April 29, 2024

Europe, but Different

Felix Syrovatka

With the European project mired in crisis, fundamental changes are needed to bolster social policy and protect workers

In the 1990s, when most of the then 15 EU member states were governed by Social Democrats, hopes for a “social Europe” were high. Support for European integration by trade unions and left-wing parties was also based on the hope that it would bring about a more social union.

Yet these lofty expectations were disappointed time and again. Following the eurozone crisis and the bailouts beginning in 2009, hopes for a European social model gave way to disappointment. At that time, the so-called “Troika” consisting of the European Commission, European Central Bank, and the International Monetary Fund imposed drastic reform programmes on a number of European countries, forcing them to implement rigid austerity policies and deregulate labour markets and collective bargaining systems.

Today, many member states are currently facing similar social and economic challenges — inflation, unemployment, poverty, and growing social inequality plague the entire European Union. Against this backdrop, calls for a fundamental retooling of European economic and social policy have re-emerged. But is such a policy possible within the narrow confines of European institutions? Where are the EU’s possibilities and limits regarding its own social policy measures?

Federica Drobnitzky from the Rosa Luxemburg Foundation spoke with European labour and social policy expert Felix Syrovatka about the changes and the future of the European Union’s social dimension.

The varying social situations in EU member states reveal vast differences: in 2022, the minimum monthly wage was 2,257 euro in Luxembourg, 823 in Portugal, and 332 in Bulgaria. How does the EU handle these inequalities?

At first glance, varying minimum wages are less indicative of inequality with regard to actual wages. Rather, they reveal a difference between the respective countries’ economies. We can observe variations in production levels, economic performance, and wage levels. This means that economic performance in Croatia is weaker than France or Germany, for instance. Along these lines, purchasing power and wages are lower in Croatia.

First and foremost, this indicates a problem with the EU and above all the eurozone: the unequal development of its member states. Within a shared economic zone, configurations of the various economies differ significantly. Not only are they interlinked in diverging ways, they are also characterized by individual traits. Because of this, development is inconsistent, meaning that inflation rates vary between the countries. This is a problem, and it was also one of the issues that led to the eurozone crisis in the first place.

In its first decades, the EU paid little regard to unequal developments in wage levels, or whether minimum wages or collective bargaining agreements and works councils were in place. Trade unions, collective wage agreements, and statutory minimum wages were even regarded somewhat negatively until recently, when the EU Directive on Adequate Minimum Wages was adopted. The EU’s opinion was that the unequal living and working conditions would converge in response to the single market as if guided by an invisible hand — in other words, that convergence processes would occur without significant regulatory measures.

This only changed in 2017 with the European Pillar of Social Rights and the subsequent revision of the European Posting of Workers Directive, as well as Support to mitigate Unemployment Risks in an Emergency (SURE), a temporary work programme passed during the COVID-19 crisis, and of course the EU Directive on Adequate Minimum Wages. There is also currently a discussion about revising the European Works Council Directives again, with a first draft due to be presented for revision by the end of the year. Its central aim will be to strengthen the scope of European works councils. These are all examples of how the EU has tried to address the social policy aspects of the current crisis. I call these efforts the social offensive of the European Commission.

European institutions and member states initiated the European Pillar of Social Rights (EPSR) that you mentioned in 2017, based on 20 social policy principles for future reforms. Since then, however, subsequent implementation by member states was non-binding. It was only at the Social Summit in Porto two years ago that the member states defined three core targets for the first time: by 2030, at least 78 percent of the population in the EU are to have a job and the number of people at risk of poverty and social exclusion should be reduced by at least 15 million. This is an ambitious declaration, but once again, it is non-binding. Does this mean that the pillar remains a symbolic policy in practice?

In fact, the pillar was always criticized for remaining a symbolic policy. One the one hand, this criticism is certainly valid. The pillar postulates unenforceable social rights — it follows that it cannot have any binding legal effect.

On the other hand, as we have seen since 2017, these rights have become a key point of reference for discourse for the Commission to legitimate social projects. Only through this was the EU’s Directive on Adequate Minimum Wages able to assume a political dimension. As mentioned earlier, the EPSR was also the starting point for the SURE package, and it will be a point of reference for the current revision of the European Directive for Platform Work, as well as the European Works Council directives. It therefore provides a framework within which social policy projects can be developed. All European member states have agreed to the EPSR, meaning that social policy initiatives are afforded a new level of legitimacy.

Let’s circle back to the EU Directive on Adequate Minimum Wages you mentioned earlier, which was adopted last year in October. Would you say that this and other EU social policy reforms symbolize a shift within the EU — away from neoliberalism and towards more social policies?

