lost generation?
Wages stagnate. Protection systems and public services are being undermined and the
labour law is being challenged. The crisis is surely more acute in some countries than in
others, but we are all concerned.
Almost ﬁve years have passed since the onset of the ﬁnancial crisis and yet workers
continue to suﬀer directly from its eﬀects. If a change to revive our economy is not
initiated, the medium-term prospects are far from optimistic. The latest economic outlook
presented by the Federal Planning Bureau announced a growth again revised downwards
for 2013 (0,2% instead of 0,7%) and is counting on extremely modest forecasts for the next
72
ﬁve years.
A real European Union – and a fortiori economic and monetary union – needs to rediscover
a strong social dimension. The contribution of the Belgian government at the June Summit
will certainly go in the right direction but, again, when will there be ﬁnal decisions and
moreover, will the words be followed by concrete and swift actions? In the meantime, we
continue to be very concerned and mobilized about the national socio-economic situation.
Public services and the system of social protection are put under pressure by budgetary
constraints. The freedom of collective bargaining has been harmed. And the protection
against dismissal is under attack.
The Belgian trade unions demand that a key role is given to the social partners to draw up
the social dimension of EMU. Remember that the Belgian trade unions (and employers’
organisations) have, throughout the evolution of the EU – made signiﬁcant contributions
to the development of the socio-economic dimension of the EU. These contributions have
often been realized in transitional periods. This applies in particular to the realization of the
1991 social protocol of the EU, as it is integrated into the Maastricht Treaty. Social
dialogue is thus anchored in the social chapter of the EU Treaty in the context of the
internal market and the initial launch of the EMU.
Without a change of course, without putting a stop to the wide ranging austerity policies
and without economic recovery in favour of employment, the democratic support for the
European construction will continue to deteriorate, including in countries such as Belgium.
A Europe that disregards the majority of its workers, its unemployed and its pensioners
simply has no future.
Anne Demelenne is General Secretary of the General Federation of Belgian Labour
(FGTB-ABVV). Claude Rolin is General Secretary of the Belgian Confederation of
Christian Trade Unions (CSC-ACV) and Bernard Noël is National Secretary of the
Belgian trade union (CGSLB-ACLVB).
73
A Social Dimension For A Changing European Union – The
Bulgarian Perspective
By Plamen Dimitrov
For the trade unions in Bulgaria, the largest organisations in civil society seeking the
protection of the workers’ rights and interests, the values of Social Europe have been
mobilising milestones, deﬁning activities since the beginning of the transition. Building a
competitive economy, reducing poverty, promoting social cohesion, the development of
education and health care, investment in human capital and the observance of human
rights, based on the unity of economic, employment and social policy in line with European
values, have been key priorities of CITUB also in times of crisis.
With the adoption of the social acquis communautaire as part of European legislation on
social policy, Bulgaria joined the framework of common rules aiming to ensure that
economic growth and competitiveness as the goal of a United Europe will not be achieved
by reducing the social standards, undermining workers’ rights or the deterioration of
working and living conditions.
Today, Europe is diﬀerent. The European Union is changing and while the social dimension
is among its main pillars, it is challenged because of the crisis and the asymmetries of a
strong economic and ﬁscal integration leaving the social integration behind. Global
competition and the global ﬁnancial crisis forced the EU and many of the member states to
change some of their policies and even to step back from some of the established social
policies and practices. The European Social Model has been undermined and weakened.
At the same time, the social and labour issues are still national, rather than European,
although there is a single market and many steps for economic integration, including the
EMU, have been made. In this sense, the challenges facing Bulgaria bring some national
characteristics to the fore, but overcoming these challenges requires both internal eﬀorts
and joint actions with the European Community. That is why we support the position of
the ETUC on a strong social dimension and the demand of a radical change of course.
Among the peculiarities of the ‘social’ Europe we see today are the following:
• There is a clear social divide between centre and periphery;
• Unfair competition, based on the low wages and social dumping is on the rise;
• Double standards in the freedom of movement. On the one hand, the workers from
low-income countries are used in higher income countries to contravene labour law
and social standards, on the other undue restrictions on the free movement of
workers are still in place. The conditions of work of the immigrants from the EUmember
states and of immigrants from third countries are often much worse than
those of the domestic workers, and racism and radical nationalism are on the rise.
• During the last few years the concept of ‘ﬂexicurity’ was dominant in labour market
74
policies. However, the ﬂexibility has often been implemented without any security;
• There are many and various national/regional patterns of industrial relations,
although in most of the West European countries they still are based on the postwar
consensus. However, in many of the new EU member states most of these
main principles (with the exception of the national consultations between the
social partners) are hardly accepted even after more than 20 years of democracy.
Sometimes even the freedom of association of the employees is challenged by the
employers.
• Both in the new and in the old member states the deregulation of industrial
relations and the decentralization of collective bargaining were observed even
before the start of the crisis. These trends are on the rise.
• The transnational dimension of labour and of industrial relations continues to
develop, however, not always with appropriate social protection. Capital/employers’
interests are instead dominant.
Sunk in the maelstrom of the crisis, we are likely to ignore the long-term issues of
development. Both the near and the more distant future of the economy and society
depends on the policies and decisions we should take at the present time. From this
perspective, I would like to discuss some of the challenges facing our country relating to
the social dimension for a changing European Union.
There are clear indications that overcoming the negative eﬀects of the crisis on economic
growth, the labour market, income and social security systems requires a change in
macroeconomic policy, which is currently focused on ﬁscal restrictions. A change is needed
that should ensure both the stability of the ﬁscal system and also create conditions for
growth and employment. Austerity policy does not encourage enough investment and
instead leads to more job losses.
The unity of ‘smart, sustainable and inclusive growth’ means that in parallel with the
implementation of structural and macroeconomic policies, the necessary synergy with
social policy objectives of increasing the social integration of vulnerable groups through
employment and poverty reduction needs to be achieved. Crucial in this regard is the
support and solidarity of the European Community for the implementation of a ‘catch-up
policy’ in the newest members states through the distribution mechanism of the EU funds.
From this background the social dimension development faces a range of internal
challenges.
• The economics of supply has exhausted all its possibilities in Bulgaria (tax rates are
at the lowest level in Europe; consistent reduction of social security contributions
led to the collapse of the pension fund). However, employment has continued to
decline. Exports cannot permanently maintain GDP growth. Eﬀorts should be
directed to attract foreign direct investment and to encourage internal investment
activity through appropriate credit and interest rate policies and encouraging
household consumption through adequate income policy.
75
• The implemented tax policy not only does not lead to sustainable employment, but
is exacerbating poverty and social inequality. The policy of low direct and high
indirect taxes leads to an unusual structure of tax revenues that imposes a
relatively higher burden on the low- and middle- income population groups. This
‘inverted tax structure’ actually exacerbates poverty and income diﬀerentiation,
rather than serving the purpose of a more equitable taxation and enhanced
solidarity in the promotion of social inclusion.
• A serious challenge is the implementation of the ‘ﬂexicurity’ approach. In our view,
an optimal balance between ﬂexibility and security in the labour market
(‘ﬂexicurity’) is only possible through the provision of security by the law and the
implementation of ﬂexibility through collective bargaining. We support the labour
market ﬂexibility, but insist it should not be at the expense of the employees:
undermining core labour standards, implementing precarious working conditions
and marginalising large groups of workers in the name of uncontrolled and
misguided competitiveness.
• Economic growth should be linked to the creation of a better regulated and
functioning labour market. The priority in the improvement of the labour market is
high-quality jobs, which in itself implies decent incomes and working conditions
and the prevention of poverty and social exclusion.
• Bulgaria needs clear and balanced economic and social policies, adopted and
implemented with the participation of social partners and civil society. Social
partnership, social dialogue and the full participation of workers are not only key
elements of the European social model, but are also important production factors
that can aﬀect and accelerate the innovation and reforms in line with the
objectives set by the country.
Social Europe is both an achievement and a goal which many generations have sought and
continue to struggle for. It is not solely a creation of the post-war boom that gave rise to
the ‘miracle’ which today seems of the distant past. We must ﬁght against austerity to
regain the social dimension of the European Union. The social dimension must be an
integral part of economic and ﬁscal governance and must be grounded in the respect for
fundamental social rights and the improvement of living and working conditions. It must
promote the European Social Model comprising strong social protection and inclusion,
quality public services and social dialogue.
In conclusion, we support the demand of the European trade union movement for a social
dimension and believe that the Economic Union, the Monetary Union and the Banking
Union must be complemented by a strong Social Union.
Plamen Dimitrov is President of the Confederation of Independent Trade Unions in
Bulgaria.
76
A Social Dimension For A Changing European Union - The
British Perspective
By Frances O'Grady
The so-called Europe debate in Britain has been framed by Prime Minister David Cameron
as a false choice between a free-trade, liberalised common market stripped of workplace
rights or any social dimension, and exiting altogether. It’s not so much that he’s
channelling his inner Thatcherite in arguing that there is ‘no such thing as society’, he’s
just denying that the European Union should have any social role.
This is a profoundly unpalatable choice, not just for trade unionists. It is also very
dangerous, giving conﬁdence and political momentum to those on the right and to the
right of his party (the ‘swivel-eyed loons’ inside the Conservative Party and the ‘fruitcakes’
outside in UKIP).
Meanwhile, it threatens to bleed whatever support still exists for the European Union
among working people and ordinary voters, already profoundly disaﬀected by the EU’s role
in promoting austerity around Europe. And it worries those inward investors looking to site
their operations in Britain as a bridge to the continent, and domestic potential investors
interested in the long-term future of the UK economy.
On the one hand, leaving the EU would be disastrous economically. It would relegate the
UK to an oﬀshore tax haven even less capable of rebalancing our economy away from overreliance
on the City towards a revitalised manufacturing and exporting industry. Potential
manufacturers are putting investments on hold until they ﬁnd out whether they will allow
them access to an entire European market or not. And on the other, repatriating control
over the social dimension of Europe from Brussels to Westminster would make Britain’s
economy less just and less eﬃcient. The TUC is particularly concerned that workplace
rights, painstakingly negotiated over the last two decades since the single market was
established, would be under threat.
There are those who argue that we don’t yet know what David Cameron would do if he got
control of the Working Time Directive (although his silence about how he would reform it
actually speaks volumes). On the contrary, I think we do. Because there was a time when
the UK did have control over working time, rest breaks and holiday entitlements. It was
before the Working Time Directive came into force. When the UK Parliament last
controlled working people’s working time, we had a free-for-all, with people’s working time
dependent on whatever their employer wanted or what their union could negotiate through
collective bargaining that then covered more people and workplaces. Why would the
situation diﬀer if the Directive was repatriated?
It’s not just rest breaks, paid holidays and work-life balance that are threatened. Equal
rights for women, as well as part-time and temporary agency workers are at stake. Even
the limited rights British workers have to ﬁnd out what their employer is up to and to have
a collective voice, depend on the European social dimension.
Measures requiring employers to respect people’s rights at work put a higher premium on
77
those workers. Yes, they make them more expensive. But experience from manufacturing
to the health service suggests that putting a higher value on workers’ labour encourages
employers to invest in skills, equipment and processes, so that working time can be more
productive.
That’s why the Netherlands, with some of the lowest working time in Europe, has some of
the highest productivity. In an economy like the UK, where productivity has actually fallen
since the global ﬁnancial crisis struck in 2008, we need more value-added employment,
rather than more low-skill, low-wage jobs.
And that vision, of investment in skills, in infrastructure and manufacturing capital, and in
productivity, is the answer to Europe’s economic and social woes, too. Unions and
progressive politicians are arguing for a new approach that will restore Europe’s
competitiveness, like the ETUC’s Social Compact. At the very least, we want to see the
European Commission and European Central Bank stop their current, damaging promotion
of austerity and the undermining of collective bargaining (whether indirectly by promoting
market freedoms over social rights, or directly, by attacking automatic indexation of
wages, maintenance of minimum wages or sectoral wage bargaining mechanisms).
We would want the European authorities to go further – for example giving the ECB a
mandate to promote growth and full employment instead of just limiting inﬂation, and
giving it a role as lender of last resort, including the issuance of Eurobonds. We want to see
a signiﬁcant injection of investment equivalent to at least 1% of GDP and possibly more,
either coordinated by or even implemented by the Commission, as well as an eﬀective
Youth Guarantee of employment, training or education. We also want more investment in
skills throughout working life, as well as boosting R&D. The initiative by 11 EU states to
implement a Financial Transactions Tax is a useful step forward, as a revenue-raising
method, but also to reorient the ﬁnancial sector away from speculation and short-termism,
putting ﬁnance at the service of the real economy rather than vice versa.
This would represent the high road: increasing domestic demand, promoting trade by
making things (and providing services) people can and want to buy, in turn delivering
governments with the budgets needed to defend and extend quality public services in a
virtuous circle, rather than the deathly downward economic spiral austerity is imposing.
Even the Chinese have abandoned the low-wage, low-skill route to economic success. A
race to the bottom with the Bangladesh economy simply isn’t possible, let alone desirable:
it’s a race we can’t and shouldn’t try to win.
Frances O'Grady is General Secretary of the British Trades Union Congress (TUC).
78
Austerity Destroys The European Social Model
By Yannis Panagopoulos and Kostas Tsikrikas
On 27 and 28 June 2013 the EU Council will meet to discuss and decide on the social
dimension of the EMU. This debate will take place amid the worst crisis Europe is facing in
decades, that starting as an economic and ﬁnancial crisis is acquiring the characteristics of
a social, humanitarian and political crisis.
Policies pursued by the EU/IMF/ECB troika to ‘rescue’ countries in Southern Europe focus
on relentless austerity and have a detrimental social and economic impact as a result of
sweeping cuts in wages, pensions and welfare, tax hikes and a broad privatisation agenda.
At the same time, far reaching labour market adjustment dismantles key labour institutions
and diminishes hard-won rights with particular emphasis on collective bargaining. As
Eurozone economies continue to stagnate, soaring unemployment rates – that in Spain
and Greece stand at unprecedented levels – attest to the wholesale failure of the austerity
project. As regional imbalances between the ‘surplus’ countries in Northern Europe and the
‘deﬁcit’ countries of the periphery grow, inequalities deepen.
Austerity is undermining the principles of the European Social Model that since the Second
World War has come to embody what Europe stands for. The European ‘social dimension’
eﬀectively emerged in 1984 with Jacques Delor’s vision of a Social Europe where solidarity
and cooperation co-existed alongside with regulated economic competition. Today, Europe,
which is in a signiﬁcant turning point in its postwar history, proves unable to articulate a
coherent response to the attack of the ﬁnancial capitalism on its weak link, the social
dimension.
Social policies have rather lost their relative weight than gaining ground. The plans to
amend the Lisbon Treaty, which has done little to bolster the EU’s social policy, the
instruments of the new economic governance architecture (‘Six-Pack’, ‘Two-Pack’, Fiscal
Compact and the European Semester) promote yet greater ﬁscal discipline and
competitiveness in Europe taking wages as a central adjustment mechanism and
dismantling the labour market instead of strengthening the welfare state and combating
recession, unemployment and poverty.
Clearly, Europe’s political identity is at stake. At stake are also the future of values,
institutions and norms that underpin the political, social and cultural European heritage.
Clearly it is down to us as trade unions to defend these principles and values and ﬁght back
the neoliberal model of globalisation und unbridled competition.
The EU social dimension should safeguard and promote a European Social Model of
eﬀective welfare systems, strong social protection, eﬃcient and high quality public
services and social dialogue. Europe will fail without a vision on the future of our social
model. By putting markets above people Europe places itself in danger. The disintegration
of the social fabric in Europe puts at risk social cohesion and human rights.
It is imperative to deliver a strong message that the fulﬁllment of social objectives
conditions the eﬀectiveness of any economic objectives. No measure of ‘economic
governance’ should be implemented without respect for fundamental social rights. This
79
should be emphasized in a Social Progress Protocol to be attached in the Treaties while
steps should be made to reinforce the EU social dimension in legislation and in daily life to
restore conﬁdence in the renewed European political project.
There are alternatives out of the vicious neoliberal circle where austerity breeds recession
followed by harsher austerity and deeper recession: a radically diﬀerent policy mix to
support investment, growth and employment, actions for tax justice, to protect workers’
income and purchasing power, to reinforce the supervisory and regulatory role of the state,
to safeguard social cohesion, to strengthen welfare and sustain the environment.
Instead of the senseless austerity that is crippling countries and their people, we need
economically viable and socially acceptable plans that are negotiated with the trade unions
through eﬀective social dialogue. Social dialogue is a fundamental political, economic and
social process, which must be part of the solution to the crisis. Marginalising social
dialogue is not only ineﬃcient but politically hazardous and undemocratic as well.
The Greek debt crisis is surely rooted in domestic ﬂaws of political and economic
governance. This crisis has, however, become uncontrollable due to the devastating
dynamics of uncontrolled ﬁnancial capital.
The problems of the debt-ridden Europe periphery ultimately pose a major challenge to the
viability of European integration and the values that sustain the European Social Model. If
debtor countries need to recover in a spirit of real solidarity and cohesion aimed at growth,
employment and innovative investment, Europe needs a solidarity and growth pact for
economically sustainable and socially acceptable solutions with workers’ participation,
democratic control and respect for institutions.
The European trade union movement and the working people are called on to articulate a
new economic policy agenda in the European Union: A new European architecture with
employment, welfare and prosperity as the main pillars of peace, democracy and solidarity.
It should be stressed that combating unemployment, in particular youth unemployment,
should be a priority for the European Union. Investments are needed to create jobs and not
just nice words. Otherwise, we will be indeed in danger of creating a lost generation.
Europe can’t aﬀord that.
The European Union needs to be there for its citizens in a spirit of solidarity and
cohesion. The European Union needs to address its social, democratic and ecological deﬁcit
and the problems of economy by shifting away from the ﬁxated belief in the supremacy of
the markets over society towards a new architecture that puts people and solidarity ﬁrst.
Yannis Panagopoulos is President of the General Confederation of Greek Workers
(GSEE) and Kostas Tsikrikas is President of the Greek Civil Servants’ Confederation
(ADEDY).
80
The Italian Trade Unions’ Proposals For Inclusive Growth
In Italy And Europe
By Anna Rea, Fausto Durante and Raﬀaele Bonanni
The crisis of our country is ever more tragic. Italy’s current economic situation is
characterized by the shrinking of production, unemployment and the continued lack of
investment. The failure to pay attention to labour issues prevents the country from
following a path which, by stopping the free fall of the economy, would allow restoring
conﬁdence in the possibility of growth again.
CGIL, CISL and UIL think that the labour issue as a whole must urgently be placed again at
the core of political and economic choices and list the necessary measures to be taken
with a view to changing course. These are:
• to solve the emergencies which fuel unemployment by taking action, in particular,
to reﬁnance the extension of unemployment beneﬁt (the so-called ‘CIG in deroga’)
and fully protect the rights of the so-called ‘esodati’ (namely income-deprived
voluntarily early retirees, who are victims of the Fornero pension reform law);
• to cut taxes for employees, pensioners and companies which will hire staﬀ over the
next two years, by automatically allocating to this end the resources resulting from
an eﬀective ﬁght against tax evasion, which must be considered a criminal oﬀence;
• to relaunch countercyclical policies including the possibility for municipalities to
have resources available to invest and starting building activities already approved
and authorized. This should be outside the framework of the Stability Pact. The
measure taken to pay companies’ credits is a ﬁrst positive step in the right
direction;
• to modernize and streamline the public administration not through indiscriminate
cuts (the so-called linear cuts), but by reorganizing and simplifying its operation to
make it more eﬀective, curbing concurrent legislation and removing all the
unnecessary formalities which slow down the decision-making process. With a view
to sustaining growth, we shall invest in public education, universities, as well as
public and private research and innovation;
• to reduce the cost of politics is the prerequisite for good institutions and good
policies (on the one hand by rearranging and simplifying Italy’s institutional and
administrative structure, following the example of the other European partners and,
on the other, by vigorously putting an end to the waste of resources and duplication
of eﬀorts, as well as the privileges which are not consistent with eﬃciency, good
administration and governance);
• to deﬁne an industrial policy relaunching production by helping companies which
invest in research and innovation and protect employment and skills.
81
Furthermore, CGIL-CISL-UIL highlight the need to deﬁne a tool capable of combating
poverty and funding long-term care for those who are not self-suﬃcient; to extend the
temporary contracts which are about to expire in the public administration and education
sectors; to reform the municipal real estate property tax (the so-called IMU) by envisaging
exemptions only for those who own the house in which they live with a cap relating to the
value of the property.
These are the choices we have to make in order to stop the fall in production and set
growth in motion again, thus creating new job opportunities. Investment, income
redistribution and a relaunch of consumption are the prerequisites for supporting recovery.
Social partners are committed to renewing labour contracts and protect employment, also
by means of social safety nets and solidarity contracts, as well as identifying ways and
means to correct the inequalities inherent in the pension reform law.
CGIL, CISL and UIL supported these claims with the mobilization organized with confederal
and industry-wide local initiatives from May 11, resulting in the large national
demonstration which was held in Rome on June 22 . Also the European issues and the
ETUC’s proposals were at the core of this event.
With speciﬁc reference to union representation and democracy, CGIL, CISL and UIL agree
to deﬁne with Conﬁndustria (the Italian Business Association) an agreement regulating –
on the basis of speciﬁc principles – the recognition and certiﬁcation of representation, the
ownership of national collective bargaining and the deﬁnition of the agreements. Based on
these principles CGIL, CISL and UIL are engaged to starting an exchange of views also with
the other employers’ associations.
The Italian situation, albeit with its own features, is closely interwoven with the European
Union’s. To this end, CGIL, CISL and UIL reaﬃrm their commitment to deepen European
integration by rejecting approaches based on excessive austerity measures not considering
social impact and development implications. We call for more economic and political
governance of the European Union and greater involvement of the social partners. The EU’s
federal development leading to the construction of the United States of Europe needs to
be undertaken immediately and with concrete actions. The lack of a real European political
architecture supporting the monetary one, which after all lacks the economic component,
has been at the root of the problems noted by the European Union in terms of legitimacy
and eﬀectiveness. For these reasons, we now need to take resolute actions for a more
integrated Europe, especially at political level, as a prerequisite for a project ensuring the
democracy, stability and competitiveness of the whole system.
