Transcript Slide 1

The Changing Economic and Political Background to EU Labour Law
John Foster
IER March 2012
THE SINGLE MARKET AND EMPLOYMENT
RIGHTS
from a dysfunctional to an abusive relationship ?
February 2012
Mario Draghi, President of EU Central
Bank
“The European Social Model has
already gone”
February 2012
Single Market, Equal Rights?
Adam Hug and Owen Tudor
The European Social Model is (almost) dead;
Long Live the European Social Model !
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THE ARGUMENT
From a dysfunctional to an abusive relationship?
• The neo-liberal assumptions of the Single European Act
and why they were in conflict with employment rights
• How they led to the attack on employment rights and to
the recasting of the ESM
• How EU’s economic model led directly to financial crisis
• How financial crisis is leading to a further assault on
what remains of the ESM
• How the EU’s economics have affected its politics
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“The design of the European Single
Currency is premised on the nonexistence of organised labour and shares
the neo-classical assumption that labour
markets can and do operate in perfect
competition”
Aidan Regan, ‘The Political Economy of Social Pacts in EMU’, New
Political Economy, 2011
A dysfunctional relationship
between the EU’s economic agenda and labour standards in member
states maintained by strong collective bargaining structures at national
level – and originally endorsed by Delors’s Social Europe
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Single European Act 1986
Cechinni Report 1988
ASSUMPTIONS Competition would automatically reallocate resources
“A supply-side shock to the Community economy as a whole.. Inflation will be cooled by the
drop in prices provoked by open markets ..and economies of scale
“Restructuring entire sectors, shifts in employment, new demands on labour mobility and
training”
PROMISE: 200 billion ecus savings; 5 per cent addition to GDP; medium term
creation of 1.5 million new jobs
BUT
FURTHER REQUIREMENT Free market for financial services demanded
regulation and ‘a stronger European currency system’. HENCE
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THE SINGLE CURRENCY
Maastricht Treaty 1992
Protocol 12 Excessive Deficit Procedure Article 1
LIMIT 3 per cent government deficit to GDP; government debt 60 per cent
GDP
Protocol 13 Convergence Criteria Article 1
National inflation no higher than 1.5 per cent over three ‘best’ member
states
Incorporated into 1997 Stability
and Growth Pact
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The dysfunctional assumptions of the Single
Market and Stability and Growth Pact
• ‘Supply side shock’ would automatically lead to converging
development across EU
• Capital and labour would be fully mobile and market-dominant
firms would not extend dominance
• Business cycle would be resolved by wage flexibility in context of
higher unemployment – not by fiscal stimulus
•
“internal devaluation” would correct “uncompetitiveness” of weaker
economies
• BUT this did not happen
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Blair moves to end
the dysfunctional relationship
Tony Blair to EU Parliament 2005
‘What type of social model is it that has 20 million
unemployed in Europe; productivity rates falling behind
the USA; that is allowing more science graduates to be
produced by India? The purpose of our social model
should be to enhance our ability to complete, to help our
people to cope with globalisation.. Of course, we need a
Social Europe but it must be a Social Europe that works’
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“A Social Europe that works”
The Blair-D’Alema Report, 2000, and the Lisbon Programme 2000
A recalibration of Social Europe
Stress on ‘labour market inclusion’, and elimination of obstacles to inclusion, to
achieve ‘flexicurity’
Restructuring of welfare systems to reduce entitlements (esp. pensions)
European Social Model (now rephrased in terms of social inclusion,
sustainability) used to justify an increasingly direct intervention
against COLLECTIVELY bargained agreements, trade union rights and
national WELFARE systems
Updated Lisbon Programme 2005
EU Green Paper on Labour Law 2007: Flexicurity
EU 2020 (2010)
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2007-2008 The Services Directive,
Lisbon Treaty and the ECJ judgements
The use of new legal powers to eliminate
obstacles to free movement of capital and
labour (freedom of establishment) across
enlarged EU
Right of Establishment superior to right to take
industrial action
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How EU Neo-liberalism led to Crisis
• Increasingly uneven economic development
across EU
• Decrease in wage share of national income
• Increased productivity gap with US
• Governments prevented from investing in
economic and industrial development – while
free movement of capital stokes speculative
bubbles
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Uneven Development worsens I
Percentage increase in German imports and exports 1998-2008:
based on euros at current value (selected countries)
Country
Percentage increase in German
exports TO
Percentage increase in German
imports FROM
Bulgaria
393
170
Estonia
240
124
France
58
31
Greece
126
19
Ireland
120
15
Latvia
323
74
Lithuania
16
-9
Portugal
53
-2
Romania
324
292
Spain
123
56
UK
61
54
Eurostat, External and Intra European Union Trade: Statistical Yearbook 2008 edition: Table 5B[1]
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Uneven Development Worsens II
Innovation and industrial investment
By 2007 old ‘core’ EU countries included 79 per cent of EU labour force
BUT
86 per cent of all research workers
95 per cent of Business R&D
99 per cent of Triadic Patents
Archibugi and Fillipatti find South Europe declining 2000-2007 while E
Europe catches up: thereafter
2007-2010 ‘the negative effects of the crisis are
remarkable’: virtually cessation of industrial Investment
in both south and east Europe
Archibugi and Fillipatti, Jrnl. Common Market Studies, November 2011
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Wage Share in GDP declines
Country
1991-2000
2001-2010
Netherlands
67.5
65.9
France
67.2
65.9
Austria
71.4
65.3
Italy
64.6
62.5
Spain
66.8
62.2
Greece
62.5
60.7
Ireland
62.4
55.7
UK
71.9
70.9
Regan, New Political Economy, 2011: social pacts across Europe reduced
wage share by preventing workers securing share of productivity gains
Bea Cantillon, Journal of European Social Policy, December 2011: ‘poverty
rates have either stagnated or even increased .. in Lisbon era’
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And productivity also worsens
Enrique Palazuelos, Labour Productivity, New Political
Economy, 15/3, 2010
Up to 2000 Europe was closing productivity gap with US;
since then it has widened
Attributes to pushing low cost labour into employment
especially in low tech service sectors while flagging
demand reduced investment.
