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As the crisis that continues to shake Europe has demonstrated forcefully, enhanced policy coordination is urgently needed in order to avoid destructive economic and financial imbalances between Member States. Feasible and well-functioning instruments of economic governance constitute a precondition for a European Union aiming at sustainable growth, social convergence, and quality employment.



The reforms of EU economic governance that have been implemented over recent years, however, follow a neo-liberal logic. The newly established instrument of so-called Country Specific Recommendations, which serves to set the priorities for economic policy at national level, is used by the European Commission to request that Member States adhere to this neo-liberal agenda. In this process, workers’ and social rights are compromised and the autonomy of social dialogue is disregarded. These reforms do not help to end the current crisis and destroy the vision of a truly Social Europe



The following examples, taken from last year’s recommendations and the Commission’s drafts for 2013, illustrate how European (services) workers and their trade unions are currently under threat from a neo-liberal reform agenda. In order to assure the Trade Union Movement’s continued support for the European Project, Europe must abolish this course immediately. We, as the European Trade Union Movement, can play a crucial part in mobilising the solidarity and the necessary pressure on European leaders that is needed in order to make a truly social Europe a reality!

In order to outcompete the EU’s main economic rivals, the European Commission regards the ‘modernisation’ of national wage setting systems as indispensable. Concretely, this concerns the reorganisation of collective bargaining so that wages can be revised downwards more easily during recessions. In the Commission’s view, centralised collective bargaining at the sectoral or even national level constitutes the biggest obstacle to such ‘flexibility’. Accordingly, in 2013 a total of four Member States (BE, IT, LU, SI) are going to receive Country Specific Recommendations demanding greater flexibility in collective bargaining, e.g. by means of decentralisation. In 2012, this group of countries comprised Sweden as well. Accordingly, five Member States are currently reorganising (parts of) their collective bargaining structures.

In many European countries, the law provides for the extension of sectoral or regional collective agreements to all businesses operating in the same area, irrespective of their participation in collective bargaining. What is the Commission’s view on this safeguard against social dumping? – They obstruct wage flexibility and must therefore be abolished! In 2013, three Member States (BE, IT, SI) are likely to receive Country Specific Recommendations demanding exactly this. If we count the Recommendations that were issued to Malta and Sweden in 2012, too, we see that colleagues from a total of five countries have to cope with such interference in national collective bargaining practices.

Out of concern over the sustainability of public finances, the European Commission in 2013 drafted Country Specific Recommendations demanding the increase of the pensionable age in 12 (!) Member States (AT, BE, BU, CZ, ES, FI, FR, LT, LU, MT, NL, SI). In 2012, Slovakia and Cyprus were told to do exactly the same, which raises the overall number to 14. This will imply working until older age for European citizens, regardless of the number of years for which contributions to public pension schemes have been paid. Given the weak position of older workers in European labour markets, this policy is bound to increase poverty among this group of workers and their dependence on other forms of social transfers. Taking into account the recent neo-liberal reforms of European labour markets, we must also expect this policy to trap younger workers in insecure and low-paid employment for ever-longer careers.

If a collective agreement expires in Greece or in Spain without a new settlement having been reached, the previous agreement remains valid in order impede unilateral obstructions of social dialogue. Is this really so? - Not anymore! To facilitate the application of massive wage cuts in these countries, the so-called after-effect of collective agreements has been limited to three months in order to obtain financial assistance from fellow Member States. Does this constitute unwarranted interference in collective bargaining? Yes it does!

Where wages are deemed too high in international comparison, the European Commission recommends urgent action to fix such ‘impediments’ to competitiveness. Without possessing the means to set the wages in the private sector directly, Member States are encouraged to employ the signalling effect of public sector salaries and minimum wages over which they possess direct leverage in order to guide wage demands in the wider economy. A total of eight countries are currently applying such policies at the Commission’s behest (GR, IE, PT, IT, ES, HU, LV, RO).