We believe that the proposals for a new roadmap ‘Towards a Genuine Economic and
Monetary Union’ adopted by the Council last December, which will be structured with
targeted measures by next June, cannot have positive eﬀects on EU growth and
competitiveness, without a radical reversal of the austerity policy adopted so far. The
pursuit of ﬁscal consolidation and macroeconomic policies at the European level – several
years after the outbreak of the crisis and precisely because of the lack of concurrent
inclusive growth plans – has resulted in growing unemployment, social inequalities and
poverty with no growth prospects in the short and medium term. A strong social dimension
of the European Monetary Union shall be incorporated into European policies by envisaging
the social partners’ direct involvement and negotiations with them. The challenges posed
82
by increasing poverty, social exclusion and unemployment (especially among young people)
need to be addressed urgently, and the proposals envisaged in the Roadmap are inadequate
and not up to the unprecedented severity of the situation. With speciﬁc reference to the
proposals which shall be put in place immediately we wish to highlight the following ones:
• to launch a concrete EU plan for growth (a European New Deal), employment and
stability funded by the EIB with Eurobonds, which would attract global savings
surpluses. Such a plan could be immediately preceded by public oﬀ-balance sheet
investment in the social, environmental and research areas;
• to loosen the Stability Pact for member states by not considering investment for
growth and sustainable development as governed by the Pact;
• to reduce economic imbalances between countries to make the Euro sustainable;
• to strengthen and extend the rules regarding the Financial Transaction Tax (FTT)
and the role played by the European Central Bank (ECB) to give it a full role as
lender of the last resort, thus reducing the speculation dangers and directing
ﬁnancial markets towards the real economy, also by means of measures facilitating
access to credit.
These are only some of the priorities set by CGIL, CISL and UIL, in the hope that Italy will
continue to contribute more vigorously to the progress of the whole European and world
system. They note the end of the infringement procedure initiated by the European Union
against Italy for excessive deﬁcits.
Anna Rea is Confederal Secretary of the Italian Labour Union (UIL), Fausto Durante is
Head of the European Secretariat of the Italian General Confederation of Labour
(CGIL) and Raﬀaele Bonanni is General Secretary of the Italian Confederation of
Workers’ Trade Unions (CISL).
83
Europe Needs A Change Of Course
By Michael Sommer
Europe is in deep crisis and people are more and more losing trust. According to the EUEurobarometer,
distrust runs at 53% in Italy, 56% in France, 59% in Germany, 69% in the
UK and 72% in Spain. As the EU has lost the support of two-thirds of its citizens, The
Guardian recently asked: 'does it matter?' Does this social and political crisis matter to the
political elites in Europe?
Some think this could be solved by better explaining what is at stake, as the President of
the Commission stated on April 23. In his view, the European institutions and the member
states have collectively not been able so far 'to explain what was really at stake and to
build the necessary support.'[1]
It is obviously not only a problem of narrative. There is a growing social and democratic
problem in Europe.
As a consequence of the EU austerity policy, poverty and inequality are increasing in many
European countries, workers’ rights are under attack and regional disparities are growing.
The private assets of the richest ten per cent of the population are growing, while the
states themselves become poorer. European trade unions see the European model at stake.
Prominent politicians like the President of the Council Mr. van Rompuy started a new
debate about the necessity of ‘a new social dimension of the EMU’. Governments, the
Council of Ministers, social partners and civil society are invited to come up with proposals
by June 2013, when the European Council discusses the new roadmap towards a ‘deep and
genuine Economic and Monetary Union’.
1. No deep and genuine EMU without a strong and binding social dimension
The debate on the social dimension of EMU rings a bell. In September 1988, the European
Commission adopted a working paper on the social dimension of the internal market[2].
Governments, the Council of Ministers and social partners were involved in a broad debate.
In the end the European Council noted that, ‘as the internal market had to be conceived in
such a manner as to beneﬁt all of the Community’s citizens, it was necessary to improve
working conditions and the standard of living, the protection of health and safety, access
to vocational training and information, and consultation and dialogue with the two sides of
industry.’[3]
While the instruments and procedures of the single market became precise and binding,
the social dimension remained much weaker. The Social Protocol never worked as an
equivalent of market integration. While the market developed its own dynamics, social
policy depended on the  often non-existent consensus of national governments. With the
ECJ rulings on Viking, Laval and Rüﬀert, it became even more obvious that there is a need
for a better balance of economic freedoms and social basic rights.
84
We should keep this in mind while discussing the social dimension of the EMU.
Without binding guarantees, rules and procedure for the social dimension, the new
economic and ﬁscal procedures, which are binding and ambitious  will work as
‘thumbscrews’ for social policies like pensions, welfare and also workers’ rights unless they
are supplemented with equally binding and ambitious safeguards  of the social dimension.
This includes legally binding guarantees for the autonomy of collective bargaining, stopping
interventions in national wage systems as well as safeguarding and promoting workers’
rights and democracy at work. It also includes binding standards for a social minimum
income in Europe.
2. A social dimension of EMU has to be embedded in a stronger social policy
agenda for Europe
The respect of fundamental social rights and the improvement of living and working
conditions are binding obligations under the Treaties. But with the crisis, a new regime was
established: attacks on social and workers’ rights, on collective agreements etc.
Therefore we need to stop this neoliberal wave and evaluate and improve the social
situation in Europe immediately. This implies an ambitious social agenda for Europe,
including a special programme for the crisis countries to stabilize their social realities.
There is deﬁnitely a need to reshape the world of work. We need to reduce insecurity,
minimize risk and create new rules for decent work in Europe that would provide
employees with better protection, strengthen their rights and ensure the required ﬂexibility
in a globalized labour market.
It was deﬁnitely a mistake to abolish the existing annual social agenda and, connected
with that, a visible monitoring of Social Europe. Europe needs a new strong social agenda.
What is necessary is an ex-ante evaluation of the social consequences of any new
‘convergence and competitiveness instruments’ (i.e. contractual arrangements) to check
whether and, if so, how they undermine or harm workers’ rights, social standards and
wellbeing in the member states.
3. A major investment programme – a kind of new Marshall plan is necessary
Instead of more austerity policies, Europe needs a long-term path towards growth and
modernization that will equip our continent for the future and create wealth and jobs for
the 21st century. This requires investments in sustainable power generation, in reducing
energy consumption, in sustainable industries and services, in training and education, in
research and development, in modern transport infrastructures, low-emission cities and
municipalities, and in the eﬃciency of the public service. It will also require all social
groups to have a fair share in a better future.
Therefore the DGB proposes to create a new Marshall Plan for Europe, designed as an
investment and development program for all 27 EU countries for a 10-year period (from
2013 to 2022). It is not a ‘one size ﬁts all’ solution but needs a specially tailored program
for each country, based on solidarity and cooperation.
85
4. Neither a more social nor a more democratic Union is possible without treaty
changes
The debate about the social dimension of EMU should not work as a diversionary
tactic. Without treaty changes a deep, genuine Social, Economic and Monetary Union is
not possible.
Intergovernmental initiatives should – if at all -  only be limited and temporary, because
they undermine the community method. The progress of the last treaty revisions, an
increasing share of legislative power of the European Parliament, is at risk. It is not only
the Eurosceptics that undermine the European project; it is also the dangerous increase of
intergovernmentalism.
Rebuilding trust needs a transparent and participatory process to bring Europe back on
track. It needs an ordinary revision of the Treaties through a new convention, involving not
only governments and parliamentarians but also social partners and civil society. The EP
should be the motor for this, using the next elections in 2014 as an accelerator. If there is a
lesson to be learned from the process of the last constitutional convention, it is that these
debates should start at the national level instead of only being reduced to the European
elites in Brussels.
A series of national pre-conventions could help to start a new grounding of the European
project by European citizens. A more social and democratic Europe is the future – but only
if the elites realize that business as usual is not an option.
Europe does matter!
References
[1] MEMO/13/368 Event Date: 23/04/2013 Austerity and growth debate at the Brussels
Think Tank Dialogue (22 April 2013).
[2] SEC (88) 1148 ﬁnal (14 September 1988).
[3] Report on Social Developments 1988 (Commission Document, Addendum to the
‘Twenty-Second General Report on the Activities of the European Communities’ 1988).
Michael Sommer is Chairman of the Confederation of German Trade Unions (DGB).
86
Proposal For A Real Social Dimension Of The EMU
By Bente Sorgenfrey and Harald Børsting
For many years, the European Union’s recommendations regarding economic policy have
emphasized the need to lead rigorous economic policies. This is, partly, seen in the
European Semester and in the country-speciﬁc recommendations in general, as well as in
the economic requirements imposed on the southern European countries that have been
struck very hard by the ﬁnancial crisis. This trend has sharpened competition between the
EU member states and will, in all likelihood, further accelerate the race to bring down a
number of diﬀerent types of costs.
The ETUC describes this approach as a one-sided policy that will devalue employment
conditions and damage the European Social Model in favour of increasing the
competitiveness of member states through free-market forces.
Therefore, the ETUC has advocated that we strengthen the social dimension in future
collaboration initiatives within the EU. We support the ETUC’s advocacy for the social
dimension.
Never has the need to take action to stop downward competition on wages and working
conditions been more pressing. Equal treatment must apply to all workers and must be a
fundamental starting point for all EU legislation in future. The ETUC reiterates its demand
for a Social Progress Protocol to be annexed to the Treaties with the aim of securing
respect for fundamental social rights.
In general, we know that the general public in Denmark has a limited interest in
amendments to the Treaties. We therefore need a thorough debate on the political as well
as the constitutional development of the European Union. However, in order to have a
fruitful and constructive debate, it is necessary that the EU starts taking initiatives that
will strengthen sustainable growth and employment with decent conditions. This is why
speciﬁc details and realisation of a social dimension will be decisive with regard to the
public’s attitude toward European collaboration in the future.
Social dumping is an increasing problem, not just in southern Europe, but also in northern
European countries, including Denmark, as it has a direct and indirect eﬀect on the labour
markets in these countries. Social dumping not only lowers social standards for the
individual, it also makes it more diﬃcult for employees to improve unfavourable terms of
employment or completely avoid such terms.
A Social Union, as presented by the ETUC and as a concept, is still very much open to
interpretation. This is why it must be operationalised in the near future. An important part
of realising a social dimension – and quite possibly the most important part – is to
establish speciﬁc initiatives aimed at improving the employment situation.
For this reason, we suggest two small but not insigniﬁcant improvements to the present
economic governance. (1) The country-speciﬁc recommendations should promote the
European Social Model rather than challenge national social standards. At the national
87
level, they must be negotiated with the social partners. (2) The scoreboard indicators must
include employment, social indicators and benchmarking of active labour market policy. In
this way we ensure an ongoing assessment of whether member states comply with the
Europe 2020 Strategy.
The requirements put forward by the European Union regarding public spending in a
number of countries rest on the realistic assumption that countries with substantial
liabilities cannot increase their indebtedness much further. This is why the issue of
ﬁnancing, i.e. taxation policies, is one of the central elements in the realisation of a Social
Union.
We are concerned about the existing political understanding in the EU institutions, which
reﬂects an excessive cautiousness to propose a modiﬁed and progressive tax system in the
member states. It is a misunderstanding to expect the EU to emerge from this job- and
growth crisis solely with deregulation and neo-liberal instruments. A strong and eﬃciently
run public sector is a precondition for a ﬂexible and inclusive labour market.
Another precondition to realise a social dimension is a binding social dialogue at the
European level leading to involvement of the social partners, including the trade union
movement, in the EU’s overall crisis management with a view to increasing growth,
employment and social equality. This also requires that member states enter into social
dialogue at national level.
Bente Sorgenfrey is President of the Danish Confederation of Professionals (FTF).
Harald Børsting is President of the Danish Confederation of Trade Unions (LO).
88
A Social Dimension For A Changing European Union - The
Czech Perspective
By Jaroslav Zavadil
‘It is exactly nine years since our country became a full member of the EU’.
The Czech Republic set out to join the EU in a period dominated by the challenging process
of transformation to adapt the economy to market conditions and in a situation in which
its economy was remarkably open to the dramatic onset of globalization. Within this
process, the social market economy has always remained our trade union vision. This was
the underlying conviction in the Czech trade unions’ expectations and support for EU
accession. We continue to promote the European Social Model based on high levels of
social protection, quality public services, and on social dialogue – a model which builds on
sustainable growth of the economy and employment support.
However, what has become of these safeguards of prosperity and cohesion lately? Will
they be able to inspire hope after the devastating eﬀects of drastic reforms and measures
introduced all over the EU, allegedly to curb the eﬀects of the crisis? What should be done
to restore the appeal of the European project for the 26 million unemployed in EU
countries and for millions of other citizens who have found themselves in an insecure and
precarious situation? Can European politicians and national governments attempting to
solve the crisis be made to avoid adopting austerity measures, reducing social standards
and wages and pursuing wage moderation?
It is perhaps interesting to remember here the words of José Manuel Barroso, President of
the European Commission, who in his 2012 State of the Union speech highlighted: ‘It is
precisely those European countries with the most eﬀective social protection systems and
with the most developed social partnerships that are among the most successful and
competitive economies in the world.’
For several years, European trade unions have been engaging in a campaign which deﬁnes
their own cure for the crisis. This is equally true at the national level – the CMKOS has also
come up with its own vision. The main requirement is for politicians to stop capitulating to
the banks and ﬁnancial markets, to make sure that eﬀective measures tackle speculation,
corruption, tax evasion and tax havens and that no measures are adopted which make
those not responsible for the crisis suﬀer, especially employees and a large part of the
European population.
The search for shared political solutions appears to be increasingly diﬃcult, though. The
four fundamental freedoms (free movement of goods, people, services and capital) are
guaranteed in the EU. Nevertheless, these freedoms are out of balance. Within the ETUC,
we are engaged in a joint struggle to carry through the social protocol to make sure that
social rights and freedoms are not outweighed by economic rights and freedoms. The
creation of the single market has given rise to certain disconcerting phenomena – there is
concern about the loss of industrial and economic sovereignty given the decline of
domestic manufacturing, with even prosperous factories and plants being shut down by
multinationals expanding into low-cost regions, and given the oﬀ-shoring of considerable
89
proﬁts which are subsequently not reinvested ‘at home’. The crisis reinforces these
concerns. They are used against the trade unions in line with the ‘charity begins at home’
logic. As trade unionists, we must protest against this attitude. For this reason, the
decision-making process must be subject to a greater inﬂuence by social partners who
must be involved at all levels, thus strengthening participative democracy.
Yet, in the period of centre-right coalition governments, social dialogue has been diﬃcult
in the Czech Republic, and often merely perfunctory. The government is seeking only
‘mandatory’ dialogue with social partners, after which it often implements the reforms set
down in the government programme, regardless of the views of the social partners. A
number of new legal provisions and so-called reforms which are all to the detriment of
employees, lead to the destruction of the welfare state and will have a long-term negative
eﬀect on the lives of citizens. More pressure is also exerted by employers on the rights of
employees – employers are increasingly taking advantage of employees’ fear of losing their
job. This has a clear eﬀect on wages and on working conditions.
It needs to be pointed out that there was a decent degree of social cohesion in the Czech
Republic prior to the reforms, thanks to a relatively eﬃcient system of social protection,
inter-generational or family solidarity. As a result, the rate of poverty and social exclusion
in the Czech Republic was among the lowest in the EU.
The CMKOS is ﬁrmly convinced that the current problems are the result not of the
‘proﬂigacy’ of the welfare state, but of a decline in the social and ﬁnancial standing of
ordinary employees and of citizens in general. The cause of the crisis is to be found on the
demand side of the economy (on the side of aggregate demand linked to purchasing
power), which fails to stimulate economic growth suﬃciently and is further undermined by
ever stronger attacks on the income of a majority of the population. The present debt crisis
and ﬁscal deﬁcits must be explained by a massive reduction in budget revenues caused by
the abrogation of progressive taxation and by the introduction of various caps on social
security premiums by centre-right governments. The course of the crisis has made it quite
clear that the reduction in direct taxation and increase in labour market ﬂexibility have no
positive eﬀect on economic performance and job creation.
Unfair reforms thus contribute to the widening of income disparities. The percentage of
people threatened by poverty is bound to increase. As in the rest of the EU, we are
increasingly worried about the young generation.
Understandably, the objective of the CMKOS and its aﬃliates is to maintain and, where
possible, improve social standards. We believe that employees must receive fair pay, must
be allowed to work and live in decent conditions, and must not fall victim to social
dumping.
To this eﬀect, we use all democratic tools available to us as trade unions. We also rely on
international commitments and standards guaranteed by ILO conventions, on the European
social acquis, and especially on the guarantee of labour and social rights highlighted in the
Charter of Fundamental Rights of the EU. For this reason, the CMKOS is strictly opposed to
the Czech exception, which was negotiated under pressure and which the present
government is seeking to uphold. We appeal to the help of all who can lobby Members of
the European Parliament and their governments to make sure this exception does not gain
90
support.
As far as the future of the social dimension of the EU is concerned, we, as members of the
ETUC, refer to the documents and resolutions adopted by ETUC bodies – documents of
the Athens ETUC Congress or a number of other resolutions, among them the resolution
‘Social Compact for Europe’ from June 2012 deserves a special mention.
Mutual solidarity represents one of the inestimable values of the EU. It needs to be
constantly cultivated at various levels in the name of cohesion and fair working and living
conditions. In this respect, we must appreciate the part played by European structural
funds and use them to help restore the lost faith of citizens and to involve the ‘vulnerable’
in active participation in public aﬀairs. Solidarity, the foundation of developed societies,
remains the key trade union principle.
This requires the EU to enforce a truly serious and eﬀective social dimension and respect
and cultivate the values on which it is built – democracy, rights, solidarity, cohesion,
peace. We must not forget unity – essential for our success in the face of international
opposition and in our eﬀorts to achieve sustainable growth and a decent life for all.
Jaroslav Zavadil is President of the Czech-Moravian Confederation of Trade Unions
(CMKOS).
Part III – Action For A Social Europe
92
A Change In Course Towards A Social Europe
By Martin Allespach and Jan Machnig
A uniﬁed Europe without dividing borders, with the certainty of a peaceful future and social
security accompanied by social and economic progress – this has always been and still is
the essence of the ‘European dream’. To us it describes the hope we associate with the
project of a Social Europe. After all that we have been through recently, however, we now
know better than ever before: our aims and desires cannot be attained merely by dreaming.
We have to work towards these, rather, in a concerted, deliberate manner. The European
dream has very little to do with the free movement of capital, nor is it just a candy shop for
international ﬁnancial markets. Europe must be more than a community that is there to
beneﬁt banks – it has to be a community that protects its citizens as well. That is the
Europe we are ﬁghting for – a Europe oﬀering better living conditions and better job
prospects for all its citizens. A Europe marked by socially responsible, sustainable business
and economics. A Europe that serves as a global model for a vibrant, living diversity of
cultures.
Probably no other topic stirs up more emotions at present than the international and
European ﬁnancial crisis, its repercussions for Europe and its people. Europe’s elites’ answer
to the Euro crisis has thus far been to slash spending, pensions, social services, ﬁre civil
servants and lower minimum wages while raising taxes and levies. These various measures
have among other things included the rollback of protection against redundancy in Italy.
But none of them have truly targeted the root of the problem and grabbed it by the horns:
slumping industry and rampant tax evasion. To take another example: in Spain ailing
companies can now unilaterally cut wages and lengthen working hours. Europe is trying to
save itself from the crisis. Cyprus has also recently imposed belt-tightening measures. The
aim and intentions? If government spending can be cut and wage costs lowered enough for
business enterprises, the engine of growth will somehow be kick-started and the public
deﬁcit will recede. Only in this way, it is argued, can government budgets be saved from
oblivion.
United Europe has lost its attractions for many of its citizens. Individual member countries
are being force-fed austerity policies with the support of European institutions. The EU
Commission never tires of initiating yet another round of deregulation. That is why many
people are blaming the European Union for the erosion of their living conditions and for
policies solely serving the interests of ruling business elites. This is destroying the
consensus on the European project. This is why we need a change of course towards a
united Europe without any dividing borders, a future living in peace, with guarantied social
security accompanied by economic progress.
What we need is a political and social Union. A European social package has to create a
new order in labour markets and combat social dumping while enabling participation,
democracy and co-determination. This can only happen if EU countries adopt a common
economic and social policy. The economic and social policies of the member states should
be coordinated by an economic administration democratically elected by the EU
Parliament.
93
The preliminary balance sheet of European policy in confronting the crisis to date shows
ever more clearly that the neo-liberal model does not work: austerity policy is sharpening
the recession and causing the debt burden to mount further. Rampant unemployment
among youth in the crisis countries has in the meantime reached dramatic levels. The
economist Peter Boﬁnger hit the nail on the head when he said that saving aggravates the
crisis because it slows growth. He considers the drastic measures imposed on Greece by
the EU Troika (EU Commission, European Central Bank and International Monetary Fund),
for instance, to be counter-productive. The policy of budget consolidation is above all
being pushed through at the expense of lower and medium-income persons, as well as
Europe’s younger generation.
No political strategy is ‘without any alternative’. The longer the crisis lingers, the more
urgent it is becoming to change course in the direction of a Social Europe based on
solidarity. There are various strategies for making Europe more viable in the future. In its
‘Karlsruhe Declaration’, IG Metall advocated as far back as 2011 a solution to the crisis
based on European solidary – a strategy marked by ‘an unwavering, immediate change in
course with respect to the EU Commission’s and German government’s ﬁnancial, economic
and labour market policy towards a democratic, ecological and social Europe.’ It reaﬃrmed
its call for a Europe united in solidarity and democratically legitimised at the ‘Change-ofCourse’
Congress in 2011. To spell it out in concrete terms:
•Europe needs sustainable growth through an active, coordinated and democratically
legitimated economic and industrial policy to ensure the viability of its industrial
base and value-creation.