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EU and US Social Models
converge on neo-liberal terms
J. Alber, ‘What the European and American Welfare Systems have in common,
Journal of European Social Policy, 2010, 20, 2 pp. 102-125
By 2008 little difference between levels of spending in US and EU on welfare
– after EU moves to privatise pensions and health and as EU benefits regime
switches to ‘activation’ and removal of ‘disincentives to work’
Countouris and Horton, Industrial Law Journal, 2009, 38, 3 pp 329-338
2008 Temporary Agency Work Directive
“To the extent that, as reported in the 10th Recital of the Directive, flexicurity
seeks to ‘strike a balance between flexibility and security in the labour market
and help both workers and employers to seize the opportunities offered by
globalisation’, we would suggest that, overall, the Directive represents a
departure, in everything but rhetoric, from the regulatory concepts commonly
associated with job, and labour market, security, in favour of deregulation,
precarization of work and further labour market segmentation.”
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And Politics Follow
Political centre of gravity shifts to Right across EU
in 1990s and 1900s – and Social Democrat
parties themselves move right
Far from protecting EU states from market forces of ‘globalisation’, EU
intensifies them and internalises them politically
Social Democrat policies now framed solely within neo-liberal
assumptions of EU
P. Manow et al, Europe’s Party Political Centre of Gravity’, Journal of European Public
Policy, 2008, 15, 1 pp. 20-29
Mark Baimbridge et al, ‘Beyond EU Neo-liberalism’, Capital and Class, 2007, 31, 67-91
Christoph Herman et al, ‘The European Social Model’, Capital and Class, 2007, pp, 125139
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Governments lose ability to invest
productively as
• Tax income falls
“market integration has fuelled tax competition and caused corporate tax rates to fall
more quickly in the EU than in the rest of the world’
P. Genschel, ‘Acceleration Downhill: how the EU Shapes Tax Competition’, Journal of Common Market
Studies, 2009, 49,3
• Deficit limits prevent government borrowing
• And Competition Policy stops state investment in
industry
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But private sector bank lending is
deregulated
Causing speculative bubbles in unproductive
areas – esp. property
External Debt: selected EU countries 2009
Country
NET Foreign Assets as per
cent of GDP
Portugal
-96
Hungary
-96
Spain
-75
Greece
-73
Ireland
-54
Germany
+22 net external credit owed
to Germany as per cent
GDP
IMF www.imf.org/external/pubs/ft/weo/2010/01/c2/fig2_7.csv
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CRISIS 2008-9
“never waste a good crisis”
• EU Commission/ECB insist governments take over
private debt owed to external financial
institutions
• “Sovereign debt” then used to claim public
spending out of control and demand intense
austerity AND
• Debtor states required to ‘reform’ labour law: wage
indexing, minimum wages, permanency of
employment contracts
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As austerity increases deficits
EU secures powers to reform national labour
laws
• EuroPlus Pact March 2011
Commitment to end labour contracts that restrict flexicurity and
benefits that reduce incentives to work by ALL eurozone countries
‘plus’ 5 others
• Treaty on Stability, Coordination and
Governance 2012
Gives ECB/Commission powers to ‘compel’ debtor governments to
reform legislation that impedes labour market flexibility
Annual deficit limit reduced to 0.5 – and national debt over 60 per
cent MUST be reduced by equiv of 5 per cent of GDP each year
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Eurozone 2012 growth projections
Country
February 2012 Eurostat
Greece
-4.4
Portugal
-3.3
Italy
-1.3
Spain
-1.0
Ireland
0.5
Germany
0.6
Austria
0.7
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Eurozone unemployment rates 2011 Q4
Country
overall
youth
Greece
19.9
48.1
Portugal
14.8
29.9
Italy
9.1
28.2
Spain
23.2
49.9
Ireland
14.8
29.9
Germany
5.8
8.6
Austria
5.0
7.3
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How does ECB explain continuing
economic contraction and mass
unemployment ?
It’s the strength of collective bargaining/employment rights
Mario Draghi, Interview with Wall Street Journal 24 Feb 2012
WSJ: Which do you think are the most important structural reforms?
Draghi: In Europe first is the product and services markets reform.
And the second is the labour market reform ..In these countries there
is a dual labour market: highly inflexible for the protected part of the
population where salaries follow seniority rather than productivity.
…one has to make labour markets more flexible. WSJ: Do you think
Europe will become less of the social model that has defined it?
Draghi: The European Social Model has already gone …These
reforms are necessary to increase employment, especially youth
employment, and therefore expenditure and consumption
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THE SINGLE MARKET AND EMPLOYMENT
RIGHTS
• Employment rights now seen as direct cause of mass
unemployment and economic contraction
• Only solution legal intervention by EU and ‘Internal
devaluation’
• Issues of monopoly power, income inequality, loss of
consumer demand, market failure and collapse of
investment not mentioned
AN ABUSIVE RELATIONSHIP ?