The specific concern for the European Commission is to ensure that if wages grow, they do so strictly in line with productivity gains. In this view, automatic pay increases, such as indexation systems adjusting wages to inflation, need to be suspended. In 2012, four Member States (BE, CY, LU, MT) received Country Specific Recommendations demanding exactly this. On the contrary, none of the Member States in which the growth of productivity outpaced wage developments received Recommendations demanding the ‘realignment of wages and productivity’. Not only workers are affected. The Commission has proposed to tackle pensioners in 2013, too: According to the Commission draft, France will have to get rid of its pension index.

The neo-liberal doctrine underlying EU economic governance regards legislation that protects workers against arbitrary employer action and atypical working arrangements as an impediment to economic growth. Therefore, many Country Specific Recommendations contain demands to deregulate employment relationships. In 2012, six countries (FR, IT, LT, PL, SE, SI) received Country Specific Recommendations demanding the revision of regulations comcerning issues such as redundancy procedures, the use of fixed-term contracts, and working time. The 2013 draft Country Specific Recommendations suggest that similar reforms will have to be pursued by the Dutch government. A further three countries (CZ, LT, SI) are expected to create a more permissive legislative environment for temporary agency work.

In order to stimulate growth in times of crisis, services liberalisation is once more high on the agenda. In 2013, eight countries (AT, BE, DE, DK, ES, FI, FR, IT) will most likely receive Country Specific Recommendations from the European Commission demanding the removal of barriers to services market entry. This concerns, among others, the abolition of licensing procedures ensuring that quality standards for services are met and which prevent competition from turning into a race to the bottom that deteriorates working conditions. This policy orientation confirms trade union’s anxiety that effective checks against social dumping are a minor concern in the deepening of the European Single Market.









The mechanism of Country Specific Recommendations is not the only instrument that is used to dismantle Social Europe and to compromise the interests of European (service) workers. Three wider trends in EU economic governance, i.e. the commitment to the principle of austerity, the narrow focus on international cost competitiveness, and the empowerment of insufficiently transparent and legitimate institutions, fortify the neo-liberal reform agenda. Trade unions must address these issues and define a feasible counter-strategy in order to put EU economic governance at the service of society and to defend the idea of a truly Social Europe.

The tight constraints the Stability and Growth Pact and the Fiscal Compact impose on public finances translate into pressure on welfare states. In many European countries, this has already led to the reduction of unemployment benefits so that even low-paid, insecure work is preferable to unemployment. This causes workers to become wary of voicing their legitimate demands concerning salaries and working conditions out of fear of dismissal. Against this backdrop, trade unions have difficulty in obtaining robust mandates for collective bargaining.

Join our UNI Europa Troika Watch Facebook Community to find out more on how the imposition of austerity politics affects workers in Europe: https://www.facebook.com/TROIKAWATCH

In neo-liberal economic thinking, flexible labour markets in which wages are easily adjusted downwards are conducive to achieving the principal goal of EU economic governance: enhancing the European economy’s international competitiveness. Accordingly, a 2012 European Commission report described government intervention aimed at the “overall reduction of the wage-setting power of trade unions” as straightforward economic policy. This suggestion has already been taken up: Romania’s revision of representativeness thresholds for trade unions, the empowerment of works councils to the detriment of trade unions in Hungary, and the reduction of working time in which trade union reps in Spain’s public services are seconded to organising activities are illustrative examples in this respect.

On 5 September 2011, the European Central bank sent a letter to the Italian government that was, at that time, depending on ECB intervention in financial markets to bring down its borrowing cost. The secret letter, which was leaked to the press, spelled out terms of strict conditionality for such assistance. In order to obtain help, Italy was told to "consider significantly reducing the cost of public employees … if necessary, by reducing wages". This constitutes a grave violation of the ECB’s mandate, which, as the ECB does not cease to insist, is strictly confined to the maintenance of price stability.



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