•Saving the Euro requires that the Community assumes joint liability and establishes
Community controls over national budgets.
•Europe needs comprehensive regulation of the ﬁnancial market.
•The European Union needs the backing of its people. To this end it has to become a
social Union.
•The European Union needs to become a political Union.
Europe requires a European Marshall Plan. The contours of such a plan have been
developed together with other German trade unions under the umbrella of the
Confederation of German Trade Unions (DGB). This plan provides a package of various
measures to boost public and private investment and creates instruments to lift
consumption. Instead of strangling demand by tightening the belt ever further, it has to be
ensured that the enormous amounts of capital awash in the world at present is channelled
into investments in the future. Europe has to ﬁght the crisis, make its economy and
infrastructure viable for the future and create permanent, secure jobs. To this end, it is
absolutely essential that the member states curb the power of banks, regulate ﬁnancial
markets and establish a just tax regime. Banks have to be forced to perform their primary
role: serving the real economy. In addition, highly speculative investments must be
regulated and rendered less attractive by means of a ﬁnancial transaction tax. A European
supervisory authority for banking and a common rating agency need to be created. The
deposit and credit business must be detached from investment banking.
It is only a combination of measures like these that can bring about a change in course
towards a Social Europe. Political decisions and not the market need to have primacy in
designing Europe’s structure. Finally, Europe has once again to become a project of the
94
broad majority of its citizens and not its so-called elites. Strengthening the social
dimension of Europe hence requires a colossal eﬀort. Let’s roll up our shirtsleeves and
tackle it together – in Europe and for Europe.
Martin Allespach is Head of the Department of General Union Policy and Societal
Politics at the German trade union IG Metall. He is also Professor of Continued
Education and Life-Long Learning at the University of Hamburg. Jan Machnig is
Political Secretary in the same department at IG Metall dealing with social and labour
market policies.
95
How To Finance A Social Europe?
By Brigitte Unger
As previously shown in this eBook by Professor Martin Seeleib-Kaiser from Oxford
University, Europe is a social model and it is time that the European Union understands
this. As historically welfare states have been used for nation building, if the EU wants to
become a strong entity it needs a European welfare state including solidarity and certain
minimum welfare provisions, such as minimum pensions, he claims. One way to
Europeanize the welfare state, he further suggests, would be a transfer union, in which an
EU fund has an automatic trigger: if unemployment rates in an EU country exceed a certain
limit, money is automatically transferred from the EU Fund to the EU country in need.
There are also several other models which may establish a fairer, more just and more social
Europe, yet all face the criticism that these proposals cannot be ﬁnanced. It seems the
problem lies in the public revenue side, or rather this is used as an excuse for not
progressing. In the following I want to put forth sources of income that the EU and EU
member countries could use to create a Social Europe.
1. Taxes
If one looks at the harm done to European welfare states by ﬁnancial markets, it seems
time for a ﬁnancial transaction tax (FTT). According to the latest calculations by the EU
from May 2013, a FTT  (a tax of 0.1% on bond and equity transactions and of 0.01% on
derivative transactions) would yield 20bn Euros till 2020. If one included a tax of 0.1% on
transactions in foreign currencies, total tax revenues would rise to 50bn Euros. Including
derivatives (= bets on ﬁnancial assets) in particular would increase public revenues
substantially and may be legitimized with political eﬀorts to make speculators, the major
actors in the ﬁnancial crisis, at least partly pay for the damages they caused. An alternative
tax, the ﬁnancial activity tax (FAT, 5% on the sum of proﬁts and wages of ﬁnancial
institutions) would yield 25bn Euros.
2. Tax Avoidance
Starting with the British Parliament that accused large companies such as Starbucks,
Google and Amazon UK of immoral behavior, using loopholes in the tax system, a series of
reports on misbehavior of companies has been revealed through media and oﬀshore leaks.
Contracts, certiﬁcates and emails from oﬀshore islands shed light on the thus far secret
underworld of company and individual ﬁnance. Mostly company taxes are not even illegally
evaded but legally avoided using loopholes in the tax system. Starbucks, advertising ‘fair
trade coﬀee’ worldwide buys its coﬀee in – guess – low tax Switzerland in order to use the
high costs for buying coﬀee there to reduce its proﬁts, which are then taxed at low Swiss
tax rates. Fair trade thus does not always equal fair tax payment. Amazon UK holds its
book stocks and book sales in the UK, yet pays its taxes in Luxembourg.
James Henry from the Tax Justice Network estimates global oﬀshore ﬁnancial assets
amount to around 32tn US Dollars. More than 122.000 letter boxes and trusts have been
discovered through oﬀshore leaks, in oﬀshore centers such as the British Virgin Islands,
96
Singapore and the Cayman Islands.
A sophisticated transnational private infrastructure of service systems has emerged, ‘which
now launders, shelters, manages and if necessary re‐domiciles the riches of many of the
world’s worst villains, as well as the tangible and intangible assets and liabilities of many of
our wealthiest individuals, alongside our most successful mainstream banks, corporations,
shipping companies, insurance companies, accounting ﬁrms and law ﬁrms’ (James Henry).
Closing loopholes in the tax systems – at least within Europe, is important. This would
help EU countries increase their tax revenues, in particular the corporate tax income.
3. Tax Evasion
Tax evasion is the illegal way of not paying taxes and has also increased. Estimates range
between large parts of the 32tn US Dollars of global oﬀshore ﬁnancial assets, to 15% of
GDP in some countries and to around 3% of GDP in others (estimates by Friedrich
Schneider on the shadow economy and tax evasion). Especially after the ﬁnancial crisis, as
EU countries had to cut expenditures due to budget problems, tax revenues in percentage
of GDP dropped and therefore counteracted the planned budget consolidation.
‘Taxes are the price we pay for a civilized society’, said Oliver Holmes, Associate Justice of
the Supreme Court of the United States, early in the 20th
century. Tax evasion increases
when the elites do not feel responsible for the public commons anymore. Not paying taxes
means not wanting to participate in the provision of public goods. This is the consequence
of an income distribution that has become extremely uneven. Evidently, a billionaire does
not need public health care but has his private doctors. The rich seem to have lost the link
with the society to which they belong and have opted for not paying taxes. Calculations
for Germany of the DIW in 2012 show that taxing only 0.2% of the richest Germans by one
percent of their wealth would bring an annual tax revenue of 8.9 bn Euros. Investing this
into a Social Germany and a Social Europe would already be an important ﬁrst step.
A study done by Booz and Company in Zurich in 2011 showed that 102 bn Euros of German
tax evasion money lays in Switzerland. Recovering this money from the Swiss neighbor
would help ﬁnance a Social Germany and could be an important second step in ﬁnancing a
Social Europe.
The European Union has a GDP of over 12.8 tn Euros in 2012, making it the largest
economy in the world. 502 million inhabitants with a per capita income ranging between
11.400 Euros (Bulgaria and Romania) and above 30.000 Euros (Germany, the Netherlands,
Austria, Sweden, Denmark, Ireland) contribute to this wealth. The largest social
expenditures in Europe are pensions followed by health care. Total social spending in EU
member countries is around 3.6 tn Euros, between 17.8% (Slovak Republic), 26.3%
(Germany) and 32% (France) of GDP.
Comparing this sum to the revenue which could be derived from taxing wealth, from
closing tax loopholes and reducing tax avoidance, and from recuperating evaded taxes
shows a Social Europe can be ﬁnanced. It can be ﬁnanced easily once one recognizes a
Social Europe, with solidarity and welfare, is the very core of Europe. Political leadership is
needed to set the path for a Social Europe. This also requires an elite who is politically and
97
ﬁnancially willing to support Europe.
Brigitte Unger is Academic Director of the Institute of Economic and Social Research
of the Hans Böckler Stiftung and Professor of Public Sector Economics at Utrecht
School of Economics.
98
Stop The Emergence Of A Liberal European Social Model!
By Björn Hacker
The Monetary Union needs a ‘genuine’ social dimension instead of austerity dogma.
The new European governance architecture with its central European Semester mechanism
of coordination, reporting and monitoring in economic, budgetary, employment, social and
many other policies, enables the EU to better organise the decentralised policies by
common targets and rules. But as progress in the ﬁeld of European social governance is
rather modest, most of the new instruments belong to the economic governance area. The
implemented Six-Pack, the Two-Pack, the Euro-Plus-Pact and the Fiscal Compact are set
in order to strengthen ﬁscal discipline in the Economic and Monetary Union (EMU). It is
obvious that all other policy areas will be subordinated to fulﬁl this objective.
Already the integrated approach of combining the Europe 2020 Strategy targets with the
Stability and Growth Pact rules in the European Semester opened the door for crossthematic
references in the recommendations for the member states. Now, with tightened
budget discipline, the likelihood is even higher that the European Commission and the
Council voice their objections on unsuitable budgetary policies of a country with reference
to particular employment and social policies. This means, if the strengthened Stability and
Growth Pact rules are not fulﬁlled, that the Commission and the Council will demand
structural reforms of the welfare state concerned.
The crisis proves the asymmetric constitutional design of European integration to be
frozen: the market creating mechanisms for enabling free trade of goods, people, capital
and services are dominant and the market shaping and market correcting mechanisms are
lagging far behind. For years there has not been a step ahead towards strengthening the
social dimension of the EU in legislation:
⁃ the equal prominence of social rights and economic freedoms in the shape of a
social clause in all EU legislation is still missing;
⁃ the Europe 2020 Strategy focuses on employment rates and poverty reduction
instead of setting common social standards;
⁃ the one-size-ﬁts-all approach of the Open Method of Coordination (OMC) is not
taking into account diﬀerent welfare state pathways and singularities;
⁃ intra-European competition for investments, jobs and production sites is
encouraged, while there are no common rules for minimum wages, social spending
and harmonised corporation taxes, which would be needed in the form of a
‘European Social Stability Pact’;
⁃ the non-binding ‘Compact for Growth and Jobs’, concluded by the heads of state at
their June 2012 summit argues for structural reforms and a deepening of the single
market, as well as implementing project bonds and making better use of the
European Investment Bank (EIB), instead of starting an actually eﬀective European
99
New Deal programme of employment and social investment;
⁃ the December 2012 summit concluded that a time-bound roadmap for the
completion of a ‘genuine’ EMU should be developed until the June 2013 summit,
also stating the importance of a social dimension of the EMU; but this aspect was
left aside in favour of preparatory work on new instruments to foster
competitiveness and economic surveillance.
Since the EMU was founded, national welfare states experienced diﬃculties in following
their own paths in some economic and social policy areas. We have seen competition
between diﬀerent wage-, tax- and social spending models in the last 14 years, based
primarily on economic, not on social policy, considerations. Now, within the new
framework of economic governance and the streamlining process in the European
Semester, we’ll move from free competition on the question of which welfare state model
adapts best to the economic integration scheme, to a sort of codiﬁed ‘right path’ on a
supranational level, which all member states will be forced to follow.
An obvious example is the austerity course in the crisis: the adjustment measures for
Greece, Portugal and Ireland, but also the recommendations for Spain and Italy, to cut
social spending, to lower wages and pensions and to increase ﬂexibility in the labour
market, dismantle the respective welfare states. From a northern perspective this is
nothing new, but in those countries, trade unions and other veto players defended major
cuts for a long time – and these singularities are over now.
Another important single policy example is that of the pensions sector: of course, social
policy remains in the hands of the member states, but the EU now disposes of a
governance framework in which claims to modify old-age policies in the welfare states can
be raised. A look into the Commissions’ green and white book on pensions shows the line
of argument: portability of pension entitlements is necessarily an issue of the single
market. And the high ﬁnancing costs of pensions are an issue for ﬁnancial sustainability in
the EMU. The expected recommendations in the ﬁeld of pensions will therefore rely
lopsidedly on ﬁnancial sustainability and not on the adequacy of pension entitlements.
Constantly, we are moving towards an even more liberal European Social Model. What we
are losing on the national level in terms of competence to shape our welfare states by the
new European economic governance structure is not given back to us on a supranational
level.
It is primarily the Merkel administration in Germany which is to blame for the dominant
crisis strategy and consequently for the problems we are facing and which will aggravate
further still. Structural reforms are necessary in the states in crisis, but it would be more
helpful if those reforms concentrate much more on increasing the tax bases and tax
collection and on modernising and simplifying administrative machineries, instead of
excessively cutting wages and social spending.
The basic problem with the austerity course is that Greece, Portugal, Ireland, Spain and
Italy are caught in a trap of recession and debt. Through the ﬁscal multiplier, lower
consumption and decreasing economic activity caused by the spending cuts and growing
unemployment lead to lower tax revenues and an even higher public debt.
100
Without progress towards a European Social Model based on solidarity, the crisis will not
be solved and welfare states will be dismantled even further. Therefore the austerity course
has to be stopped. Also, the social and growth dimension of EMU governance reforms
needs to be pushed forward, for example by setting up a European Social Stability Pact and
a European New Deal Programme.
Björn Hacker works on economic and comparative welfare policies at the International
Policy Analysis Unit of the Friedrich-Ebert-Stiftung in Berlin.
101
The Shock Therapy Applied To A Social Europe
By Anne-Marie Grozelier
There was a time when the European project gave rise to amazement and even admiration
in the rest of the world. Seen from China, Japan, Madagascar or the United States, Europe
at the end of the 20th
century appeared to be the only region in the world that placed the
need for social justice at the centre of its project, while having available in each of its
component parts a body of social regulations that were the result of legislation or
negotiations between the social players, employers and trade unions.
It is therefore easy to understand that at the Europe Work Employment Biennials organised
by Lasaire, representatives from these countries were interested in what was called the
European Social Model. It was built upon several important values shared at the outset by
the six founding countries then, to a greater or lesser extent, by the new arrivals: a social
justice deﬁned collectively by all the players in the political and social life, and a market
economy framed by social regulations. The two, linked together, correspond to a certain
quality of life. In other words, the question of 'how to live together' was more important
than 'how to get rich as fast as possible'. I was still aware of this in 2004, at the Boston
Social Forum, where I was invited with Guglielmo Epifani, then Secretary-General of the
Italian CGIL, to present the European Social Model to a very attentive audience. This
European model was built on the synthesis of common formative characteristics inherent
in the national models:
⁃ systems of social protection (illness, unemployment, retirement, and maternity) funded
collectively, based on the double principle of solidarity and social cohesion, decided
and negotiated by the social players themselves;
⁃ services of general interest ensuring equal access for all to public services, health care,
transport, education, and energy, while guaranteeing the economic eﬃciency
associated with a certain quality of life;
⁃ systems of representation for employees and collective bargaining founded on the
recognition of trade unions and their involvement in the economy, i.e. founded on a
form of social democracy; 
⁃ and in more general terms, a certain conception of society and a certain organisation of
work tending to allow women, and also men, to reconcile their professional and
private lives.
Beyond these characteristics, the capillary action eﬀect has been observed among the
national models induced by participation in the European Model, with certain
particularities of the national models spreading to neighbouring countries. For example,
this led to works councils being set up in the United Kingdom; the minimum wage being
introduced in countries where it did not previously exist; or even the German system of codetermination
and the French system of the extension procedure for collective agreements
arousing interest in neighbouring countries.
Finally, in addition to the highlighting of the national models’ structural characteristics, we
have observed the progressive establishment, on the level of the European area, a body of
social rules that are deﬁned directly at this level. During a certain period of time, Social
102
Europe appeared to be moving forward. Thus we saw the setting up, albeit somewhat
laboriously, of European works councils, and the Maastricht social protocol establishing a
production system for social rules for the entire EU, at the inter-professional level and then
at the sectoral level.
Today, on the other hand, we have the impression that we are retracing our steps. We are
now reduced to ticking oﬀ a list of all that has been relinquished in a social Europe, a
decline that aﬀects the very foundations of the model: The Commission now only talks
about reducing the minimum wage and salaries, cutting public services, reducing social
protection, making the job market more ﬂexible, and bringing into question systems of
collective bargaining. In brief, we are drifting away from the major principles set forth in
1957 in the Treaty of Rome: 'To ensure the economic and social progress of the countries …
the constant improvement of people’s living and work conditions …' Not only has the
development of a body of rules applicable to the European area been stopped, but the EU is
now involved in unravelling the national models, in particular the structural element that is
the participation of trade unions in economic decisions. Governments are taking over those
domains which were the exclusive competence of the social players, starting with the
ﬁxing of salaries. Even fundamental rights such as the right to strike have been aﬀected.
Thus, the Greek Government did not hesitate to resort to emergency powers to break a
strike.[1]
In order to react to this situation, the 10th
Lasaire biennial issued two proposals in 2012.
The ﬁrst one was to set up a European conference aimed at encouraging salary
negotiations coordinated among the Member States. The objective would be to deﬁne a
framework for salary progression, adjusted in relation to the economic situation and the
speciﬁc productivity of each country. The second proposal was aimed at bringing to an end
the sidelining of the trade unions by proposing the strengthening of their presence and
their autonomy in negotiating in every place where economic decisions are taken, here too,
within the framework of a coordinated European eﬀort.
It is noteworthy that Europe has never been able to set up real cooperation among the
Member States. The crisis that Europe is experiencing now only serves to exacerbate this
inadequacy to the point where it encloses the countries in a confrontation of reasoning
among themselves. Europe should bring peace by establishing cooperation among the
States: instead, it is organising an economic war among them by using a reasoning that
leads to competing social systems.
The crisis serves as a pretext to bring into question the social model in its broadest sense.
Is this not the most vivid example of the 'shock strategy' described by Naomi Klein?[2]
Reforms and in-depth deregulation are instituted, taking advantage of the traumatism
provoked by the crisis. Who seriously thinks that a decrease in salaries and guarantees, and
the liberalisation of the job market could possibly have any eﬀect whatsoever on the
indebtedness of the countries? Who thinks that more ﬂexibility will create growth, or that
by reducing unemployment beneﬁt, the jobs needed will be created? No serious study has
ever demonstrated that job ﬂexibility creates jobs. In Greece and Spain, the job markets
were made extremely ﬂexible, nevertheless the unemployment rate remains very high. Yet,
there is no getting away from the liberal ideology. We are steeped in that ideology. It is
therefore not surprising that after Greece, Spain and Italy, it is now France which is being
called upon to reform. The European Commission is demanding structural reforms known
103
to us all: reforms aﬀecting retirement schemes, a decrease in employment costs, a
reduction in unemployment beneﬁt considered too generous, and an increased ﬂexibility of
the job market, etc. France is among the last Member States to give in.
Europe proposed an example of social progress. By relinquishing it, Europe aligns itself with
the rest of the world in reducing the social dimension to a simple consequence of
economic choices.
References
[1] The International Trade Union Confederation (ITUC) protested, as it did when trade
union rights were violated in Colombia or in the Philippines.
[2] Naomi Klein, La thérapie du choc (la montée d’un capitalisme du désastre) (Leméac/
Actes Sud, 2008.
Anne-Marie Grozelier is a sociologist and Secretary General of Lasaire.
104
What Can The Social Dimension Mean In Times Of
Austerity?
By Wolfgang Kowalsky
Is there any topic less sexy than the ‘social dimension’? Even deﬁning what it is can be
tricky, there are many deﬁnitions out there so it tends to get mixed up with other terms. It
is often used as the equivalent of ‘Social Europe’ or the ‘European Social Model’. The debate
also pops up under the heading of a ‘European Social Union’ which would complement the
‘European Economic Union’ and a ‘European Political Union’. It is not a cornerstone of
anything. It’s always under suspicion and on the defensive. Moreover, it has to justify its
added value.
For instance, the internal market is inherently economic and political: an agreement was
reached on the political framework of this economic market area. In contrast, the social
dimension of the internal market, having been added later, is neither inherent nor intrinsic.
To complicate matters even further, it has never been possible to achieve a sustainable
consensus on the social dimension as part of the internal market. If something is exterior
and can be added later, logically it can also be removed. That was the case with the social
policy agenda – it simply disappeared some years ago.
The discussion is not new. Just 25 years ago a special issue of ’Social Europe‘ was
published: ‘The social dimension of the internal market’ (1988) and a Commission working
paper ‘Social dimension of the internal market’ with a chapter on ‘a new strategy for
growth’, presenting itself as ‘ambitious’ (SEC (88) 1148 ﬁnal; 14 Sept. 1988).
A look back can be quite useful: the ﬁrst social programme of the Commission was
published in 1974. The breakthrough, however, came in 1988 when Jacques Delors
addressed the annual TUC Congress in Bournemouth with a speech ‘Let’s construct social
Europe’, in which he oﬀered a deal: he promised to deliver an ambitious social policy
programme, in exchange he asked for support for his internal market agenda. Unfortunately
there was no written record of the deal, so Delors’s successors could get out of it and, in
the end, the Court of Justice could allow biased cases like Laval, Viking etc. In the time of
Jacques Delors, it was quite clear that an ambitious social policy agenda as well as social
dialogue were part of the social dimension. In Lisbon in 2000, the Left was proud of having
added employment to the social agenda: the famous Lisbon strategy. The Lisbon strategy
was not, however, binding in the same way as the budgetary and ﬁscal indicators were.
The neoliberal agenda conspired to bury the social dimension. But in the face of rising euro
scepticism, the unrest due to the austerity policy, the rescue packages and the protests
against the unfair distribution of the ﬁnancial burden, the European Council of December
2012 showed itself to be more in touch with social reality than the European Commission.
It asked the latter to come up with a roadmap for the social dimension. Once again the
social dimension is being added to something, but to what – the austerity policy, the
economic governance package, the Europe 2020 agenda, and as what – window dressing,
decoration?
105
About a decade ago, a working group on the social dimension failed quite spectacularly in
the European Convention (2002/03) because the British representative succeeded in
diluting all the concrete progressive proposals and in opposing them afterwards. Therefore
no consensual result could be added to the European Constitution. The failed referenda in
France and the Netherlands were all that was needed to bury social ambitions at EU treaty
level. Back-pedalling became the new trend.