That is a difficult question. I do believe that the Directive on Adequate Minimum Wages, the revision of the Posting of Workers Directive, as well as the SURE package in parts and very probably also the upcoming revision of the Works Council Directive represent an increase of powerful resources trade unions can draw upon. If you use this as a standard for assessing these initiatives, it can be said they tend towards market limitation.

In this way, they may also be described as social. As asserted by Thorsten Schulten and Torsten Müller, it is a paradigm shift in the discourse when trade unions and collective bargaining agreements are no longer regarded as obstacles to growth, but rather as central elements towards poverty prevention.

However, it should not be forgotten that these initiatives remain highly limited. On the one hand, formally, because of the way they are implemented in the EU directives. While any directive has to be passed by the Council of the European Union, this does not necessarily mean it will be implemented by all member states in exactly the same way. Quite the opposite is true. Initial studies on the revision of the Posting of Workers Directive, for example, reveal national implementation is a key factor in the dilution of directives. In this regard, it always depends on how directives are translated into national law and ultimately on the balance of power at the national level.

On the other hand, this new tendency — which we currently see not only in labour and social policy, but also in competition and industrial policy — is always already embedded in an institutional structure that is focused on building markets. The EU domestic market and the monetary union continue to exist in their current form, limiting the effect of market-limiting policy mechanisms.

Although the Maastricht convergence criteria are currently still suspended due to the COVID-19 crisis with reform pending, a fundamental reform of the monetary union does not seem to be on the horizon. However, a social Europe needs to revise its treaties, leaving behind those elements that, to date, have only privileged and strengthened a market-creating policy, even imposing this policy under threat of sanctions.

You published a book on “New European Labour Policy” last year. In it, you describe EU labour policy from the years 2009 to 2017. What drove changes in EU labour policies at the time?

In my book, I was able to show that economic policy strongly influenced European labour policy during the eurozone crisis. The EU’s primary focus lay in strengthening the competitiveness of European companies on the global market. And according to the EC’s Directorate-General for Economic and Financial Affairs (DG ECFIN) in its report Labour Market Developments in Europe 2012, this was only possible if an “overall reduction in the wage-setting power of trade unions” could be achieved.

Retrospective analysis often neglects the fact that at the beginning of the eurozone crisis, it was still unclear how the crisis would be framed. Remember, there were massive disputes over the causes of the eurozone crisis. On one hand, the Southern European countries, led by France, criticized Germany’s strong export focus and advocated for a redistribution of funds, for instance through Eurobonds. This was opposed by a group of Northern European countries arguing that the crisis was above all caused by the competitive weakness of the Southern European countries. Subsequently, the European Commission mediated between the member states and, using the EU 2020 strategy, established a common narrative for the crisis, which was largely similar to that of the Northern European bloc.

However, the Commission required the implementation of the Treaty of Lisbon, and its goal to make the EU the most competitive area in the world. The Southern European member states had also agreed to this treaty. I was able to determine that this strategic move, together with the development of the EU 2020 strategy, was closely coordinated with the organized interests of transnational European companies through the European Round Table for Industry (ERT) in particular — as well as BusinessEurope — who worked closely with the DG ECFIN. The ERT organized joint workshops and events that were attended by senior Commission officials. For example, the Vision2025 strategy paper is similar to the EU 2020 strategy in many respects.

What dominant narrative has emerged from the crisis?

What won the day was the claim that the crisis was caused by the southern member states’ lack of price competitiveness. That meant the main lever for adjustment was wages, not industrial policy or any other form of economic support. It was claimed that wages were too high in southern Europe, reducing their competitiveness on the global market. This led to drastic cuts and the implementation of structural programmes. For example, in Greece, the collective bargaining system was decentralized and the negotiation of minimum wages was taken out of the hands of social initiatives.

However, the EU also exerted massive pressure on states that were less of a focus during the crisis, and were not part of the countries commonly associated with the measures taken by the Troika. Italy, for example, was essentially forced by the ECB to legislate for companies to deviate from collective bargaining agreements, otherwise the ECB would not have purchased its government bonds on the secondary markets.

Zoom out from these national examples and a pattern emerges: various instruments and processes interact to regulate workplace relations and therefore waged relations more generally. In my book, I describe this as the Europeanization of wage relations during the eurozone crisis. This led to the establishment of what I call the New European Labour Policy.

The European Left regards it as a fundamental problem that although the EU is a supranational entity in which large companies are highly networked, the politics of unions and activists largely take place within national frameworks. Can this structural disadvantage be overcome?

There are ultimately two questions there — on the one hand, the question of European civil society, and on the other hand, the need to communicate European interests.

