THE FUNCTIONING OF THE TROIKA : MAIN MESSAGES FROM

THE ETUC REPORT

Athens, March 2014

rjanssen@etuc.org

THE PICTURE THAT EMERGES….

• … IS A PICTURE OF A COUNTRY BEING TAKEN OVER

• NOT A « SILENT » TAKEOVER….

• …. BUT AN OPEN AND HOSTILE TAKEOVER …..

ONE KEY AIM : « THE SANCTITY OF DEBT »

• ALL EXTERNAL DEBT IS TO BE REPAID

• AND TO MAKE SURE DEBT WILL BE REPAID, LIVING AND WORKING STANDARDS NEEDED TO BE CUT MASSIVELY

• ALL STANDS IN THE WAY OF THIS POLICY HAD TO GO

FIRST THING TO GO: ECONOMIC RATIONALITY • DANGERS OF AN OBSESSIVE POLICY OF FISCAL AUSTERITY WERE WELL

KNOWN…

• …. BUT WERE BEING IGNORED

• CONSEQUENCE: VICIOUS CIRCLE OF CUTS, ECONOMIC COLLAPSE, MORE CUTS

AUSTERITY ON A MASSIVE SCALE….

0

5

10

15

20

25

30

Greece Portugal Ireland Spain UK Italy Euro Area France Netherlands Finland Belgium Austria Germany

Total of fiscal cuts from 2010 to 2014, in % of GDP (1)

….TRIGGERING ECONOMIC COLLAPSE

-35

-30

-25

-20

-15

-10

-5

0

5

10

Portugal Greece Cyprus Ireland

WHAT HAPPENED TO ECONOMIC ACTIVITY SINCE ENTERING THE TROIKA REGIME (includes 2014 forecast)

SECOND THING TO GO: ALL THAT IS SOCIAL

0

5

10

15

20

25

30

Portugal Greece Ireland Cyprus

UNEMPLOYMENT RATES

year before troika entering 2013

SECOND THING TO GO: ALL THAT IS SOCIAL

0

5

10

15

20

25

30

Portugal Greece Ireland

Anchored poverty rates (2008)

year before troika entering 2011

THIRD THING TO GO: WAGES AND COLLECTIVE BARGAINING SYSTEMS • THE TROIKA « LOGIC »: A DEVALUATION OF WAGES HAS A DOUBLE

DIVIDEND: IT KILLS DOMESTIC DEMAND AND IMPROVES COST COMPETITIVENESS;

• EXPORT LED GROWTH IS TO SAVE THE ECONOMY FROM THE EFFECTS OF AUSTERITY

• IMPORTANT: THIS IS NOT JUST ABOUT SQUEEZING WAGES DOWN AT THIS PARTICULAR MOMENT IN TIME ….

• … BUT ALSO ABOUT WEAKENING THE SYSTEMS OF WAGE FORMATION THEMSELVES SO AS TO MAKE MONETARY UNION ‘FIT’ FOR FUTURE SHOCKS

THIRD THING TO GO: WAGES AND COLLECTIVE BARGAINING SYSTEMS • ALSO, THIS IS NOT JUST ABOUT THE « DECENTRALISATION » OF COLLECTIVE

BARGAINING • BUT ALSO ABOUT PUTTING INTO QUESTION THE PRINCIPLE OF COLLECTIVE

BARGAINING BY REPRESENTATIVE TRADE UNION • REFORMS SUCH AS:

• FREEZING MINIMUM WAGES • CUTS IN MINIMUM WAGES • CUTS IN PUBLIC SECTOR WAGES • REVERSING HIERARCHY IN LEVELS OF COLLECTIVE BARGAINING • MAKING A LEGAL EXTENSION OF BARGAINING AGREEMENTS MUCH MORE

DIFFICULT • CREATING A LEGAL VACUUM WHEN THE BARGAINING CONTRACT COMES TO AN

END • SUBSTITUTING REPRESENTATIVE TRADE UNIONS WITH « GROUPS OF WORKERS »

EVOLUTION OF NOMINAL AND REAL WAGES PER EMPLOYEE SINCE START OF TROIKA PROGRAM AND UP TO 2014

-1

-17

-3,7

-13,6

-3,7

-16,8

-5,1

-15

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

Portugal_ Greece Ireland Cyprus

Number of published collective conventions in Portugal

50

100

150

200

250

300

350

2007 2008 2009 2010 2011 2012 2013

FOURTH THING TO GO: AUTONOMY OF SOCIAL DIALOGUE • A WIDESPREAD MISPERCEPTION THAT SOCIAL DIALOGUE WAS TRIED

BUT THAT SOCIAL PARTNERS (TRADE UNIONS) FAILED TO REACH AN AGREEMENT

• NOT SO

• IN SEVERAL CASES (GREECE,PORTUGAL), A CONCENSUS BETWEEN SOCIAL PARTNERS WAS REACHED

• TROIKA, HOWEVER, DECIDED IT WAS NOT ENOUGH, IGNORED THE SOCIAL PACT AND PUSHED THROUGH ITS OWN IDEAS OF DEREGULATION

FIFTH THING TO GO: TRUST AND SUPPORT FOR DEMOCRACY…

...AS WELL AS SUPPORT FOR THE EUROPEAN PROJECT

WHAT HAS THE TROIKA TO SHOW FOR ALL OF THIS? • HAS MARKET CONFIDENCE BEEN RESTORED ?

• HAVE PUBLIC DEBTS BECOME MORE SUSTAINABLE?

• HAS ECONOMIC GROWTH POTENTIAL BEEN INCREASED?

Spreads only falling after Draghi intervention, not because of fiscal cuts

Public debt ratio’s continue to increase

50

70

90

110

130

150

170

2009 2010 2011 2012 2013

Gross Public Debt since start of Troika Regime (% of GDP)

Portugal Greece Ireland Cyprus

HAVE FUTURE GROWTH PROSPECTS BEEN IMPROVED? • MASSIVE EMIGRATION OF (MAINLY YOUNG SKILLED) PEOPLE DOES

NOT BODE WELL FOR POTENTIAL GROWTH

• EUROPEAN POLICY MAKERS DO NOT BELIEVE THIS THEMSELVES, SEE THEIR ESTIMATES OF STRUCTURAL UNEMPLOYMENT

2007 2013

GREECE 10,1 19,3

PORTUGAL 9,3 15,3

IRELAND 6 12,9

SPAIN 11,7 23,2

TO CONCLUDE

• ONE KEY CONCLUSION: WE HAVE TOMAKE SURE TROIKA CAN NEVER HAPPEN AGAIN IN EUROPE/MONETARY UNION • WAKE UP DG EMPLOYMENT AND SOCIAL AFFAIRS

• APPEAL ON THE ILO AND COE

• EP TO USE ITS RIGHT TO ACCESS ECJ TO INTRODUCE COMPLAINTS AND TO MAKE SURE EU TREATY AND SOCIAL AQUIS ARE NOT ‘JUST A PIECE OF PAPER’

• SOCIAL RECOVERY PLAN FOR TROIKA COUNTRIES TO REFIX FAIR WAGES

• ECB OUT

• SOCIAL PARTNERS IN ESM ADVISORY BOARD