Social Europe regularly climbs back up the agenda before European elections and as we
approach the next European elections, it is clear that the conjuncture is about to occur
again. Many diﬀerent readings of Social Europe compete with each other. The least
ambitious reading was propagated by Herman Van Rompuy when he declared that the
European Treaties themselves are social, because some of the objectives, e.g. a high level
of employment and the social market economy are social.
Others deﬁne it more ambitiously, declaring that Social Europe means full employment,
eﬃcient public services, social protection, fair distribution of wages and wealth, democracy
at work on all levels, including co-determination, high quality industrial relations with
information-consultation-board-level participation and autonomous collective bargaining,
social dialogue, a high level of health and safety protection, high environmental norms, and
fundamental social rights. If we accept this deﬁnition, Europe is far from reaching its goal,
and in the last few years the goal posts have moved even further away. The gap, already
very wide in the past, is now becoming dramatically so, and the discrepancy between the
terminology and European ’realpolitik’ is quite alarming.
The term ‘European Social Model’ is quite close to ’Social Europe’, but has a diﬀerent
starting point, a comparison with other world models such as the American or Japanese
Social Models. Does it make sense to choose this reference for comparison? The European
Union was not founded to compete against the USA or other world regions, but to unite
Europe, politically, economically, geographically, and socially. Nowadays the EU is in
danger of setting the South and North of Europe up against each other, or – in geopolitical
terms – the core and the periphery. Some countries have youth unemployment close to
60%, and others are recruiting workers outside their member state in order to solve their
labour market problems. In this game, the EU has opted for continued austerity and against
any fundamental policy change. As a consequence, the EU will go further down the road of
growing divergence and polarization in areas such as social protection, employment,
poverty, wages, and social exclusion.
So where are we now, a quarter of a century later? Faced with the ﬁnancial, economic and
social crisis, the ‘social dimension’ has taken on a new meaning. This crisis has brought to
the fore features of economic governance that are undemocratic, and my colleagues label
the troika exercises a ‘dictatorship’[1]. National parliaments face real diﬃculties as their
national prerogatives are being jeopardised. At the same time, national and European social
partners and well-established industrial relation systems are being undermined. The most
logical response would be to push for more democracy and more involvement by the social
partners. Part of this new democratic project must be the deepening and the broadening of
industrial democracy, of democracy at work. The democratisation of the economy must be
high on the agenda once more. No more shareholder but instead more stakeholder
participation – the opposite of what the recent Internal Market Action Plan of the
European Commission proposed. One of the fundamental aims of this strengthening of
106
democracy must be to close a major gap, as there is a quite disjointed acquis on
information and consultation, but no European standard on workers’ board level
representation. Instead of creating a long overdue European basic standard, there is a
national patchwork: the European Company Statute is strongly linked to the pre-existing
national provisions (‘before-after-principle’).
At Davos in 2013 Angela Merkel recommended boosting the EU by ‘a compact for
competitiveness along the lines of the ﬁscal compact’. The think-tank of the European
Commission, BEPA, is propagating a ‘partnership for competitiveness’ along the same lines.
Competitiveness among states seems to have become the new dogma. Cooperation has
become a taboo. Competitiveness among companies is acceptable, but to apply the
concept to the member states does not make sense. Merkel’s plea means making nonwage
labour costs and unit labour costs fall within the competence of the EU. The
Commission’s think-tank reminds us that ‘the question of competitiveness was also at the
centre of discussions at the last European Council’ – the one which adopted the demand
for a social roadmap.
BEPA highlights the fact that ‘competitiveness is the key to exiting the crisis’ – but wasn’t
competitiveness what got us into this mess? BEPA points to ‘heightened competition’ from
‘low-wage competitors such as China, India, Brazil and Russia’ – only in order to say that
we don’t compete on wages but on productivity and that we need labour market reforms.
Competitiveness is the compass of the Commission. One wonders if the social roadmap is
not the sugar coating being used to make progressive forces swallow the bitter pill of the
new ‘competitiveness agenda’? In the same way, was the Lisbon strategy with its
ambiguities used to sweeten the ’better regulation agenda‘? BEPA is convinced that the
Commission ‘has also aimed at tackling the social implications of the crisis’ and ‘has acted
to support job opportunities for young people’. The results are scarcely impressive: youth
unemployment is hitting new highs: 5.7 million young people in the EU (23.5%) are without
a job (March 2013). The achievement of the ‘spectacular improvement of the trade
balances’ is misleading as it often hides the fall in imports.
What are the prospects for change? A look at the PES draft programme reveals that there
is not much common ground with trade unions on topics like information-consultationparticipation,
restructuring or collective bargaining. The word democracy (at work) can’t be
found.
Why is there no alternative European policy agenda on the table? Many unresolved issues
are in existence, but aren’t being tackled: fundamental social rights are being jeopardised
by Laval/Viking, the issues of the posting of workers and working time are unresolved. At
the European level, there is still no basic standard for workers’ board-level representation.
(Although a French initiative to push for an extension of this is on its way.) After the failure
of corporate governance, it could well occur to people to go into the direction of
strengthening the stakeholder approach. At the European level no stakeholder initiative is
in sight. Neither the Commission, nor the European Socialists, nor the United Left, nor the
Greens are proposing to explore this uncharted territory. And some socialists may prefer to
be the junior partners in a grand coalition rather than standing on their own feet with the
Greens.
That the unanimity principle is a major hindrance to making progress in social policy is the
107
message being conveyed by the PES. However, a coalition of the willing may push for
progress and may attract others to join this open group. At the Seville Congress in 2007
the ETUC decided to support a ‘core social Europe’ as a last resort to avoid a complete
social standstill [2]. But since then the ‘social standstill’ has continued. An ideological
debate should be avoided as it only serves to prolong this standstill and plays into the
hands of regression. Such a pioneer group should be open to as many as possible. The
ﬁnancial transaction tax has once more shown that progress is possible by a coalition of
the willing. Many observers consider social policy as a national matter, and this perspective
seems to be coherent with the subsidiarity principle: local responses to local questions,
regional responses to regional questions, national ones to national problems and ﬁnally
European responses to European questions. It is not desirable to have European responses
to all questions. It is clear that a level playing ﬁeld is still necessary.
The worst outcome of the new debate on the social dimension would be the conﬁrmation
that the current policy is social policy. The best outcome would be the launch of a new
debate on Social Europe, on a new social policy agenda for the next European Commission
and the next European Parliament. They have to transform these demands into reality and
push for progress. The probable outcome lies somewhere between these two options. It
depends on the initiatives and reactions from trade unions and other actors, political
parties, NGOs etc. to build up a progressive coalition of the willing. There is only one
scenario under which Social Europe can make some progress – an end to austerity and a
democratisation of economic and social governance. Some recent developments point in
that direction.
References
[1] Ronald Janssen, DNWR And The Euro Area’s Experiment Of Internal Wage Devaluations:
http://www.social-europe.eu/2013/04/dnwr-and-the-euro-areas-experiment-of-internal-
wage-devaluations
[2] ETUC Strategy and Action Plan 2007-2011, p. 124: ‘The ETUC has already in the past
agreed to consider the need for open groups of countries to relaunch political, economic
and social integration, as a last resort solution to avoid total standstill. Such a 'social core
Europe' would however have to be aimed at integrating other Member States as quickly as
possible and bringing them up to higher social standards, in order to stop a lasting social
rift in the EU.’ (http://www.etuc.org/IMG/pdf_Rapport_congress_EN.pdf)
Wolfgang Kowalsky is a policy adviser working in the trade union movement in
Brussels.
108
A ‘Poldermodel’ For The EU?
By Frans van Waarden
National social policy programs across Europe have their roots in three diﬀerent traditions
of origin. There is the (partially British) liberalist regime, where programs are the outcome
of supply and demand on markets; there is the (French) étatist tradition, where programs
have been produced and are organized by the state; and there is the (Germanic) corporatist
tradition, where they have been produced bottom-up by organizations of civil society, in
several versions eventually supported - e.g. legally framed - by the state.
The corporatist tradition is found especially in Austria, Germany, Belgium, Switzerland, and
the Netherlands, and to some extent in Sweden. These countries form the geographical
‘center’ or core of Europe where the inheritance of the medieval European guild tradition the
source of some of the earliest social programs - has persisted most strongly. Social
insurance programs there were agreed, developed, and sometimes implemented out of, and
in, close cooperation between associations of employers and employees, the so-called
social partners. In some cases (Belgium and Sweden) beneﬁts were paid out by trade
unions. Health care was ﬁnanced by ‘Krankenkassen’ and other similar health insurance
cooperatives and was privately provided by associations such as ‘Arbeiterwohlfahrt’ and
‘Caritas’ in Germany, or protestant ‘diaconessenhuizen’ in the Netherlands. Aﬀordable
public housing was provided by socialist, catholic or protestant housing associations, while
vocational training was and still is provided by the German and Austrian Handwerk
organizations, having their roots directly in the guild-tradition. Such solid foundations of
social policy programs in civil society have produced some of the most developed welfare
‘states’ around (here the term ‘state’ stands more for ‘nation’ than for ‘public authority’).
And Germany is even in the liberal US and Britain admired for its well-developed
association-based system of vocational training.
Notwithstanding the historical success of the corporatist model, European social policy
tends to follow more the liberal and the étatist traditions. It leaves as much room as
possible to the market. Whatever can be commodiﬁed should be. And if Europe interferes,
it does so in the étatist tradition by public regulations, directives, and case law.
The rich European civil society-based tradition is ignored and many of its institutions at the
national level have even been destroyed. Association-based health insurance, hospitals and
housing corporations have been forced to commercialize and compete on care and housing
markets with commercial enterprises; close cooperation between associations and national
states in the provision of services has been forbidden, as undue forms of state support,
considered unfair on open service markets where also enterprises from other member
states should have access; and forms of close cooperation between national adversaries
across the competitive - as well as the class-divide to supply such social services, or to
ﬁnance or regulate them, have been considered illegal ‘restraints of trade’.
This destruction of self-organization by civil society has everything to do with the
dominance of the neoliberal ‘supreme commandment’ and apparently highest value in the
European Union, that of ‘competition über alles’. It holds for individuals as well as
organizations and is ﬁrst of all made possible by the ‘four freedoms’: the free movement of
goods, services, capital, and - last but not least - labor, across the EU’s territory.
109
Furthermore, it is reinforced by the ban on collusive practices. Cartels and other forms of
cooperation between competitors are anathema. In principle this could have even aﬀected
trade unions. After all, they could be considered by some to be cartels of competing
workers against ‘customers’ on the labor market. These principles and rules, ﬁrmly
established in the Treaty on the European Union, the Treaty on the Functioning of the EU,
and the Charter of Fundamental Rights of the EU, are meant to help reach the so-called
‘Lisbon goal’: That the EU should become the most competitive region in the world.
It remains to be seen whether that goal can be realized by placing competition so high in
the European value hierarchy. And even if so - which is not likely as I will argue - then the
price is high. Because in the process a rich and speciﬁc European heritage of social selforganization
by civil society through cooperation rather than competition threatens to get
destroyed.
To be sure, the values of freedom and equality are being served by placing competition so
high in the value hierarchy. Freedom of establishment implies equal chances of individuals
and corporations in markets. And a bright future seems to lie ahead if we follow such Social
Darwinist ideas: The best, the brightest, the ﬁttest will survive. In the market, as much as
in sports, the court room, or academia. Free movement and competition of goods, services,
capital, and labor may lead to higher quality and better service. And ﬁercer competition on
prices, wages, and working conditions will reduce production costs.
But can European countries really win a global competitive struggle based on low
production costs? Against countries like China, which seem to have an inﬁnite labor
supply? In order to prevent such an all-out race to the bottom the EU has attempted to
complement negative integration - abolishment of barriers to free trade - with some
positive integration: Common regulatory standards for respectable wages and working
conditions, environmental friendliness, etc. But as Fritz Scharpf has emphasized, negative
integration is easier done than positive integration in the EU.
Furthermore, what are the most competitive countries according to the World
Competitiveness Index, annually produced by the World Economic Forum (WEF) and
ranking 144 countries? In its 2012-2013 report among the top were Switzerland (1), Finland
(3), Sweden (4), the Netherlands (5), and Germany (6), ahead of the US (7), the UK (8),
Hong Kong (9), Japan (10), Canada (14), Australia (29) and China (29). The North-Western
European countries are not particularly the low-wage and poor working conditions
countries and neither countries that are nurturing a very liberal economic ideology. But
they are typically the countries with a long-standing corporatist tradition. They have in
common that they complement competition with various forms of cooperation between
competitors and other adversaries.
Take the Netherlands for example. For decades it has been among the top ten in this WEF
list. This tiny country has, notwithstanding very limited soil for agriculture, managed to
become the world’s greatest greengrocer. According to UN international trade statistics
the Netherlands is responsible for 12.4% of global trade in fresh, frozen, and simply
conserved vegetables. It even exports tomatoes to California! And exactly this highly
productive and innovative sector exempliﬁes the Dutch model of organized cooperation
between three types of adversaries in markets, as it is traditionally organized in various
producer-cooperatives and associations. There competitors and social partners cooperate
110
to compete, globally.
First, competitors cooperated ‘horizontally’, in trade unions, trade associations, and even
cartels. Up until 1998, when the EU banned it, the country was considered a ‘cartel
paradise’. Cartels were in principle allowed, unless proven to be harmful. In order to
determine that, they all had to be registered in a cartel register.
And even that champion of neoliberalism, the OECD, had to admit in its 1993 report on
‘the unusual Dutch case’ that 'collusive agreements' are not always as destructive as
economists like to predict. Though ‘many sectors of the economy are enmeshed in a web of
restrictive agreements, regulations and barriers to entry’ as it wrote, it had to acknowledge
that ‘the economy has apparently suﬀered less from this situation that other countries
with weak competition policy’ and ’prices are not obviously higher than in most other
countries’, while ‘the social consensus may have had a beneﬁcial impact on overall
economic performance’.
Second, there was ‘vertical’ cooperation between private transaction partners, i.e.
(organizations of) buyers and of sellers cooperated. This concerned not only suppliers and
customers of goods and services in longer product value chains, but also labor. Trade
unions and employers associations have a long history of relatively peaceful ‘social
partnership’, i.e. in addition to cooperation across the competitive struggle there was also
cooperation across the historical class struggle.
The third form of cooperation was between organizations of private market parties and
public authorities. The latter provided both passive and active support for private market
regulation: Passive in the form of tolerating such self-organization and self-regulation; and
active in the form of ﬁnancial support for associations or ‘extension’ of their private
regulations to the status of public law. Such happened e.g. with the book price cartel and
many sectoral wage agreements. Also, the food sector was organized in statutory
compulsory trade associations, much like the German, Austrian, and Swiss chambers. They
were all considered to be in the public interest: The interest in production of suﬃcient
Dutch language books, of joint innovation in agriculture and food, and in social peace
between employers and employees.
The three-stage cooperation - ﬁrst between competitors on one side of the labor market,
then between these associations on both sides of that market, and then between these
and the state - produced the mainstay of social policy programs: Regulated wages
including a minimum wage, rules on health and safety at work and on working hours and
paid holidays, pension plans, and social insurance schemes against the risks of
unemployment, sickness, disability and old-age.
This cooperation between economic adversaries has a long history. In the more distant past
in guilds. More recently in - partly statutory - trade associations and trade unions. In
addition to regulations they have also produced sectoral collective goods, such as
vocational training, joint basic research, or collective generic advertising for the sector. A
symbolic example was the association of six bicycle lenders on the small North Sea island
of Ameland. Together these six ﬁnanced the placement of simple manual bicycle pumps tied
to poles - across the island, thus making it more attractive for people to rent and ride
a bike.
111
In my inaugural lecture 20 years ago I used dykes as metaphor for such market regulations,
thus introducing in passing the term ‘polder model’.[1] Just as dykes around a ‘polder’
create reliable dry spaces in which life is possible and investments of farmers sensible, so
can market regulations create an orderly social space in which it is safe to invest and
where there is ‘space for competition’. And just as Dutch dykes have been the result of
deliberation, cooperation, and concertation between competing landowners and farmers
ever since the 11th
century, so were private market standards the result of cooperation and
concertation between competitors in markets.
The Netherlands has not been alone with such market standards. Quite a few other
European countries have similar institutions that regulate markets and create sectorspeciﬁc
collective goods. I referred already to the German, Austrian, and Swiss Handwerk
associations, which organize the vocational training systems in these countries, linked to
the famous ‘made in Germany’ brand. Membership is compulsory for all SME ﬁrms in the
sector/region and these collective goods are provided by both compulsory dues payment
and provision of traineeships by the member ﬁrms.
In a way such statutory trade associations can be compared to municipalities. Whereas the
latter have a territorial domain and create order in physical space, the former have a
sectoral domain and create social order there. Both levy compulsory taxes and provide
collective goods for their domain. And in both their ‘citizens’ have voting rights.
The EU, by overemphasizing competition in the market, is overlooking the positive sides of
its opposite: Cooperation in the market. Markets need institutions, not only to maintain
competition, but also to regulate and structure markets, to inform potential transaction
partners, to set product quality standards thus reducing information problems for
customers and creating trust in the market, and to collectively engage in research,
innovation, information dissemination, and in organizing market competition as with
cooperative auction halls. Entrepreneurs do not only need to experience fear - as provided
by competition - but should also see sensible opportunities - as provided by regulatory
institutions, that can stabilize expectations.
Curiously enough, the EU does not particularly encourage competition between member
states. What is good for business and labor is apparently not so for countries. The ideal of
the integrated European market is a level playing ﬁeld, leveling or equalizing regulatory and
institutional conditions across European markets. Many EU regulations, directives, and
case law aim to reduce the ‘variety of capitalisms’ found in Europe. This variety, based both
on regulations and regulatory styles of implementation, is frowned upon. But why not let
the most eﬃcient institutional framework prove itself by ‘surfacing’ in competition
between such ‘varieties of capitalism’?
In short, if the EU ever wants to realize its goal of becoming the ‘most competitive region’
in the world, it might be wise to recognize the potential contribution of sectoral selfregulation,
self-organization, and self-production of collective goods like vocational
training, collective research, or mutual quality control. And in order to do so to mitigate the
gospel of unrestrictive competition and make more room for cooperation between
adversaries. Rather than ‘competition über alles’, the slogan might better be ‘cooperation
countenanced’.
112
Precisely this could be the meaning of a ‘poldermodel for the EU’: To balance competition
against cooperation between adversaries in the marketplace, as the Dutch have done
successfully for over six centuries. The resultant forms of self-regulation could form the
‘dykes’ that make transactions - involving trade, production, work, income, and investment
- in the polder, protected by those ‘regulation-dykes’, a more sensible enterprise. At the
very least, the EU could be more tolerant to such varieties of capitalism that depart from
the neoliberal ideal. By thus nurturing a diversity of capitalisms rather than striving for
convergence towards the neoliberal ideal, the EU would also be more true to its oﬃcial
motto ‘In Varietate Concordia’, meaning ‘Unity in Diversity’.
Such tolerance, recognition, or even stimulation of self-organization by civil society could
also produce eventually a more ‘Social Europe’. And not only in its provision of social
protection and social services - as safe dykes around the market - but also by thus
encouraging the participation of bottom-up formed organizations of civil society in the
creation, regulation, and implementation of social programs. After all, social and societal
organizations do form that ‘Social Europe’ themselves.
References
[1] See for the text of that inaugural lecture the recent English translation with an added
evaluation of the changes over the last 20 years: Frans van Waarden (2013) ‘(Will and) Did
the Netherlands breach its Dykes?’, in Annette Zimmer (ed.) Civil Societies Compared:
Germany and the Netherlands, Baden-Baden: Nomos Verlag, pp.219-246.
Frans van Waarden is Professor of Policy and Organization Studies, University College
and Department of Social Science, Utrecht University.
113
A Social Europe For Euroland
By Joël Decaillon
Social dialogue dates back to the birth of the European Coal and Steel Community (ECSC)
in 1951. It has gradually been incorporated into the treaties in a number of stages, most
notably the Social Protocol of the Maastricht Treaty. Social dialogue has been beset by two
major problems. The ﬁrst is the diversity of national trade union systems (trade union
confederations in some countries are not authorised to negotiate on behalf of their
members, for example). The second problem relates to the attitude of employer
associations, which are reluctant to negotiate at European level. Employers initially agreed
to take part in social dialogue in order to hamper, rather than further, Community
legislation.
The employers’ arguments can be summarised as follows:
a) The harmonisation of working conditions and industrial relations must be subject to the
demands and constraints of the market.
b) The principle of subsidiarity must be fully applied, meaning that the Commission must
not intervene in social issues if they can be dealt with at national level.
c) Social dialogue must not be a means of circumventing traditional legislative processes.
In particular, UNICE and now BUSINESSEUROPE have long been adamant that social
dialogue should not serve as the basis either for new Community legislation or for the
negotiation of collective agreements. Generally speaking, their objective is to anchor
industrial relations ‘at the bottom’ (where employer interests are well-represented) and ‘at
the top’ in a social dialogue that commits them as little as possible. This strategy can be
seen as reﬂecting the very low level of coordination among employer organisations, which
in turn is a means of opposing the establishment of centralised relations with European
trade unions, which ﬁnd it hard to get an employer representative to take accountability.
From the employers’ point of view, the unanimous vote system means that all they need to
do is lobby national governments eﬀectively to block all undesirable Community decisions.
Europe-wide trade-union mobilisation is most often assessed in the light of EU social
policies
The weakness of positive social integration is accompanied by negative forms of
integration, particularly those aimed at using regulations to establish transnational forms
of labour market governance, e.g. by promoting competitive cross-border posting (Laval,
Viking, Ruﬀert and Luxembourg rulings) on the grounds of supposed labour law
‘inﬂexibility’, or by attacking the pension and social security system. It can be argued that,
in this respect, the EU is striking at the heart of Europe’s productive systems, or at least
one of their vital components, namely industrial relations, a term encompassing workers’
status within companies, employer-worker relations and forms of ﬂexibility and
employment. In other words, what is at stake here is both wage relations and the
conditions for competitiveness. We therefore need to contemplate the possibility of a
Europeanisation of industrial relations through the standards and labour disputes to which
114
they give rise.
