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The Changing Economic and Political Background to EU Labour Law John Foster IER March 2012. - PowerPoint PPT Presentation
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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
Single Market, Equal Rights?
Adam Hug and Owen Tudor
The European Social Model is (almost) dead;
Long Live the European Social Model !
February 2012
Mario Draghi, President of EU Central Bank
“The European Social Model has already gone”
The Changing Economic and Political Background to EU Labour Law: 2 IER March 2012
• 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
THE ARGUMENTFrom a dysfunctional to an abusive relationship?
“The design of the European Single Currency is premised on the non-existence 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
The Changing Economic and Political Background to EU Labour Law: 3 IER March 2012
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
BUTFURTHER REQUIREMENT Free market for financial services demanded
regulation and ‘a stronger European currency system’. HENCE
The Changing Economic and Political Background to EU Labour Law: 4 IER March 2012
The Changing Economic and Political Background to EU Labour Law: 5 IER March 2012
THE SINGLE CURRENCYMaastricht 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
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
The Changing Economic and Political Background to EU Labour Law: 6 IER March 2012
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’
The Changing Economic and Political Background to EU Labour Law: 7 IER March 2102
“A Social Europe that works”The Blair-D’Alema Report, 2000, and the Lisbon Programme 2000
A recalibration of Social EuropeStress 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)
The Changing Economic and Political Background to EU Labour Law: 8 IER March 2012
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
The Changing Economic and Political Background to EU Labour Law: 9 IER March 2012
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
The Changing Economic and Political Background to EU Labour Law: 10 IER March 2012
Uneven Development worsens IThe Changing Economic and Political Background to EU Labour Law: 11 IER March 2012
Percentage increase in German imports and exports 1998-2008: based on euros at current value (selected countries)
CountryPercentage increase in German exports TO
Percentage increase in German imports FROM
Bulgaria 393 170Estonia 240 124France 58 31Greece 126 19Ireland 120 15Latvia 323 74Lithuania 16 -9Portugal 53 -2Romania 324 292Spain 123 56UK 61 54
Eurostat, External and Intra European Union Trade: Statistical Yearbook 2008 edition: Table 5B[1]
Uneven Development Worsens II
Innovation and industrial investmentBy 2007 old ‘core’ EU countries included 79 per cent of EU labour force
BUT86 per cent of all research workers95 per cent of Business R&D99 per cent of Triadic PatentsArchibugi 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
The Changing Economic and Political Background to EU Labour Law: 12 IER March 2012
Wage Share in GDP declinesThe Changing Economic and Political Background to EU Labour Law: 13 IER March 2012
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’
And productivity also worsensEnrique 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.
The Changing Economic and Political Background to EU Labour Law: 14 IER March 2012
EU and US Social Models converge on neo-liberal terms
The Changing Economic and Political Background to EU Labour Law: 15 IER March 2012
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.”
And Politics FollowPolitical 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, 67-91Christoph Herman et al, ‘The European Social Model’, Capital and Class, 2007, pp, 125-
139
The Changing Economic and Political Background to EU Labour Law: 16 IER March 2012
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
The Changing Economic and Political Background to EU Labour Law: 17 IER March 2012
But private sector bank lending is deregulated
Causing speculative bubbles in unproductive areas – esp. property
The Changing Economic and Political Background to EU Labour Law: 18 IER March 2012
External Debt: selected EU countries 2009
CountryNET Foreign Assets as per cent of GDP
Portugal -96Hungary -96Spain -75Greece -73Ireland -54Germany +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
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
The Changing Economic and Political Background to EU Labour Law: 19 IER March 2012
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 2012Gives 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
The Changing Economic and Political Background to EU Labour Law: 20 IER March 2012
Eurozone 2012 growth projections
Country February 2012 EurostatGreece -4.4Portugal -3.3Italy -1.3Spain -1.0Ireland 0.5Germany 0.6Austria 0.7
The Changing Economic and Political Background to EU Labour Law: 21 IER March 2012
Eurozone unemployment rates 2011 Q4
The Changing Economic and Political Background to EU Labour Law: 22 IER March 2012
Country overall youthGreece 19.9 48.1Portugal 14.8 29.9Italy 9.1 28.2Spain 23.2 49.9Ireland 14.8 29.9Germany 5.8 8.6Austria 5.0 7.3
How does ECB explain continuing economic contraction and mass
unemployment ?
The Changing Economic and Political Background to EU Labour Law: 23 IER March 2102
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
It’s the strength of collective bargaining/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 ?
The Changing Economic and Political Background to EU Labour Law: 24 IER March 2102
THE SINGLE MARKET AND EMPLOYMENT RIGHTS