As for European framework agreements and action frameworks of more limited scope, we
can reasonably assume that the impact of these standards will diﬀer depending in
particular on:
a) national systems
b) national social legislation
c) the sectors involved
Convergence eﬀects are undoubtedly felt most in less protected sectors and the ‘poorest’
countries. EU legislation on parental leave, for instance, led to a massive catch-up eﬀect in
Ireland and Portugal, two countries where such measures were virtually non-existent.
Indeed, the justiﬁcation for framework agreements and action frameworks is based on the
principle of the non-regression clause. Yet the current crisis, with the role of the Troika, has
undermined this concept in virtually all southern and central European countries, where
the hierarchy of social standards and labour codes have been challenged. What value does
such a reference to non-regression have today?
Is it still a point of reference? If so, how can we enforce it?
On issues as fundamental as redistribution policies and income, there is no coordination
mechanism at a European or Eurozone level. European social policies are still very far from
displaying the features of a welfare state. At present, Europe is merely advocating a
general policy agenda that is much more neoliberal than social-democratic in nature, while
imposing budget criteria laid down in the Treaty.
Furthermore, the diﬃculties with mobilisation faced by the ETUC powerfully highlight the
conditions needed to enable the expression of solidarity between EU workers. A tentative
hypothesis can be derived in this context, namely that it is diﬃcult to separate the
expression of solidarity between workers from the feeling of sharing a ‘European identity’,
even if the EU is primarily considered a community of interests. However, numerous
studies agree that European identity remains problematic, to say the least, for the bulk of
European citizens. We can rightly argue that social conﬂict is a powerful driving force in
the forging of identity, but it is uncertain whether the European construction process will
have an impact similar to that of the creation and consolidation of nation states in the late
19th century. This is probably a handicap that European trade unions will have to face on a
long-term basis.
The ETUC has neither full supranational negotiating powers nor the ability to directly
mobilise workers. In the absence of a Europe-wide right to strike, organising a
simultaneous work stoppage in multiple EU member states is a huge challenge due to the
complexity and diversity of national legislation. From this perspective, the day of action
and strikes on 14 November 2012 was a very signiﬁcant step forward.
The state of trade unionism at national level is a major factor in explaining the situation in
which European trade unionism ﬁnds itself. Other reasons – internal to the organisation –
115
also need to be considered. Indeed, the ETUC can be seen as a vast mosaic, complex and
varied (a quality reinforced by geographical and ideological expansion), whose modus
operandi is constrained (and sometimes frustrated) by the side-eﬀects of historical
divisions, namely the persistence or survival of disagreements between diﬀerent social
democratic and Christian cultural traditions. Paradoxically, the ETUC’s strength lies in its
organic unity. Demanding the creation of a Social Union within the Eurozone would
undoubtedly result in a more eﬃcient political framework for negotiation and the
expression of protest, and would doubtless be a driving force for the advancement of social
rights throughout Europe.
Joël Decaillon is Vice-President of Lasaire and former Deputy General Secretary of the
ETUC.
116
Respect And Promote Wages And Collective Bargaining
By Ronald Janssen
‘I regard the growth of collective bargaining as essential. I approve minimum wages and
hours regulation. I was altogether on your side the other day, when you deprecated a policy
of general wage reductions as useless (…).’
These words were written 75 years ago. In today’s Europe, they are even more valid now
than they were then. Just like the United States in 1938 was digesting the decrease in
unemployment, the Eurozone economies are now expected to slowly emerge from their
‘double dip’. Just like the United States in the 1930s, the 2012/2013 recession of the
Eurozone was triggered by an untimely and exaggerated policy of ﬁscal contraction.
Back in 1938, President Franklin D. Roosevelt took the message John Maynard Keynes had
written to him in this letter of February 1938 to heart. A few months later, he signed a Fair
Labour Standards Act based on the idea that goods that were not produced under
‘standards of decency’ should not be allowed to ‘pollute the channels of interstate trade’.
This Act outlawed child labour, guaranteed a minimum wage, limited the working week to
40 hours and introduced overtime pay. Some years later, at the end of the Second World
War, a follow-up act was proposed aiming to strengthen the practice of collective
bargaining itself, but President Roosevelt passed away before this second act could be
approved.
From the Great Depression in the US to the Great Recession in the Europe of today
Where do we in Europe stand on this? For the past half year, the diﬀerent European
Council formations have been discussing how to build a so-called ‘genuine’ Economic and
Monetary Union, a discussion that was supposed to include the social dimension and social
dialogue as well.
One – optimistic – reading of this is to think that European leaders have realised that their
double strategy of ﬁscal austerity and wage deregulation they are pursuing will be be
disastrous, and that it is their genuine intention to change course. If so, this is a not-to-be
missed opportunity to draw up a list of demands on Social Europe.
Another – rather Machiavellian - interpretation is that European leaders have not really
changed their mind, but have become nervous because of the political backlash against ‘la
pensée unique’ in some member states. In this case, European leaders actually remain
convinced of the need to continue with internal wage decreases by getting rid of all
institutions that prevent wages from being cut. However, in an attempt to contain
widespread resistance against such policies, an invitation is extended to trade unions to
join the discussion table and actually assist in the implementation of these policies.
What are the facts? One consideration is that the social dimension in the draft conclusions
of this week’s European Council is minimal and limited to proposing ‘appropriate indicators’
and ‘better coordination of employment and social policies’. This does not amount to very
much.
117
Another fact is that the Council conclusions remain on the track of building even more new
instruments of European economic governance; the idea being to force individual member
states to undertake those types of reforms that weaken wage formation systems and allow
employers to cut wages easily.
Meanwhile, the race to the bottom on wages is ongoing. After wages have been squeezed
in Greece, Spain and Portugal, it is now France’s and Italy’s turn to put downward pressure
on wages .One – cynical- illustration here is that ﬁnancial markets, becoming aware of the
fact that the Eurozone dominos keep falling, have invented a new acronym. Markets are
now referring to France, Italy, Slovenia and Holland as the FISH countries. And it will surely
not end there: Sooner or later, with the export prospects of the remaining group of
countries (Germany, Austria and Finland) under continuing pressure from the collapse in
import demand in the rest of the Eurozone and with their relative unit wage costs
increasing because of the wage cuts elsewhere, the view that the latter countries (the
GAFs?) have lost competitiveness and need to follow the example set by Spain or Greece,
will gain traction. If so, GAF, FISH and GSP-countries will then compete for the
questionable title of who is able to cut wages the most.
A Genuine Social Dimension: Respect and promote collective bargaining on wages
If the social dimension of European Monetary Union is to be genuine, then one of its key
priorities should be to ensure that currency devaluations are not being replaced by wage
devaluations and that the race to the bottom on wages is prevented from taking place.
As Keynes indicated in the quote above, the practice of collective bargaining is key to this.
Robust collective bargaining systems with wide coverage and representative trade unions
and employer organisations allow economies to arrive at balanced outcomes. This is
particularly the case when collective bargaining is coordinated so that all bargaining parties
can take the situation of the macro economy at national as well as Eurozone level into
account. Moreover, one particular concern, often expressed by trade unions in CEE member
states, is that a minimum wage ﬂoor without strong collective bargaining practice is not
suﬃcient, since 60% of a low average wage is still a low wage.
A ﬁrst and urgent action is to stop the ongoing attacks on collective bargaining systems,
attacks that are systematically coming from the new system of European Economic
Governance (‘six-pack’, competitiveness contracts, ex ante coordination, Troika programs).
This can be done by giving the social dimension side of monetary union the power to set
clear limits on this system of European economic governance and its tendency to reduce
wages and collective bargaining systems. The almost unlimited power the masters of
ﬁnance (EU ﬁnance ministers council, DG ECFIN) and money (ECB and IMF) have managed
to obtain over national economic and social policy-making needs to be constrained. One
concrete example is the wage-safeguard clause in the regulation on excessive
macroeconomic imbalances, stating that the application of the regulation shall not infringe
on the freedom to bargain and the right to take action, also that national systems of wage
formation are to be fully respected. Similar wage-safeguard clauses should be developed
and inserted into all the other regulations, contracts and programs that make up this
system of economic governance.
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A second line of action is to complement these wage and collective bargaining safeguards
with a policy approach that supports and promotes the practice of collective bargaining.
This could take the form of introducing collective-bargaining-related clauses in public
procurement, or of explicitly imposing on employers when using posted workers to pay the
collectively bargained wage (and not the lower minimum wage). In line with the existing
European Social Dialogue, giving social partners the primacy over European social and
labour market regulation, one could also propose to establish a platform of coordination at
European level, where social partners meet to discuss and take action in an autonomous
way.
Finally, we insist on the fact that European Treaty does not need to be changed for the
Commission and the Council to undertake the policy directions described above. Indeed,
the Treaty contains a number of principles that allow and even oblige European policymakers
to respect and promote collective bargaining. There are the objectives to improve
and harmonize living and working conditions (TFEU article 151). There is the obligation of
the Union to promote social justice (EU article 3). There is the obligation of the Union to
facilitate dialogue between social partners, while respecting their autonomy as well as the
diversity of industrial relations systems. Finally, we have the horizontal social clause
forcing the Union to take, amongst others, the values of democracy and equality into
account when deﬁning and implementing its policies (article 9 TFEU). Collective bargaining
has clear links with all of these objectives and values.
Ronald Janssen is an economic adviser working in the trade union movement in
Brussels.
119
Evolution Of Social Pacts And Bargaining
Decentralisation
By Jacques Freyssinet
The social pacts were developed in the European Union at the beginning of the 1990s, on
the one hand to deal with the economic slow-down and the increase in unemployment
between 1993 and 1997, and on the other hand to meet the conditions of entry into the
euro zone in certain Member States. In several states, these pacts were signed at the
national level with unequal ambitions and for diﬀerent durations. The same kinds of
agreements were multiplied at the level of branches, territories or companies (sometimes
called 'pacts for employment and competitiveness'). In every instance, they consisted of an
exchange between the employers and the trade unions. The latter accepted the
concessions, mainly concerning salary costs and adjustments to working hours, in
exchange for commitments with regard to employment, sometimes the limitation of
insecure employment or more productive investment.
Governments encouraged the signing of these agreements, notably through the adoption
of active employment-policy measures, the ﬁght against poverty and social exclusion, and
the development of certain public services. The adoption of these pacts led to major
discussions within the trade union movement. Certain trade unions refused to support the
reduction of rights that had been acquired through previous struggles and negotiations.
However, the majority of organisations considered that, during a period of unfavourable
circumstances, it was necessary that the trade unions remained players in deﬁning
economic and social choices at both macroeconomic and microeconomic levels, and that
they would thus be able to limit the reductions involved and obtain some compensation.
Faced with the employers’ onslaught regarding bargaining decentralisation, this strategy
also permitted the construction of a link between the diﬀerent negotiating levels.
The new economic slow-down that occurred in 2001 (not as pronounced as the earlier one
and less long-lasting) was marked by an initial backsliding of the national social pacts in
favour of company negotiations, sometimes branch negotiations, mostly poorly
coordinated. The crisis which emerged in 2008 brutally reinforced this trend. Tripartite
compromises were still to be found in 2009 for policies aimed at relaunching the economy
and reducing the social costs of the recession. But, as from 2010, the priority given in each
country and at European level to restoring competitiveness and 'major balances' has led, at
State level, to favouring the reduction of deﬁcits and public debt and, at company level, to
the reduction of salary costs, ﬂexibility of employment and restoring proﬁt margins.
Today, the social pacts have practically disappeared at the national level. In the majority of
countries, branch negotiations have been weakened by various techniques which both
increase the margins for autonomous negotiations by companies and enable the latter to
depart from the provisions of branch agreements in certain domains. In countries less
aﬀected by the crisis, the trade unions have accepted this trend while endeavouring to
maintain a certain control over the deﬁnition of the domains and decentralisation methods.
In those countries experiencing the greatest diﬃculties, either subject to the injunctions of
the troika (e.g. Greece and Portugal) or to satisfy the 'recommendations' of the European
120
Commission (e.g. Spain and Italy), legislative reforms have imposed radical measures on the
decentralisation of collective bargaining.
The content of company agreements is strongly determined by threats of closure and/or
relocation of production units and/or mass redundancy. Pressure is particularly intense in
those multinational companies aiming to make their production units more competitive,
whether they are located within or outside the European Union.
The trade unions have been requested to make concessions in various domains, notably:
⁃ company salaries and social advantages for all employees and, sometimes, in an
accentuated manner for newly hired employees;
⁃ duration and ﬂexibility of working hours;
⁃ internal mobility measures or external retraining.
For the main part, the compensation oﬀered in return has consisted of guarantees to
maintain jobs, and not resorting to economic redundancies during a speciﬁed period. They
have sometimes been accompanied by commitments to make investments or pledges to
maintain or set up certain production lines (e.g. in the automobile industry, for certain
models). Finally, clauses have sometimes been introduced that provide for a partial
making-up for the sacriﬁces agreed should the company or establishment return to a
better economic situation.
In a context of the exacerbation of the necessity for companies to be competitive, the
systematic decentralisation of collective bargaining is leading to an endless race towards
local sacriﬁces. This can only be accelerated by the phase of quasi-stagnation or recession
underway in most of the countries of the European Union. This movement should be
reversed by adopting an economic relaunch policy, concerted and coordinated at EuropeanUnion
level, and by the reconstruction of a system of branch negotiations to combat the
logic of social dumping that is predominant today.
Jacques Freyssinet is Chairman of the Research Council of the Centre for Employment
Studies, Paris.
121
Wages And Competitiveness: The Need For Coordination
By Odile Chagny and Michel Husson
Wages are not the cause of the crisis, nor a tool to overcome it. But wage coordination is
needed as an essential element of a Social Europe.
Wages as a problem?
According to the mainstream analysis, excessive wage growth is the cause of imbalances
within the Euro area. Yet there was a fall in the wage share in most countries. In other
words, wages grew less than labour productivity and it is therefore not possible to speak of
a wage drift. However, unit labour costs have diverged between the ‘North’ and ‘South’ of
Europe. These two observations can be made consistent by decomposing the nominal unit
labour costs (in Euros) as the product of the GDP deﬂator by the real unit labour costs, the
latter being a proxy for the wage share.
1) The competitiveness lag between ‘North’ and ‘South’ is not the result of wage drifts but
is mainly the consequence of  diﬀerences in structural inﬂation. Its main determinants can
be synthesized as follows:
- inﬂation is higher in countries where growth is faster due to a catching-up process;
- inﬂation is much higher when the increase in wages in the sheltered sectors is close
to that of wages in the exposed sector (dissemination of productivity);
- inﬂation is higher in countries where there is a high degree of inequality that
generates more pronounced distributional conﬂicts. The construction of the ‘Euro
system’ has forgotten these structural determinations of inﬂation. It was based on
the wrong assumption that a single currency, a 2% inﬂation norm and ﬁscal
discipline would be suﬃcient to ensure the convergence of inﬂation rates across
countries.
2) The development of relative unit labour costs cannot explain the relative export
performances. As noted by the European Commission in the 2010 Competitiveness Report:
‘If there is a relation between unitary labour costs and export performance, it is weak and
of a secondary order of magnitude (…) and hence the former cannot be the cause of the
latter’.
For example, Austria and Germany on the one hand, and Greece and Spain on the other
hand, exhibited similar export performances during the ten years preceding the crisis,
despite wide divergences in unit labour costs trends in manufacturing (see graph).
122
Exports and unit labour costs in manufacturing
1997=100. Source: Ameco database
3) Unit labor cost growth was very diﬀerent in exposed and in sheltered sectors.
4) The trajectory of Germany diﬀers from that of other countries, with a steady decline in
real unit labour costs (up to the crisis). This trend deepened during the years preceding the
crisis, leading to a high decline in the wage share.
5) The competitive constraint has been bypassed by two ‘leak variables’. A large trade
deﬁcit could be sustained since there was no threat, by deﬁnition, for the value of the
national currency. The convergence in nominal interest rates led to a sharp decline in real
interest rates in the countries with higher inﬂation rates, favouring over-indebtedness and
real estate bubbles.
Wages as a solution?
Since the beginning of the crisis, there has hardly been any relationship between the
slowdown in wages and the evolution of the wage share. The conﬁgurations are multiple,
depending on national economic and institutional features, and also on the industrial
specialization patterns.
The future dynamics of wages in Europe will be determined by two objectives:
• restoring the proﬁt share in the countries where it fell;
• improving competitiveness as the only means to reduce external imbalances.
But this objective faces two contradictions:
• The ‘internal devaluations’ do not lead to a structural improvement in trade balances. The
improved trade balances of the South countries are mainly explained by a decline in
123
imports, with the partial exception of Spain.
• The recovery of the proﬁt share does not lead to a recovery of the investment rate
because demand remains depressed and the decline in wages will contribute to depress it
more.
The ﬁscal austerity-recession cycle reinforces these two contradictions. In the case of
France, a ‘heuristic’ scenario shows that  restoring the proﬁt share to its pre-crisis level
requires a near zero growth of real wages. This scenario is built on a relatively ‘optimistic’
hypothesis for the growth of productivity (1.4% per year) and assumes a constant dividend
share in added value. Other scenarios are of course possible but under the condition of
changing the income distribution between wage earners and ‘rentiers’.
Conclusions
1) The crisis has ultimately revealed a ﬂaw in the design of EMU (its ‘original sin’) with
its focus on nominal rather than real convergence, implicitly assuming that the
latter would be achieved in a somehow spontaneous manner through the own
virtues of implementing EMU and ﬁscal discipline.
2) Wages are not the cause of the crisis in the Eurozone. This crisis is primarily due to
the fact that structural diﬀerences between national economies especially in terms
of industrial specialization and inﬂation have been neglected. In retrospect, it
appears that it is rather the declining wage share that must be considered as one of
the main factors of this crisis.
3) Wage moderation is becoming the central axis of European policies and the
European institutions in charge are taking wage policies to an always greater level.
This orientation is not a coherent exit from the crisis and might instead lead to
policies that increase the recessionary risks, paradoxically forgetting that Europe is
an integrated economy that requires the coordination of economic policies.
4) Beyond the debt crisis, Europe is facing a crisis of wage coordination. This is why
the debate on an optimal wage rule should now be a priority. A European wage rule
should aim to combine three objectives: a fair distribution of productivity gains to
the wage-earners, the reduction of structural disparities of wages across sectors,
and maintaining the relative price competitiveness across countries.
Odile Chagny works for Groupe Alpha and Michel Husson is an economist at IRES
(Institut de Recherches Economiques et Sociales) in Paris.
124
The 2012 White Paper On Pensions – A Building Block For
EU Social Policy?
By Florian Blank
In 2012, the European Commission published the White Paper ‘An Agenda for Adequate,
Safe and Sustainable Pensions’ (COM(2012) 55 ﬁnal). The paper discusses challenges to
pension policies in the context of continuing demographic change across Europe (‘Unless
women and men, as they live longer, also stay longer in employment and save more for
their retirement, the adequacy of pensions cannot be guaranteed as the required increase
in expenditure would be unsustainable’, p. 2). It presents policy proposals and asserts in a
rather self-conscious way that it is ‘now time to act and to implement in a decisive manner
the actions put forward in this White Paper’ (p. 15).
What do these proposed actions entail? They include linking retirement age to increases in
life expectancy, restricting access to early retirement schemes, supporting longer working
lives (e.g. by means of developing employment opportunities for older workers), equalizing
the pensionable age between men and women, and the development of complementary
private retirement savings.
Rather than going into these proposals in depth, I would like to make some general
observations regarding this White Paper. These include the framing of social policy issues
as a matter of public ﬁnance, the avoidance of distributive issues, and the neglect of
diﬀerent interpretations of the social contract. In short, it seems that the question of
adequate beneﬁts of public pensions takes a back seat.
First, even though the paper to some extent deals with the sustainability of pension
systems in order to maintain an adequate level of beneﬁts, it frequently links public
pension expenditure to the development of public ﬁnance and economic competitiveness.
Even though there is undoubtedly a link between public revenues and public expenditures,
the perspective the White Paper takes towards social policy is disappointing. Instead of
deﬁning which beneﬁts are necessary, adequate or fair and then ﬁnding ways to ﬁnance
them, the White Paper seeks to adjust the public expenditure side. Rather than asking how
to raise revenues in order to reach speciﬁc social goals, it makes expenditures dependent
on revenues. More generally, rather than defending the public role in shaping society, it
often frames social policy matters in terms of being a burden to public ﬁnances, as well as
an obstacle to economic success. Hence, social policy seems to be treated not so much as
a matter of its own right, but subordinated to other policy ﬁelds.
From an EU point of view this is understandable as it ﬁts rather well into the limited
competencies of the EU regarding social protection. ‘Adequate, Safe and Sustainable
Pensions’ in Europe however, as the White Paper claims, cannot be reached by
subordinating social policy to other policy ﬁelds!
Second, and in line with the ﬁrst argument that the White Paper represents an approach to
social policy that is not driven by social policy concerns alone, there is one central aspect
of social policy missing in the whole paper: matters of distribution. The European
Commission does not seem to bother about inequality between old people or between
125
future pensioners, nor does it seem to take an interest in the ‘classical’ question of the
distribution of proﬁts between work and capital.
This latter point is of importance, especially when it comes to the proposed development
of complementary private retirement savings. While public pension schemes are often
ﬁnanced through taxes or through contributions from employers and employees (as
stipulated by public law), private schemes are mostly individualized schemes or
occupational schemes. Regarding occupational schemes the bargaining power of the social
partners often determines who bears the load of contributions. Hence, the proposal to
further develop private pensions may have greater distributive eﬀects than merely being a
shift from public to private pension expenditure.
The third and last point to be mentioned is the treatment (or rather lack thereof) of the
social or generational contract. Reading the White Paper it seems incomprehensible to the
European Commission that today’s and tomorrow’s contributors or tax-payers could be
willing to pay more for today’s and tomorrow’s pensioners, given they can trust that they
will be treated the same way and under the condition that there is a fair sharing of the
costs. Just to give one example from German pension policies: The oﬃcial retirement age
will rise during the next years from 65 to 67. This move was justiﬁed by the government by
referring to increasing life expectancy. It was met by ﬁerce opposition from trade unions.
What has been somewhat neglected in the public discourse is one detail of this measure:
Increasing the retirement age will reduce foreseen increases in pension insurance
contribution rates by 0.5 percentage points of gross wages, according to the governing
coalition’s 2006 draft bill. These 0.5 percentage points are shared between employers and
employees. It is merely a guess, but in the author’s opinion only few employees would
object to these foreseen increases in contributions of 0.25 percent points of their gross
wages to enable the older generation to exit from work two years earlier and to gain the
promise to be treated the same way – especially if this ‘burden’ is shared by employers and
employees.
How to summarize these arguments? The White Paper on Pension Policy is a very unusual
example of social policy. It is neither an attempt to realize some ideals of a fair and just
society by means of public involvement of social matters, nor does it take concepts such
as distributive justice seriously. It is a rather mechanistic exercise that tries to solve
perceived problems of public expenditure. Adequate, safe and sustainable pensions have to
be discussed from a social policy point of view, which includes possibilities of reformulating
the social contract between generations, between employers and employees and between
the rich and the poor.
Florian Blank is Senior Researcher in the ﬁeld of social policy at the Institute of
Economic and Social Research (WSI) at the Hans Böckler Stiftung.
126
Questions Of Age Discrimination In Decisions Of The
European Court Of Justice
By Nadine Zeibig
Europe has long been considered an international community based on solidarity and
peace; more recently the ﬁnancial and economic crisis as well as measures/decisions taken
by EU institutions have led to reduced conﬁdence in Europe, and in particular in a social
Europe. It can be read in newspapers and specialist publications that the EU Commission
and ECJ rulings are a licence for social dumping (Fritz Scharf 2008) or that ‘social Europe is
not taking place’ (Höpner 2008). ECJ rulings have also been the subject of substantial
criticism in the member states; examples include ‘Usurpation instead of delegation – How
the ECJ radicalises internal market integration and why political control is
required’ (Höpner 2012), ‘Is the ECJ weakening trade unions?’ (Vorbau 2010) and
‘Scandalous judgements that jeopardise peace in Europe’ (Sommer 2008). In particular, the
ECJ rulings in 2007 and 2008 in the cases Viking, Laval, Rüﬀert and Commission versus
Luxembourg clearly demonstrate that especially in the area of collective labour law the ECJ
gives priority to fundamental economic freedoms over fundamental social rights.
ECJ rulings on questions of age discrimination are also seen critically in Germany.
Numerous age-related statutory and collectively bargained provisions exist in Germany
that are linked to the establishment, design and termination of employment contracts.
These include, for example, age-related salaries, age-related periods of notice, special
protection against dismissal for older workers and graduated holiday entitlement according
to age. Several of these age-related rules, which for years were seen as socially acceptable
and proportionate, have been classiﬁed by the ECJ as inadmissible age discrimination since
the European antidiscrimination directives came into force, because the Directive
2000/78/EC and Art. 21 EU Charter of Fundamental Rights prohibit age discrimination.
ECJ rulings are inconsistent regarding questions of age discrimination, so that the
negotiation and creation of age-related provisions lack legal certainty in terms of assessing
the lawfulness of these rules (for details see Zeibig, WSI-Mitteilungen 5/2013). They are
also frequently less rigorous than for questions of discrimination on grounds other than
age. Unlike Art. 6 of Directive 2000/78/EC, which merely demands that objectives must be
legitimate to justify age-related unequal treatment, the ECJ generally only permits social
policy objectives, i.e. objectives from the realms of employment policy, labour market and
vocational training (e.g. to promote job creation or intergenerational equity) to be classed
as a legitimate aim within the meaning of Art. 6 of Directive (C-447/09; C-159/10;
C-388/07). In questions concerning the admissibility of automatic termination of
employment relationships on reaching the statutory retirement ages, the ECJ bases some
decisions about the issue of proportionality on whether the pension obtained was for an
appropriate amount (C-411/05). In other decisions the amount of pension to be paid was
irrelevant despite a disproportionately low pension (C-45/09), while in yet further rulings it
was suﬃcient for proportionality that a pension covered basic needs (C-141/11). The partial
lack of rigour by the ECJ on the justiﬁcation of unequal treatment based on age is shown
by the fact that on a number of occasions it ruled that the necessity and proportionality of
‘compulsory retirement regulations’ were already given if they were ‘not unreasonable’ with
respect to achieving the objectives pursued (C-45/09).
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The ECJ Mangold ruling relating to Germany (C-144/04) adopted in 2005 was also strongly
criticised. Here the ECJ ruled that Section 14 III of the Act on Part-Time Work and FixedTerm
Contracts (TzBfG) (old version), which provided for ﬁxed-term employment contracts
of up to ﬁve years without objective justiﬁcation for older workers, is contrary to European
law even though the deadline to transpose Directive 2000/78/EC, which regulates the ban
on discrimination, had not yet expired for Germany at that time. The ECJ elevated the
principle of the ban on age discrimination in this ruling to a general principle of EU law,
which then enabled it to declare that the German law was contravening European law.
Many believe that, in the process of interpreting the law, the ECJ unfairly usurped
legislative powers and was not entitled to do so; ultimately the Federal Constitutional
Court in Germany ruled that the ECJ had not overstepped its competencies (BVerfG 2 BvR
2661/06). The ECJ made a similar ruling in the Kücükdeveci case related to Germany, ruling
that Section 622 of the German Civil Code (BGB), which states that employment with a
company before the age of 25 shall not be taken into consideration when calculating
periods of notice, is incompatible with EU law. Whilst the obligations arising from the
Directive governing the ban on age discrimination applied to member states, the primary
legal principle of age discrimination also applied between private individuals, and therefore
also between employer and employee, according to the ECJ (C-555/07).
With reference to the question of possible age discrimination, the ECJ had to make a
decision, also regarding Germany, on the issue of the admissibility of automatic
termination of employment on workers reaching certain ages. For reasons of
intergenerational equity, the ECJ deems national agreements which provide for the
automatic ending of employment on reaching the statutory retirement age to
fundamentally comply with European law (C-159/10; C-45/09). It also viewed regulations
which provide for dismissal by the employer irrespective of the wish of the employee when
the latter reaches the statutory retirement age to be permissible (C-388/07; C-141/11). The
ECJ also deemed ﬁxing the maximum age for appointing civil servants in the ﬁre service to
just 30 years to be compatible with European law; the requirement of full physical ﬁtness
for intermediate technical occupations in the ﬁre service necessitated a restriction of this
kind (C-229/08). By contrast, the Federal Oﬃce of Public Health (BAG) viewed the
standard maximum age limit of 32 years and 364 days for the appointment of pilots trained
in other airlines to constitute a breach of the ban on age discrimination on the grounds of
inadmissible disadvantaging of older people (BAG 7 ABR 98/09).
The ECJ also had to rule on numerous other cases of possible age discrimination. For
example, the ECJ classiﬁed the salary regulations applied in Germany in the collective
agreement for salaried federal employees (BAT) up to the end of 2005 to be inadmissible
age discrimination against younger workers, because the amount of salaries was primarily
based on age and not suﬃciently on professional experience (C-297/10). In a Danish
referral procedure, regulations that exclude workers close to retirement age from
redundancy payments irrespective of their wish to continue working were classiﬁed by the
ECJ as inadmissible discrimination against older workers (C-499/08).
These reports indicate the scope of ECJ rulings. Fundamental critics of ECJ jurisdiction take
the view that the only way to escape the inﬂuence of ECJ jurisdiction is not to follow the
ECJ rulings (Scharpf 2008). According to the opinion represented here, the impact of ECJ
jurisdiction is ambivalent. In many areas, especially concerning individual labour law, it
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strengthens workers’ (protection) rights, thereby making a substantial contribution to a
social Europe; however in other areas, especially in the area of collective labour law, it
sometimes produces dubious rulings that are not in the interests of workers and the parties
to collective agreements. Not following the ECJ or giving up and leaving the EU cannot be
the solution, despite some problematic rulings. Rather, the aim must be to campaign for a
social Europe. In future it will also be essential for the legitimisation of the ECJ that it does
not engage in the inadmissible further development of law, does not prioritise fundamental
economic freedoms over fundamental social rights, shows due regard for national
speciﬁcities, uses objective grounds as a basis for restricting workers’ rights and adequately
considers existing discretionary powers of the collective bargaining parties when
establishing collective labour agreements. Otherwise a stop must be put to it.
Nadine Zeibig is Head of Unit Labour and Social Law at the Institute of Economic and
Social Research of the Hans Böckler Stiftung in Düsseldorf.
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Social Democracy: Trap, Utopia Or New Horizon For
Europe?
By Pierre Héritier
The social dimension of Europe is not restricted to social protection: what will be the place
of labour and of workers in an economy dominated by market forces? What new
foundation of the relations between capital and labour can we consider? Social democracy
is currently one of the favourite topics of seminars, colloquiums and political speeches. Is
this concept likely to give an argument to those who create prosperity with their knowhow,
their creative energy, their engagement or just their work, but who suﬀer from the
pressure of the labour market which is generally unfavourable for workers, or even from
competition between territories, countries and continents? Or is this a smokescreen
instead, or a device to reassure those who often need to make concessions in order to
avert a shipwreck? Both interpretations are possible at ﬁrst sight. Why not seize the
opportunity to give some sense and content to this generic term, which in the minds of
European citizens evokes multiple types of representation, action and strategic
conﬁguration. As far as I am concerned, I think that its implementation requires answers at
diﬀerent levels and not only at company level.
A representation of salaried workers in strategic decision-making places of major
customers, to say it simply, in boards of directors of big companies, only makes sense if we
know the general context, the limits and the scope of that measure. The eﬃciency of a
reform in countries which do not know co-management would be multiplied by an
enlargement of the area of intervention of the ‘labour factor’, as is the case in Germany.
First and foremost, the role of trade unions should be recognized and reinforced in their
basic activity. The ability to negotiate well on critical issues is certainly the basis of a
‘social democracy’. Extending the power of the representative bodies of workers – whether
it be workers’ councils or committees – would also be part of this new balance of power.
We know the German example in which co-management is not restricted to the existence
of salaried board members.[1] We do not know so well the powers of Dutch boards of
directors which have some kind of ‘veto right beforehand’, which of course comes with a
responsibility for employees’ representatives to comply with the rule of secrecy. At regional
level (regions, districts, Länder), we should reﬂect on the place and the role that social
partners should have, and sometimes already have. It is absolutely necessary that salaried
workers are represented in places where production processes and tomorrow’s economy
are being decided, so that they can express their opinion and put forward their proposals.
As a matter of fact, companies themselves depend on market conditions. What use would
any bargaining or decision-making power in a company be if those who are supposed to use
them are left to ﬁght defensive struggles to manage one social plan after another or
provide support in the cases of redundancy plans or site closures? It goes without saying
that the union’s action is pragmatic, and that the role of the workers’ representatives
consists very much of ﬁnding the best compromise in any given situation or framework
that is imposed on them. But aren’t they supposed to do something about that ‘framework’
as well? Historically, during each phase of any change in competition, there has always
been a struggle between those who want to regulate the terms of the competition and
those who want to ‘deregulate’. How can we cope with this? How can we reinvent, at
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least at regional level, like in the Eurozone, what has been done at national level in the
Rhineland model? How can we implement cooperative policies that create employment
and solidarity in the whole of the Eurozone ?
All this implies strategic, even ideological questions. This new framework we should invent
is part of a ‘new New Deal’, of a social compromise between trade unions and
entrepreneurial company leaders. When the latter innovate, when they are open and locally
based, they may be described as ‘company leaders who have a carnal relationship with
their company’.[2] Finally, to make a social democracy come true, ‘changing labour’ is
absolutely necessary: the worker should act for himself and the economy. This implies he
cannot be the appendage of a machine, nor the element of a procedure, or suﬀer any other
form of oppression. The same goes for trade unionism, which should rethink its system of
relations with salaried workers.
In fact, the emancipation of the worker, whose know-how has been conﬁscated, is the
foundation of a true social democracy and of any political, social and union citizenship,[3]
but also, I am convinced, a formidable tool of creativity and progress. The joy of work –
replacing the suﬀering at work – would allow an incredible progress in all ﬁelds. We need a
new social and economic deal moving towards a European social and economic model that
is innovating with a human face. To make democracy a tool for today and a perspective for
tomorrow.
It’s the best way, but it will take time to achieve.
References
[1] Cf. : The bargaining power of German trade unions and the important role of workers’
councils and company councils.
[2] The expression is from Alain Mérieux, one of the major French company leaders in the
chemical industry.
[3] Read ‘La cité du travail’ by Bruno Trentin, former secretary general of CGIL.
Pierre Héritier is founder of Lasaire and a former union oﬃcial at the French
Democratic Confederation of Labour (CFDT).
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Adapting European Governance To Meet The Social
Imperative
By Christophe Degryse
The Euro crisis and the remedies the European institutions and member states have been
attempting to administer for nearly four years have been subject to repeated scrutiny, in
terms of both the diagnosis and the policies implemented. However, has suﬃcient
consideration been given to the institutional questions this crisis raises, particularly with
regard to economic and social policy? In other words: does the deterioration of the
economic and social situation, seen to varying degrees from one country to the next, not
have something to do with the institutional design of European governance per se?
To provide a very schematic view, this design is embodied in socio-economic terms by a
European Central Bank that has assigned itself the sole mission of achieving a target
inﬂation rate of just below 2% (a target it failed, incidentally, to meet in the spring of
2013); a European Commission that polices public ﬁnances and watches out for
macroeconomic imbalances; and member states to whom it falls to ensure economic
growth and tackle unemployment. This division of responsibilities is regularly and explicitly
aﬃrmed by both the ECB and the Commission: it is up to the member states to revive
growth and combat unemployment, while the ECB guarantees price stability and the
Commission macroeconomic stability.
This raises the initial question of whether this division of responsibilities is true to the spirit
and the letter of the European treaties. The answer is that the ECB and the Commission
both interpret their role in extremely narrow terms. Indeed, according to the Treaty,
without prejudice to the objective of maintaining price stability, the ECB is required, inter
alia, to play a part in achieving full employment and social progress, combating social
exclusion and promoting social justice and protection, economic, social and territorial
cohesion, and solidarity among member states, which is no small task. However, as Paul
De Grauwe has pointed out, these objectives have been considered of secondary
importance by the ECB, which maintains, on the basis of a theory of debatable validity,
that their fulﬁlment is automatically assured by price stability.
As for the European Commission, today it acts as watchdog not only over national public
ﬁnances, but also in respect of all macroeconomic imbalances (property market bubbles,
deepening trade deﬁcits, rising unit labour costs, etc.). Under the ‘two-pack’, it is required
to inspect national budgets before they are adopted. This strengthening of its powers of
budgetary surveillance is based on the – also largely controversial – theory that the Euro
crisis is the result of a public ﬁnance crisis. With regard to the issues of growth and
employment, the Commission is shifting responsibility onto governments, forgetting a
little hastily that the treaties confer on it the task of helping to improve living and working
conditions for European citizens and to promote social dialogue.
After all, in what position do the Eurozone member states ﬁnd themselves, those member
states which appear to have sole responsibility for growth and employment? First of all, in
choosing to join the Euro, they have relinquished control over monetary policy, which is
now in the hands of the most independent central bank in the world. Next, by blindly
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approving the inﬂexible rules of the Stability and Growth Pact and Fiscal Compact, they
have ensured that their budgetary policies are now so restricted that they serve not growth
and employment, but crisis and unemployment. Moreover, by refusing to equip the EU, and
the Eurozone, with a budget capable of absorbing asymmetric shocks, they have deprived
themselves of the instruments of adjustment that are a usual feature of monetary unions.
Finally, by neglecting to appoint a European economic government – providing close
coordination of investment, ﬁscal, industrial, research and innovation and social policies –
they have denied themselves a European strategy for growth and employment.
In the absence of all these instruments, the Eurozone governments have placed
themselves in the position of having to ﬁght, each for themselves, to attract a degree of
investment and business. And, with that goal in mind, the ECB and Commission
condescend to oﬀer them advice and recommendations. The latter relate, in particular, to
social welfare systems, the functioning of labour markets and wage-setting systems. At
this stage, it is speciﬁc ideological choices that are being proposed: the reform of wage
indexation systems and of employment protection legislation, the suppression of
‘obstacles’ to recruitment and the linking of the statutory retirement age with life
expectancy, etc. The power of these recommendations resides in the fact that there is –
without doubt – no longer any alternative, in the absence of the aforementioned
instruments. These, then, are the latest measures (DG ECFIN has others in reserve)
designed to bring growth and jobs.
In summary, unelected institutions – the ECB and the Commission – are shrugging oﬀ
their responsibilities in terms of growth and employment, passing them on to national
governments, which are accountable to the electorate on this issue, in spite of the fact
that they have been stripped, individually, of control over monetary policy and of budgetary
powers and, collectively, of a European budget worthy of the name, as well as of a
European economic, industrial and innovation strategy. The failure to compensate for the
removal of national powers by increasing Europe’s capacity for action means that they are
left no choice but to resort to social and ﬁscal competition in order to attract investment,
business and jobs.
This sort of imbalance in the division of responsibilities condemns the Eurozone member
states to the permanent structural erosion of social rights. Little by little, instead of
strengthening the European project, the Euro will drain it of its substance, until any vestige
of public support has been lost.
If we accept this analysis, it becomes clear that, beyond the ideological debate, it is the
institutional architecture that needs to be altered, to reﬂect a more eﬃcient division of
responsibilities between the institutions and member states, based on the EU’s founding
values of integration, shared resources and convergence. This readjustment would, in
particular, require the ECB and the Commission to share and assume alongside the member
states collective political responsibility for economic development, convergence, for
tackling unemployment and social degradation. Degradation should be combated through a
monetary policy designed to boost growth and employment, policies of recovery and
investment, industrial strategies, ﬁscal policy, etc. In all these respects, it would mean
establishing a level playing ﬁeld beneﬁting from social provisions (minimum wages, social
security and the observance and championing of collective bargaining, labour law and basic
social rights).
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An institutional readjustment of this kind would require social objectives to become fully
part of European governance in the same binding fashion as the objectives of budgetary
consolidation. That, in turn, means close monitoring of developments in the social
situation in the member states (e.g. unemployment, household income, poverty, the
working poor), as well as the introduction of indicators and thresholds that serve as social
standards (minimum income, minimum wages, access to social services, etc.), beyond
which warning mechanisms would be activated. For instance, German abattoirs should not
be able to employ Bulgarian workers as slave labour. Furthermore, European adjustment
mechanisms to address excessive social imbalances should be set up, with a budget that
could be funded from a percentage of corporation tax. This level of integration would, as
Ronald Janssen has pointed out, also require the introduction of a review mechanism for
reforms adopted by the Eurozone member states that have the purpose or eﬀect of
intensifying the various forms of social or ﬁscal competition.
The political question is whether the European project is an internal area shaped by Euroglobalisation
that adapts to suit the market or a common area of economic development
and convergence characterised by ﬁnancial, budgetary, ﬁscal and social integration? It is
the answer to this political question that must determine the institutional architecture of
the Euro.
Christophe Degryse is a Researcher at the European Trade Union Institute (ETUI).
134
Is Job Creation Useful In Fighting Poverty And Social
Exclusion?
By Eric Seils
European policy-makers believe that job creation is not only a goal in itself, but should also
be regarded as a strategy to lift people out of poverty and to strengthen social cohesion.
Increasing employment was already an important objective of the so-called Lisbon Process.
When the Lisbon Strategy failed in 2010, it was replaced by the ‘Europe 2020 Strategy’
which aims at turning the EU into a ‘smart, sustainable and inclusive economy’ (European
Commission 2010).
According to the Commission, inclusiveness implies a ‘strong emphasis on job creation and
poverty’ reduction. The Europe 2020 strategy shall raise the employment level of the 20 –
64 year-olds to 75 percent and shall reduce the number of people living in, or at risk of,
poverty or social exclusion by 20 million people. The latter target is measured by the socalled
AROPE-indicator. It is deﬁned as the sum of people living in at least one of the
following conditions: severe material deprivation, very low work-intensity households or
below the poverty line. In passing, note some interesting features of this indicator: Firstly,
it is deﬁned in absolute numbers. Thus, demographic change will likely help the EU to
achieve its target. Secondly, if governments restrict unemployment beneﬁt, beneﬁciaries
may be forced to take up low-paid employment. This almost certainly reduces the number
of people living in households with low work-intensity. At the same time, this may increase
the number of people below the poverty line or in severe material deprivation leaving the
overall AROPE-indicator unchanged (European Commission 2012, p. 48).
Is job creation really a strategy to overcome poverty and to promote social exclusion? In its
most recent report on ‘Employment and Social Developments in Europe’, the European
Commission claims that there is a strong link between poverty and social exclusion, on the
one hand, and the labour market situation on the other (European Commission 2012, p.
149). It presents evidence that countries with high employment rates display lower rates of
poverty or exclusion (AROPE). Likewise it shows that changes in the employment rate are
negatively correlated with changes in AROPE-rates and changes in the share of people
living in households with low work-intensity.
What can be said about this view? Given that wages are the main source of most people’s
income it should not come as a surprise that the lack of income from employment is
associated with poverty. The negative association between changes in employment and
changes in the share of low work-intensity seems even more trivial. But does this really
imply that we can alleviate all social problems by raising levels of employment? I think
there are good reasons to doubt such a view:
1) The negative cross-sectional association between AROPE-rates and employment rates
may be a spurious correlation. The AROPE-indicator is a summary index that includes three
diﬀerent items which may be determined by other variables than employment levels. For
example, it can easily be shown that the cross-country diﬀerences in share of people living
in severe material deprivation cannot be explained with reference to employment levels,
but by diﬀerences in economic development. At the same time, employment rates are on
135
average higher than in poorer countries. More interestingly, there is no signiﬁcant bivariate
association between employment levels and the prevalence of households with low work-
intensity.
2) Raising employment does not necessarily result in falling rates of poverty or social
exclusion. Since 2004 Germany has experienced rising levels of employment and increasing
numbers of (working) poor. At the same time, the share of people living in material
deprivation or jobless households has remained roughly stable. What Europe therefore
needs is not simply more employment but jobs that earn a living wage.
3) Expanding employment is not really a strategy at all. The failure of the so-called Lisbon
agenda has shown that European governments are unable to increase the number of jobs
at will. Today, the ﬁnancial crisis drives up unemployment in the Eurozone, making it
virtually impossible for many governments to reach their self-deﬁned employment targets.
If governments exercise little or no control over the labour market, they cannot use it as a
means to combat poverty.
What is the upshot from all this? Increasing employment may be a good thing, however it
is no viable strategy for reducing poverty or social exclusion in Europe.
References
European Commission, ‘EUROPE 2020. A Strategy for Smart, Sustainable and Inclusive
Growth,’ (European Commission, Brussels, 2010).
European Commission, ‘Employment and Social Developments in Europe
2012,’ (Publications Oﬃce of the European Union, Luxembourg, 2012).
Eric Seils is a Researcher at the Institute of Economic and Social Research of the Hans
Böckler Stiftung, Germany.
136
ESM: European Social Model Or European Stability
Mechanism – Is There A Crash?
By Bela Galgoczi
The acronym ‘ESM’ stood for a long time for a set of common European social values, goals,
illusions even, to express a certain common identity for the EU especially when compared
to other regions of the world, notably the US. For a few years now, ESM has been the
leading acronym in the media for the Eurozone’s main crisis management tool, the
European Stability Mechanism. Just a coincidence, one may say, but there is a deeper layer
behind this shift of focus. Mario Draghi even declared the European Social Model as dead
and indeed it has an uncertain future given the current state of the Eurozone and the
entire EU.
Beyond the coincidence with the acronyms, there is a fundamental clash between Europe’s
social ambitions and the way adjustment is under way. The conditionality of any bailout or
support from the Stability Mechanism is geared clearly in one direction: austerity, cost
cutting and undermining of social standards, this all means ‘rebalancing’ downward. Greece
has lost 25% of its GDP during this process up till now.
The idea of the European Social Model has always taken the back seat in the process of
European integration. A raft of political science literature (Streeck, W 2000; Scharpf, F
2002; Martin, A and Ross, G 2006) argued that the single market project has always been
the hard core of integration backed by hard law and its ﬂagship project the EMU. Although
the EMU is based an incomprehensive architecture as we bitterly learned during the crisis,
the social dimension meanwhile has only been based on declarations, wish lists and the
Open Method of Coordination. It was just based on ad hoc ideas, e.g. some sort of a tax
harmonisation, or corridors of budget redistribution ratios, although the latter should not
be seen as a totally unrealistic idea. While the EMU has clearly represented a new stage of
integration and much of the underlying regulatory framework was based on ﬁscal rules (not
particularly satisfactory rules as we again learned during the recent crisis), it is hard to
imagine seriously that one can have a common ﬁscal platform among member states that
have public expenditure ratios in the range between 34% and 57% of GDP. And indeed,
some elements of social spending are carefully scrutinised during the rebalancing act:
pension systems and social spending are under huge pressure, but again the direction is
downward.
Besides debt consolidation and ﬁscal austerity, the other main dimension of crisis
management focuses on the adjustment in the divergence of competitive positions among
EMU members. The therapy here is also biased in one direction: downwards. On the one
hand, adjustment policies are asymmetrical with the whole burden of correction put on
deﬁcit countries, while surplus countries are not seriously involved. On the other hand, the
correction in the competitiveness gap (gap in unit labour cost developments) is forced out
through the price channel (especially through a cut in labour costs, i.e. wages) while nonprice
aspects of competitiveness (economic and export structure, productivity, quality) are
ignored. This again results in a downward bias.
All this leads to asymmetric and downward adjustment, where mostly peripheral, lower
137
income countries are aﬀected. The result of this crisis management strategy is a
persistently growing gap between surplus and deﬁcit countries that manifests itself in a
diverging Europe (a detailed analysis is given in ETUC/ETUI 2013).
Where has the big European dream about convergence gone?
From convergence to divergence – what is the EU heading for?
Beside the historical founding principle of the EU as a peace-keeping project, it was the
prospect of convergence that gave a true substance to the European idea for millions of
people. This also seemed to work for several decades. Now that Europe’s ﬂagship project,
the single currency, is in trouble, responding to the external shock posed by the ﬁnancial
crisis and adjustment therapy, the member states are forced into a diverging downward
spiral. Thus this essential and fundamental mission seems to be evaporating.
The promise of income convergence – between poorer and richer member states and
among the poorer and richer regions within them – has been an underpinning feature of
European integration from the outset. In this respect, a glance back over ﬁfty years of EU
history up to the crisis provides conﬁrmation of an unprecedented feat. As stated in a
recent World Bank (2012) report: ‘The European convergence in consumption levels in the
last four decades is unmatched. Except for East Asia, the rest of the world has seen little or
no convergence.’ Indeed, already by the early 1990s the incomes of more than one hundred
million people in the poor south—Greece, southern Italy, Portugal, and Spain—had grown
and moved closer to those of the more prosperous areas of Europe. Similarly, between the
late 1990s and the mid-2000s, the income levels of one hundred million people in Central
Eastern Europe were dynamically converging towards levels seen in the richer part of the
continent. Figure 1 oﬀers a historical glance at the economic divide in Europe, showing that
Central Eastern European countries still have substantially lower per capita GDP levels (at
PPS) than the EU27 average. The data also indicate milestones in the last ﬁfteen years,
showing the varying convergence dynamic of individual countries in the diﬀerent periods.
Figure 1: Income gaps and convergence: GDP/capita as percentage of EU27 total for selected
years and countries (based on market prices at PPS)
Most of the convergence took place between 2000 and 2007, after which it lost
138
momentum or even went into reverse. It is apparent also from the graph that Greece and
Portugal stand out as having displayed no convergence whatsoever over the whole ﬁfteenyear
period. The year 2008, with the onset of crisis, marked a halt in these processes of
convergence achieved via the catching up of the less prosperous countries and regions,
placing a question mark over the continuing sustainability of some of the progress achieved
in the earlier phases of European integration.
Although 2008 was a common point of fracture for both East and South, the experience of
these two regions was signiﬁcantly diﬀerent. While convergence ground to a deﬁnite
standstill in Southern Europe, in the Central Eastern European (CEE) countries the much
stronger impetus towards convergence came to a more abrupt halt which, in some cases,
nonetheless proved no more than temporary. Indeed, in most CEE countries – and
particularly those with the lowest per capita GDP levels – a rapid process of catching up
had been observable in the years before the crisis. In Southern Europe, however, the picture
had been more mixed, even during the boom period, with Spain having achieved signiﬁcant
convergence, while Greece and Portugal had tended to stagnate. Latvia and Lithuania, the
two countries which suﬀered the most dramatic falls in output in 2009 (17.7% and 14.8%
respectively), nonetheless showed still impressive overall convergence for the 1995-2011
period as a whole, with per capita GDP levels relative to the EU27 rising from 31% to 59%
for Latvia and from 35% to 66% for Lithuania.
The picture for Southern Europe is much bleaker: between 1995 and 2011 the region
showed no convergence – in the case of Greece and Portugal – or, in Spain, only limited
convergence to EU27 levels. Thus, while Spain still achieved some convergence over these
16 years, from 91% to 98%, Portugal saw none over the entire period (77% in 1995 and the
same in 2011), while Greece actually experienced a loss of convergence (from 80% in 1995
to 77% in 2011). All three countries suﬀered signiﬁcant setbacks in the wake of the crisis,
most particularly Greece with a 14%-point drop in its relative income level between 2008
and 2011.
What matters is economic structure, not costs
The diﬀerent patterns in the catching-up process in the East and the South are the result
of a number of underlying structural diﬀerences among European countries that have
aﬀected their respective paths in economic integration. We will take a look at four
important drivers of economic integration that played a key role in convergence: exports;
the balance-of-payments situation and its structure; foreign direct investment (FDI); and
the role of credit ﬂows.
Currently, the most pronounced division in Europe is between ‘surplus’ and ‘deﬁcit’
countries, as determined by their balance-of-payments position within the Euro Area, with
the core ‘surplus countries’ clustered around Germany and the ‘deﬁcit’ ones around the
Mediterranean. A similar distinction applies beyond the Euro Area, with a number of CEE
countries belonging to the ‘surplus’ core (e.g. the Czech Republic and Poland) and the more
peripheral CEE crisis-ridden countries (e.g. the Baltic states) falling into the ‘deﬁcit’ group.
This division between surplus and deﬁcit countries thus cuts across the historical divisions
between the East and the West of the continent.
The Czech Republic, Hungary and Slovakia had broadly balanced trade even before the
139
crisis, whereas Latvia, Bulgaria, Greece, Romania and Portugal were, during this period,
used to having persistent and double-digit trade deﬁcits.
The key distinction to be considered here is the one we see between countries that
experienced credit bubbles in terms of huge credit expansion that was followed by credit
crunch and recession, and those with a more balanced development. The credit expansion
underpinned the current-account deﬁcits in the South and in the deﬁcit countries in the
East. With the credit crunch and the accumulated high debt, short-term growth and
convergence eﬀects achieved through credit expansion evaporated all of a sudden and
turned into their reverse.
When looking at key features of ‘deﬁcit’ and ‘surplus’ countries on the periphery, we see
important structural diﬀerences in their economies. While ‘surplus’ countries in the East
had large-scale foreign direct investment into their productive sectors and have a high
export share of their GDP, this is not the case for the deﬁcit countries in the South. For
illustration, Figure 2 shows export shares for this group of countries.
140
Figure 2: Exports of goods and services (% GDP)
Moreover, some ﬁgures also indicate that even if wage and unit labour cost developments
showed a high grade of divergence in the decade up to the crisis when the competitive
positions of periphery countries (both in the East and the South) deteriorated substantially
in comparison to Germany, there is no fundamental cost competitiveness problem if we
look at the levels of productivity and wage costs in their tradable (manufacturing) sector.
Figure 3 shows that based on the manufacturing sector, peripheral countries would not
have a cost competitiveness problem with Germany. The problem some have is more of
structural nature: the share of manufacturing and exports in general is very low in their
economies.
Figure 3: Wage-adjusted productivity in manufacturing in selected countries, 2009
The case of the two peripheries in Europe demonstrates that the competitiveness problem
of some of the Mediterranean countries is much more due to deeply rooted structural
problems than just price and costs levels. Since the therapy is focused almost exclusively
on cost and wage cuts, not addressing their structural problems, not only is their previous
141
achievements in convergence wiped out, but their future perspectives are also put at
stake.
Although tackling these structural problems through cost adjustment (wage and spending
cuts) can deliver temporary results in cost competitiveness at the price of a dramatic
increase in poverty and unemployment, in the end these inevitable ‘side eﬀects’ also
jeopardize the success of the entire adjustment. Cost adjustment is simply not an
adequate way of addressing the longer-term structural problems (such as the share of
manufacturing in the whole economy, export shares, qualitative composition of exports,
place in the international division of labour, etc.)
The problem, to put it bluntly, was not that consumers in the surplus countries had been
buying less olive oil and port wine due to rising unit labour costs in Greece or Portugal. In
other words, the cure chosen to date is one that tackles the symptoms but not the causes
of the problem.
Even if part of the achieved convergence before the crisis can be deemed as not
sustainable, this also points to a policy failure. European institutions in a series of reports
and communications were proud to give account of growing employment and income
convergence in many of the peripheral countries up to 2007. This progress was also seen as
partial achievement of the Lisbon targets. Even if much of this was not based on real
performance, it is also a strong criticism of current EU policies. European leaders cannot
just shrug their shoulders and say, sorry, what we believed and welcomed as an
achievement turned out to be partly false. We cannot say it was just an illusion and wipe it
out. It is a matter of fact that much of the unsustainable expansion was due to a huge
capital-allocation problem resulting also from irresponsible ﬁnances and lending practices
(especially through banks in surplus countries). Now ordinary working people are paying the
price and those who blew the bubble are safeguarded without any future consequences.
Conclusions
The crisis has highlighted the diversity of economic models and of their sustainability
during hard times and external shocks in the European ‘peripheries’. Convergence of
income levels between poorer regions in the South and the East towards the level of rich
countries in the centre has been one of the big European objectives and seemed to
function for several decades. This also strongly contributed to the legitimacy and the
public support of the European Union. Convergence, although mostly driven by economic
processes, had also been a fundamental factor to maintain a European Social Model amid
diversity at member-state level.
While divergence in the economic catching-up processes, particularly after 2008, showed
an East-South division, the multiple fault lines characterizing the diversity of political and
economic structures can be shown to cut across historical and geographic country groups.
The credit crunch of 2008 highlighted the division between the countries with current
account surpluses, the European ‘core’ around Germany including also the Central Eastern
European exporters, and the ‘deﬁcit’ countries, including Mediterranean countries and a
number of countries in Central Eastern Europe. Given the lack of eﬀective adjustment
mechanisms in the Euro Area, the surplus-deﬁcit divide quickly turned into the diﬃcult
creditor-debtor relationship. The ‘debtor’ countries then experienced a prolonged agony of
142
negotiated and imposed adjustments in the context of crisis-driven Euro-area institutionbuilding.
Given the unequal power relations between debtors and creditors, the concerns of
the latter inevitably came to dominate the nature of the adjustment eﬀorts made.
What we clearly see now is that if convergence is driven by economic processes only, the
result will not be enduring and balanced. More political and institutional integration is
needed, the single market alone will not do the job. The paradox and most worrying
phenomenon is that political integration in the form of the economic governance that
evolves through the current crisis management practice of the EU is doing precisely the
opposite: it drives diversity further up to the point where it may tear the Eurozone and the
EU apart.
References
ETUC/ETUI, ‘Benchmarking Working Europe – 2013,’ (ETUI, Brussels, 2013).
Andrew Martin and George Ross, 'Introduction: EMU and the European Social Model,’ in
Andrew Martin and George Ross (eds.), Euros and Europeans. Monetary Integration and the
European Social Model (Cambridge: Cambridge University Press, 2004).
Fritz Scharpf, 'The European Social Model: Coping with the Challenges of Diversity,’ Journal
of Common Market Studies (vol. 40, no. 4, 2002), p. 665.
Wolfgang Streeck, ‘Competitive Solidarity: Rethinking the' European Social Model,’ in Karl
Hinrichs, Claus Oﬀe, Herbert Kitschelt, Helmut Wiesenthal (eds) Kontingenz und Krise,
(Frankfurt: Campus, 2000).
World Bank, ‘EU11 Regular Economic report: Coping with External Headwinds,’ (World Bank
Oﬃce, Zagreb, 2012)
Bela Galgoczi is Senior Researcher at the European Trade Union Institute (ETUI) in
Brussels.
143
A Social Dimension For A Changing Europe: Drifting From
The Primary Dividing-Up Of Revenue, Inequalities And
Crisis
By Joël Maurice
The ﬁnancial crisis that burst onto the scene on 15 September 2008 (the bankruptcy of
Lehman Brothers) was preceded by increased inequalities, conﬁrmed by several oﬃcial
sources. Thus[1], the ILO,[2] in its report ‘World of Work, Report 2008: Income Inequalities
in an Age of Financial Globalization’ covering 73 countries, observed that between 1990
and 2005, the share of salaries in the added value had decreased in 51 countries, and
notably by 9 points on average in the advanced economies; and the OECD in its report
‘Growth and Inequalities, Distribution of Revenues and Poverty in OECD Countries (Paris
2008)’, stated that, during 1998-2008, the inequalities in revenue increased in 17 of the 20
countries analysed, and concluded that ‘the only sustainable way of reducing the
inequalities is to bring to an end the underlying trend of a widening gap regarding salaries
and capital revenues.’
The inequalities aﬀected both components of added value. Regarding salaries, in the
majority of countries, the gap widened in favour of higher salaries (notably managers’
salaries and the salaries of hi-tech specialists) to the detriment of insecure jobs (limited
term contracts, temporary jobs, forced part-time work, ‘mini-jobs’, etc.). With regard to
proﬁts, the lion’s share went to shareholders, to the detriment of self-ﬁnancing of
investments.
Is there a link of causality between the increase in inequalities and the ﬁnancial crisis? In
his analysis, ‘La crise économique de 1929: anatomie d’une catastrophe ﬁnancière’ (The
Great Crash of 1929), J.K. Galbraith[3] already identiﬁed ﬁve causes of the Great
Depression, the ﬁrst of which he claimed was ‘the faulty distribution of revenues’. The
subprime crisis in the United States in 2007-2008 was symptomatic of the disequilibrium
created from start to ﬁnish by credit granted to households that were insolvent (due to
their modest income), then surreptitiously transferred through the channel of
securitization to ‘investors’ who were not particularly astute and who believed that ‘money
grows on trees’. Lasaire had denounced this before the crisis exploded and called for the
distribution of revenues conducive to fostering balanced growth, allowing consumption
and the sustainable growth of income at the same rate.[4] The causality between an
unbalanced distribution of revenues and the crisis is also at the core of the work written by
J.E. Stiglitz (2012) ‘The Price of Inequality’.
But what is happening within the European Union, and more particularly within the euro
zone? A striking phenomenon is the erratic evolution of salary costs per production unit
between the Member States, highlighted for example[5] by V. Glassner:[6] between 2000
and 2008, this unit cost remained virtually stable in Germany, whereas it increased by 18%
in France, 22% in Italy, 25% in Spain, 32% in Ireland, and 55% in Greece. But from 2009,
this cost started to increase (moderately) in Germany, and to slow down in France and
Italy, and even decreased noticeably (Ireland, Greece, Portugal and Spain). In comparison
with 2000, Germany had acquired a competitiveness-price advantage in relation to the
144
Member States previously mentioned, which, although in the process of becoming
attenuated, remains substantial, which is not the least of paradoxes for a country that also
enjoys a solid competitiveness that is also renowned and envied, excluding costs.
It is clear that the euro zone is experiencing considerable disequilibrium, which is far from
being resolved in relation to public ﬁnances, and which is reﬂected in the abnormally high
unemployment rate in Member States (except for Austria and Germany). A tardy awareness
of the macroeconomic disequilibrium has emerged, and today it is recognised that we
cannot consider as sustainable the disequilibrium in the current accounts between Member
States, some of whom have, year after year, surpluses and others who have high deﬁcits (in
2013, according to OECD forecasts: the Netherlands: +9.9% of GDP; Germany: +6.7% of
GDP; and France: -2.2% of GDP).
To re-establish the competitiveness-price within the euro zone, the Commission is
recommending a strategy for countries in diﬃculties consisting of ‘internal devaluation’,[7]
which means capping nominal salaries, or even reducing them somewhat, as has been
observed today in Greece and Spain, for example. But would it not be simpler, as was
suggested by Lasaire, to proceed with an ‘internal re-evaluation’ of the countries with a
surplus? In fact, voices have been raised calling for ‘a somewhat faster inﬂation in
countries with a surplus’ (Bruegel think-tank), or even – in a rather less convoluted manner
– a certain increase in salaries in Germany (W. Schäuble in a declaration to Focus, 5 May
2012). And eﬀectively, the salaries negotiated by the social partners in Germany (within
the framework of the ‘Autonomy tariﬀ’) have recovered a greater dynamism since 2012
than that of other Member States. At this rate, we would nevertheless need years before
we could return to a more sustainable internal equilibrium in the euro zone.
It is now urgent that we deal with the unbearable level of unemployment which is
overwhelming the majority of Member States. The Franco-German initiative for a European
‘New Deal’ aimed at combating youth unemployment is most welcome, but it does not
resolve the fundamental problem of how to get the euro zone out of the crisis situation,
because, and it has become an obvious fact, this zone currently does not fulﬁl the
conditions of an ‘optimal monetary zone’.[8] The single currency is notoriously
‘incomplete’. Notably, it would need a veritable community budget.[9] It would need
provisions that would allow it to control the eﬀects of ‘geographical polarisation’ of
production (a consequence of eﬀects of scale), i.e. a veritable community policy for
territorial planning. In particular, it would need, in the absence of any possibility of
modifying the exchange rate internally, a mechanism that would allow for the harmonious
evolution of salaries, so as to avoid social dumping and ensure balanced growth as well as
an upward convergence of living standards in accordance with the objectives of the Treaty
(EUT Article 3.3). The tripartite social summit would appear to be the ideal place that
would need to be reactivated with this purpose in mind.
References
[1] J. Freyssinet, ‘Deux rapports sur les inégalités dans le Monde.’ in ‘Regards sur la Crise’,
(Cahier Lasaire,
no. 37, 2009).
[2] International Labour Organization, International Institute for Labour Studies, Geneva,
145
2008.
[3] J.K. Galbraith, La crise économique de 1929: anatomie d’une catastrophe ﬁnancière
(Petite Bibliothèque Payot, 1970).
[4] M. Fried, ‘De la crise des subprimes à la crise ﬁnancière,’ (Cahier Lasaire, no. 35, April
2008); ‘les non-dits de la crise,’ (Note Lasaire, 2011).
[5] Chagny, Husson and Leray, ‘Les salaires : aux racines de la crise de la zone euro?,’ (La
Revue de l’Ires, no. 73, 2012).
[6] V. Glassner, ‘Séminaire Lasaire : the debt crisis, the crisis of the European social model
and the role of social partners’ (4 November 2011): ratio of compensation per employee to
real GDP per person employed’, ETUI.
[7] A new term for what has been practised in France since 1983 known as ‘competitive
deﬂation’.
[8] In the meaning highlighted by R. Mundell (1961) ‘A Theory of Optimal Currency Area’,
American Economic Review.
[9] In brief: a community budget of this nature is necessary for two reasons: (a) to be able
to confront the asymmetrical shocks separately aﬀecting one Member State or another; (b)
to support the economic situation of the zone in situations of general crisis when, as is the
case at the present time, interest rates are approaching 0, and the monetary policy sees its
eﬀectiveness limited by the eﬀect of the ‘liquidity trap’.
Joël Maurice is an economist at Lasaire in Paris.
146
Social Issues Are Disappearing From The European
Project
By Michel Fried
The objective of ensuring ‘proper social protection’ is enshrined in the European Treaty, but
it is not a direct objective, only a derived objective that is based on the idea that it will be
achieved solely as a consequence of implementing a sound economic policy. The Euro crisis
has shown that this theoretical construction has led to a dead end, which is most striking
as it has occurred within an ideological context characterised by a destructive liberal
approach that presents social issues as a cost or a means towards obtaining optimum
behaviour by private agents. Accordingly, as the President of the European Central Bank
has noted, the social model has ‘already gone’ and we should give up a model based on
security of employment and generalised redistribution of wealth.[1]
While social issues have thus exclusively become an economic variable, the European
approach, moreover, turns it into a special economic variable as it is linked to the public
sphere. The whole European approach is based on the assumption that, in contrast with
the private sector, the imbalances of components of the public sector – be it the state,
local authorities or the social security system – are by their very nature destabilising for
the private sector (companies, households and ﬁnancial system). While the development of
the crisis has refuted this dogma, the economic policy recommendations of the European
Council and the Commission remain focused on ways and means of absorbing public
deﬁcits as quickly as possible.
However, this orientation of European policies has been undermined on two important
occasions: the ﬁrst time in 2003 when, after their public deﬁcit had exceeded the 3%
threshold, France and Germany refused to pursue a policy of austerity within a context of
virtual stability of growth. The second time was during the 2008 recession when European
countries let their public deﬁcits drag on, in order to ﬁnance the economic recovery and
underpin their ﬁnancial systems. On this occasion, the existence of automatic stabilisers,
of which the social protection systems constitute an essential component, was considered
an asset as it obviated the need for the countries of the EU to draw up support plans of the
same scope as that of the United States.[2]
In 2011, when it was wrongly thought that the crisis had been brought under control, the
Council and the Commission decided to restore budgetary equilibrium as soon as possible
without adopting minimum growth as a joint objective, compatible with the maintenance
of an acceptable standard of living. Only the IMF, although it participates in support plans
for the countries most aﬀected by the crisis, has issued a warning against the generalised
introduction of austerity policies and the refusal to apply automatic stabilisers, at least for
the countries most severely aﬀected.[3] Moreover, the work of the IMF has shown that the
economic models used by most of the institutions have underestimated by approximately
half the deﬂationary consequences of the recommended austerity measures, which
explains their poor results.
Without going into detail of the measures adopted by the Commission and the European
Council, control of policies implemented by the member states has been tightened
147
considerably, with the strengthening of the preventive and corrective measures laid down
in the Stability and Growth Pact and stricter surveillance of the risks of macroeconomic
disequilibrium. However, perhaps the most signiﬁcant event, although hardly commented
on, of the liberal tightening-up of European policy has been the signing of the Euro Plus
Pact in March 2011. This agreement deﬁned the priority action areas which the
governmental plans should include, and in particular the excessively centralised procedures
for ﬁxing and negotiating wages, reform of the labour market with the aim of enhancing
incentives to work (which focuses on the labour costs and unemployment beneﬁts), and
ﬁnally the need to reform pension schemes, health care systems and social security
systems so as to ensure the viability of their level of indebtedness. These areas for action,
recalled each year by the European institutions, have been implemented with varying
degrees of harshness by all the countries in the Euro zone and have determined the access
which countries in diﬃculty have to European support measures.
These structural rebalancing measures[4] have been applied in the Euro zone in a context
of very weak growth, or even recession. Since 2010, they have on average represented
0.9% of the GDP a year. In Greece it was 4% of GDP a year, in Spain 1.6%, in France 1% and
in Germany 0.4% of GDP. These measures have created a vicious circle by putting a strain
on domestic demand and therefore on unemployment, with the result of constraining the
resources of social protection, which in turn has formed an obstacle to desired rebalancing.
In May 2013, the European Commission to some extent changed course in its policy by
authorising, subject to the Council’s agreement, the EU countries with an excessive deﬁcit
to postpone compliance with the objectives of the Stability and Growth Pact by one or two
years. As a quid pro quo, it asked the countries concerned to redirect their budgetary eﬀort
in particular towards reducing their public expenditure, rather than increasing taxation, and
to focus their eﬀorts on structural expenditure. This relaxation of the rules will call into
question the national social models even further.
References
[1] Interview with Mario Draghi in the Wall Street Journal of 22 February 2012.
[2] The IMF has calculated that the automatic stabilisers of Europe contributed to the
European recovery eﬀort by 2.2% of GDP and only 1.6% for the United States.
[3] These reservations were highlighted publicly by the Director-General of the IMF, in
particular in the Financial Times of 16 August 2011 and at the annual meeting of the IMF
and the World Bank of 11 October 2012. However, the IMF has continued to support the
questions raised about the levels of social protection in the countries beneﬁting from its
aid.
[4] The concept of structural deﬁcit used excludes the public debt burden.
Michel Fried is an economist at Lasaire in Paris.
148
The European System Of Industrial Relations And The
Dynamics Of Transnational Company Agreements
By Udo Rehfeldt
European Works Councils (EWCs) and transnational company agreements are a cornerstone
of the social dimension of the European Union. They constitute the most dynamic element
of the European system of industrial relations which has emerged in the last decades in
spite of the considerable diﬀerences between the industrial relations systems of the
member states. The construction of this system started in 1984 when the European
legislators vested the European Commission with the task of encouraging the development
of a ‘social dialogue’ so as to promote contractual relations in the longer term. After a
period of quasi tripartite European social dialogue that produced rather modest results, the
European governments followed the agreement of 31 October 1991 signed by the ETUC,
UNICE (now BusinessEurope) and CEEP and introduced a pre-emptive role for the social
partners in the European legislative process. This was the very essence of the social
protocol appended to the Maastricht Treaty (1992) and now included as a social chapter in
the treaties. The European trade unions and employers’ organisations thereby acquired
public status and strong pre-emptive power in the social legislation process. If they
manage to negotiate an agreement, they can force the governments to extend that
agreement and thus contribute to European social regulation.
In reality, progress towards European collective bargaining has been modest. A series of
reasons can be found for this feeble performance. First of all, some employers’
organisations have continued to oppose any form of collective bargaining at European
level. They wanted to limit the European social dialogue to negotiations on noncontroversial
‘soft’ subjects, whilst avoiding negotiating on more antagonistic issues. In a
similar manner, at the sector level, certain employers’ organisations were slow to emerge
as a social partner with a mandate to negotiate sectoral agreements. To overcome these
limits, strong political determination was needed on the part of the Commission, inducing
fear of legislative initiatives to goad the employers’ organizations to negotiate ‘in the
shadow of the law.’  This determination is increasingly lacking today. The situation is a
little less modest at sector level, especially in sectors with embryonic industrial policy on a
European scale. None of the inter-industry and sectoral agreements deal with wage issues,
owing to the fact that pay has been excluded from the EU’s legislative competencies that
the social partners did not want to exceed by autonomous bargaining. Trade unions have
nonetheless deﬁned criteria in certain sectors such as metallurgy aimed at a form of
coordination of pay demands and negotiations in the member states.
Unlike the inter-industry and sector levels, there is no European legal framework today for
company transnational collective bargaining. A social dialogue has nonetheless managed to
develop on the basis of the EWC directive of 1994. This directive has indirectly given
impetus to a kind of transnational collective bargaining, as there are currently more than
1000 EWCs established on the basis of an agreement negotiated with workers’
representatives.
These EWCs show a wide variety of experiences. The EWC agreements often lack
appropriate procedures for a real, informed discussion and a possible modiﬁcation of
149
management decisions. The question of the anticipatory nature of information, particularly
in the case of restructuring, was raised when the Belgian subsidiary of the Renault group in
Vilvoorde was closed in 1997. This question was at the heart of the process to revise the
directive which in 2009 ended up strengthening the information and consultation rights of
the EWCs.
In 2004, the European Commission announced its intention to provide an ‘optional’
European legal framework for transnational company bargaining which was entered in the
Social Agenda 2005-2010 adopted in 2005. Because no consensus was reached among
European social partners on the need for a legal framework – the ETUC was for and
BusinessEurope against it – the Commission dropped the plan to submit a draft and opted
to continue the discussion by resorting to assessments and seminars. If such a legal
framework were adopted, the ETUC would want the trade union federations to get the
exclusive right to sign European company agreements, even if unionized EWC members
might take part in the negotiation process.
In spite of the lack of a legal framework, transnational collective bargaining at company
level has developed on a voluntary basis since the end of the 1990s. On the basis of a
Commission database, 226 transnational company agreements can be identiﬁed by the end
of 2011 (da Costa/Rehfeldt 2011), nearly all of which were signed by multinationals which
have their registered oﬃce on the European continent. Half of these (115) are ‘International
Framework Agreements’ (IFAs), which are agreements global in scope and signed by global
union federations (GUFs). These IFAs deal mainly with fundamental labour rights and
corporate social responsibility. The agreements signed at European level, which by analogy
are now widely called ‘European Framework Agreements’ (EFAs), deal with a greater variety
of issues, mainly restructuring, social dialogue procedures and occupational health and
safety. French companies have signed near half of the EFAs (47 out of 111). An important
number of agreements deal with a transnational restructuring and provide substantial
guarantees to save production sites and jobs. Nearly all of them were signed in the
automobile sector, in particular by General Motors Europe and Ford, two subsidiaries of
American corporations in Europe, who were playing a pioneering role here.
The EWCs have played an important role in this process. The large majority of EFAs were
signed by the EWCs. Some were co-signed by national or European trade unions. A growing
number of EFAs were signed only by European trade union federations. This is the result of
a European trade union coordination strategy initiated by the internal procedure adopted in
2006 by the European Metalworkers’ Federation (EMF), which has now merged into
IndustriAll Europe. This EMF procedure is aimed at obtaining a negotiating mandate from
its member organisations to engage in negotiations with a transnational corporation. The
negotiating mandate must not only deﬁne the issues to be negotiated, but also the
procedures to be followed and the composition of the negotiating team. A negotiated draft
agreement must then be approved by a two-thirds majority (preferably unanimity) of the
trade unions concerned. This procedure moreover entails an obligation to include a nonregression
clause in the agreement that guarantees compliance with rules of national
agreements.
It is a fact, however, that nearly all EFAs signed by the EMF were negotiated with French
multinationals. German multinationals, but also multinationals from other countries,
continue to sign EFAs with their EWC. This shows the diﬃculties for the European trade
150
union movement to impose a unique negotiation procedure to a variety of industrial
relations systems, dominated by two models: the British single channel model and the
German dual model. The functioning of EWCs of German multinationals is still largely
inﬂuenced by the German model which gives works councils a negotiation power on a
whole rage of subjects, leaving to the trade unions an exclusive bargaining right only for
wages and working time, two subjects which up to now have in practice been excluded
from transnational company agreements. As long as there is no binding legal framework,
the European trade union federation must therefore ﬁnd new ways to integrate EWCs,
namely the unionized EWC members, into the negotiation process of EFAs, if they do not
want to slow down the past dynamics of transnational bargaining by rules which are not
shared by a large number of the main actors.
Udo Rehfeldt is a political scientist and senior researcher at IRES (Institut de
Recherches Economiques et Sociales) in Paris. He also teaches comparative industrial
relations at the University of Paris-X-Nanterre.
151
Social Exchange In The Crisis – 2010 The Turning Point
By Jean-Marie Pernot
A genuine social dimension of Europe is not possible without the participation of those
primarily beneﬁtting from it and therefore the participation of their representatives.
Collective bargaining, the social dialogue, has been established in the member states over
many years and it ought to be extended to the European level. This is a complex task
which ﬁrst of all requires adherence to and the promotion of the principles of social
exchange by the countries making up the Union. The turning point of 2010 has instead
created a further distance from these democratic goals.
Since the 1980s, the systems of employer-labour relations have been aﬀected by two
major developments which have to various extents taken place in the countries of the EU:
on the one hand a gradual diminution of the number of employed persons belonging to
trade unions and on the other hand a trend towards decentralisation in collective
bargaining with a general shift towards the company. This decentralisation has in general
been conceded by the trade unions because of their weakened position in the relationship.
Whether coordinated or not, and rather less and less coordinated, collective bargaining has
since 2000 gone through a fairly signiﬁcant formal and substantial development, with
three aspects: the ﬁrst is reﬂected in the development of the number of workers covered
by collective labour agreements which has diminished in the countries where extension
procedures are non-existent or little used, leaving an increasing number of workers outside
the scope of the negotiated standard; the second development, which has also varied in
intensity from one country to another, concerns the inter-occupational agreements or
sectorial agreements with an increasing number of saving clauses enabling companies to
make adjustments in accordance with the local situation, or indeed the possibility of
derogating from the sectorial agreements. The third development pertains to the question
of wages, with increasing individualisation which has contributed to reducing the part of
the wage that has been eﬀectively negotiated.
However, there has been a turning point in these long-term developments, less so in 2008
when the ﬁnancial crisis broke out than in 2010 when the crisis changed into a ‘public debt
crisis’.
In the ﬁrst phase (2008-2009), a number of countries reverted to the tripartite ‘social pact’
formula initiated by the state, as existed in Europe at the beginning of the 1990s.
Confronted with the emergency, the states have tried to control the massive threats to
employment. The number of hours worked had dropped considerably in all the countries
concerned and the challenge was to ﬁnd formulas that would attenuate the impact on
employment and living conditions. In 2010, austerity further tightened wage constraint, at
times transforming it into a massive regression. In the countries put under the surveillance
of international institutions, the adjustment has been drastic and has been imposed
despite social protests. In Greece, in Spain and, even more radically, in Italy, the
contractual construction melted down in no time as a result of labour market reforms.
In Italy like in Spain, the trade unions’ strategy has not been to incite protest. They have
152
endeavoured to engage in arbitration, thus preserving their role as negotiators.
Radicalisation, equally in Greece, Spain and Portugal, has been the response to the
haphazard austerity which deprived the trade unions of all room for manoeuvre. In Greece,
genuine political risks continue to pose a threat to democracy.
Elsewhere, mostly in northern Europe and in France, increased wage restraint has reﬂected
the dual need for protecting the employment of workers and the competitiveness of
companies. At formal level, it has moved towards extending saving clauses, greater
freedom of adaptation for companies and, going hand in hand with this, a strong
involvement of the state to change the regulatory and ﬁnancial framework. In the
countries of northern Europe, the trade unions adopt this strategy of exchange between
wages and jobs in the industrial systems which continue to be for them the best source of
income and employment for the future. The core of the production system is thus
preserved but the periphery of low wages and precariousness continues to expand. In the
countries of southern Europe, on the other hand, among which Ireland should also be
included, the radical adjustment has eliminated any room for compromise. Those who
made their voice heard in social protest have often considered the trade union movement
as an agent integrated in this system which pushes a large part of the population into the
margins. Elsewhere, where a certain amount of power has been retained by the trade
unions, the challenge has been to prove its ability to integrate. The portion of the labour
force on which the trade unions have any inﬂuence is dangerously shrinking, calling their
capacity to embrace the solidarity-based defence of the workforce into question.
France, as is often the case, is somewhere in between. Collective bargaining was
decentralised well before this happened elsewhere, and for a long time now coordination
by the companies is no longer assured. The annual bargaining round inevitably concerns a
third of workers in the private sector, with the remainder abandoned to minimalist sectorial
regulation and, in terms of wages, largely dependent on the SMIC minimum wage policy.
In an assessment of the social dialogue in the crisis, form cannot be separated from
content: most of the countries of western Europe have extensive procedures for
negotiation or mutual consultation. What is important is not knowing whether the
consultation rituals have been maintained, whether the representatives have met or have
signed agreements but whether, in the ﬁnal analysis, this dialogue has made it possible to
reach genuine social compromise: the extent of the economic shock, the long history of
the systems of social relations places a burden on the situation today. While the trade
unions have in general adopted a pragmatic attitude with a view to preserving the values of
collective bargaining, one cannot but recognise that apart from a number of cases, now
exceptional, there is currently a trend towards more cohesive state intervention and
reducing democratic procedures that underpin the above mentioned European social
model.
Jean-Marie Pernot is a Senior Researcher at IRES (Institut de Recherches Economique
et Sociales) in Paris.
153
Trade Union Responses To The Attack Of The EU On
Wages
By Anne Dufresne
Wages, and thus trade unions, are being violently attacked by European authorities. Until
now, wages have remained an exclusively national issue as a negotiated right at the very
core of the trade unions’ identity. It had been excluded from the EU’s competences since
the Maastricht Treaty. Yet, for approximately two years, with the implementation of the
new ‘European economic governance’ (Pact for the Euro, Six-Pack, etc.), the economic
actors of the EU have held wages to ransom. The ECB, DG ECFIN and the ECOFIN Council
transformed wages into a statistic ﬁgure of ‘Unit labour cost’ (ULC), measured as an
indicator that should be contained in order to improve competitiveness. A cap on wage
increases should be respected to avoid a ﬁnancial penalty. So, from a negotiated right at
national level, wages have become a European market price!
According to the European Council ‘the obstacles of institutional nature to a ﬂexible
adjustment of prices and salaries to market conditions (must be) suppressed’. And this is
why since 2010, wage institutions have been suﬀering all over Europe, more or less
violently so depending on the state of subordination of that particular country to the EU.
These include the authoritarian interventions of the Troika (Commission, ECB, IMF) and its
compulsory austerity plans in the so-called ‘peripheral countries’ of the South, the East
and in Ireland (unilateral reduction of minimum wages, brutal cuts in public services) or
through recommendations of the Commission in the countries of the North (questioning of
the indexation and wage stop in Belgium, reduction of minimum wages in France, etc.).
Dismantling collective bargaining systems that people fought for is equal to a frontal
attack on the very existence of trade unions in each of the member states: the
Commission makes no secret about this, and indicated in a recent report of DG ECFIN that
it should be possible ‘to promote measures that lead to a global reduction of the ability
that trade unions have to set wages’ (2012). As they are facing this threat, how do
European trade unions ﬁght back?
For too long, wages have remained a taboo issue for the European Trade Union
Confederation (ETUC), which preferred the European Social Dialogue, excluding precisely
wages. But the frontal attack perpetrated by the EU brought the subject to the foreground.
In April 2008, the ETUC organised the ﬁrst European demonstration with the slogan
‘increasing salaries and better sharing of proﬁts’, and not a vague slogan such as ‘for a
Social Europe’. In May 2011, at its latest congress in Athens, the ETUC was able to express
a common diagnosis by the vast majority of European trade unions (only CFDT was of a
diﬀerent opinion): it clearly opposed the Commission and its governance, and demanded
the stop of the anti-salary bulldozer of the EU. So, if there is a real consensus of the trade
unions to refuse a persistent wage austerity, one question remains: how can we proceed?
What should be the trade unions’ counter-strategy?
A ﬁrst answer goes back to the nineties. The ETUC, following the example of the European
Metalworkers Federation – which in the meantime merged into the Federation of European
Industries, with the chemical and textile Federations – had developed a strategy to ﬁght
wage dumping: the coordination of collective bargaining. The idea was to promote a ‘union’
154
wage norm, according to which real wages should at least increase in parallel with the
increase of productivity. While the EU (regardless of inﬂation) now promotes nominal
wages ‘according to productivity’ and pleads for a downward harmonisation all over Europe,
it is important to update this union norm and to reinforce the European coordination
attempts by trade unions. A more oﬀensive approach against the current European wage
policy would be to promote the reinforcement of all collective bargaining institutions in the
diﬀerent countries, in order to back a European growth policy driven by wage increases.
A second line of inquiry: the European minimum wage is a watchword that could impose
itself, given the diﬀerences in wages paid within the EU and the lack of a minimum level in
some countries. A European regulation allowing for a relative increase in all countries could
be the introduction of a minimum wage calculated in relation to the national average
wage: 50% in the short-term and then 60% in the longer term. Trade unions in large
countries are broadly in favour: French organisations with the ‘SMIC’ model, English unions
with the success of their recently obtained minimum and the German ones, that are
looking for a universal standard before the next elections. Nevertheless, the ‘no front’, with
the Italians and the Scandinavians in particular, is clearly against this because they fear
that their bargaining systems of minimum sectoral wages, that are often very high, might
suﬀer. Their veto has been blocking all demands in this matter since the beginning of the
century. The current impossibility to ﬁnd an agreement on a European minimum wage,
despite the ever-increasing assaults against wages, shows that there is still a long way to
go before obtaining a common bargaining dynamic at the transnational level.
So lots of questions are left over: how can we break the deadlock of national withdrawal by
trade unions? How can we avoid an imbalance increase between countries, social tensions
and eventually the stalemate of the trade union movement? How can we create a new
balance of power in response to the economic players of the EU?
The challenges this implies are huge: on the one hand, the implementation of a strategy of
‘Europeanisation’ of social movements, already underway with the increasingly rapid
succession of decentralised movements. A good example was the transnational strike of 14
November 2012, which was novel because it was organised simultaneously in all the
southern countries, which have been aﬀected most severely by austerity measures. On the
other hand, the social partners should regain their power with respect to wages. If wages
are to be dealt with at EU level, then they are the only ones who can manage this. The
economic actors which pursue a policy of surveillance of wage moderation cannot. The
road ahead is likely to be a long and winding one.
Anne Dufresne is a Researcher at FNRS-FRS of the Université Catholique de Louvain,
Belgium and a Research Fellow at IRES (Institut de Recherches Economique et
Sociales) in Paris.
ISBN: 978-0-9926537-1-2
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