First of all, there is a general problem with European policy because European civil society is very underdeveloped. But Gramsci teaches us that hegemony, that is the consensus supporting prevailing politics, is established in civil society. However, for most people, European civil society is highly fragmented between nation states. European politics are always transmitted by national media, national politics, etc.

This often means that the EU’s positive policy outcomes are sold as government ideas within the nation states. One good example is Ireland, which is reforming the minimum wage into a living wage as a result of the Directive on Adequate Minimum Wages. But the directive was never mentioned in press coverage or official government communication — you had to be well-informed to know that the EU Council of Ministers passed the directive with a great majority in Brussels the day that the reform was announced in Ireland.

The idea of a European discursive space might sound good, but it is complicated by the many different languages. Such a space is actually only accessible to a small elite group. If we are honest, for most people the space of experiencing politics is mainly at the regional level. This is a problem for the EU and in my opinion, for many people, this dynamic also limits the legitimacy of the EU’s policies. At the same time, it makes it easier and simpler for organized interests to get access to political decisions.

Now we reach the second part of the question. In my book, I demonstrate that the widespread mindset that the trade unions simply need to be as well organized as capital at the EU level is probably doomed to failure. I also believe that trade unions drew a number of conclusions in the wake of the eurozone crisis.

Based on the example of the failed competitive councils, I demonstrated that from 2014, unions shifted strategy towards a stronger coordination of national activities. The member states in particular usually (still) retain strong channels of influence. In other words, the EU level should not be the main focus. Instead, attention should be paid to the national or sub-national level, where good contacts and powerful institutional channels and resources support trade unions. In my opinion, these should be put to use rather than tilting at windmills at the Commission.

Of course, that does not mean that the trade unions should neglect the European level, but they should not place their emphasis on lobbying the Commission. The example of competition councils has revealed that this form of lobbying is especially successful when social democratic parties are in the governments of the largest EU states.

Whether it’s the financial crisis of 2008–9, the refugee crisis of 2015, the COVID-19 pandemic of 2020–22, climate change, or digital transformation: the challenges of the recent past underscore the fact that the EU will only remain viable in the future if it takes the social rights of its citizens into account. From your perspective, how should the roadmap to a more social Europe look?

I think such a plan should be structured like a house. First and foremost, the foundation of this house consists of changing or adding to the EU treaties. There is a negative logic behind European integration that is anchored into the treaties. Put in simple terms, this logic implies that we should reduce all restrictions on commerce, while simultaneously creating state regulation on the basis of mutual recognition. This is what allows differing levels of national regulation to exist side by side, leading to massive pressure on those countries where the regulation is relatively strong.

Because the EU member states, and their varying regimes of growth or accumulation, are automatically pitted in competition with each other, the resulting downward spiral is inevitable. In my assessment, the treaties’ tendency to create negative forms of European integration and their prioritization of market integration must be eliminated or at least adjusted via a social progress clause. Its design must protect the fundamental social rights and social achievements of labour policy from the freedoms of the domestic market.

Iwould be necessary to integrate the social progress clause into European primary law. Here, the primary aim would be to eliminate the over-constitutionalization of domestic market principles, dialling back market freedoms and bolstering equality rights. The social progress clause would prioritize social rights over equality rights if there is a conflict. This would not only counteract the prevailing negative dynamic of European integration, but also ward off interventions — for example, in collective bargaining autonomy or existing national social standards — that would disadvantage workers.

The second point — equally a part of the house — is the expansion of the Maastricht criteria through social and labour policy, or even better, their permanent suspension. If the goal is to alter the treaties, then the Maastricht criteria must be somewhat expanded through social and labour policy objectives. If the Maastricht criteria cannot be eliminated per se, the progressive option would be to separate labour and social policy expenditure from national deficits, as is currently on the table for investments in green and digitalization technologies. This means that associated expenses would no longer be subject to the deficit procedures and would be excluded from the EU’s recommendations or requirements, which otherwise significantly reduce the pressure to adapt to market rule.

The third point — let’s say, the house’s walls — involves encoding the European Pillars of Social Rights into European primary law, augmenting the EU Charter of Fundamental Rights, and rendering its social rights binding for all member states. This will require coordination of labour market and wage policies built on the principle of solidarity, taking into account their macroeconomic development.

For this, I would suggest reactivating the EU macroeconomic dialogue with the collective bargaining partners, forming a central coordinating body for a solidarity-based labour and wage policy. Although it was established in 2000, the threads of the macroeconomic dialogue have frayed somewhat because power relations have shifted to the disadvantage of European coordination. Counteracting this, the macroeconomic dialogue — which is indeed an integral part of the European Semester — could instead be strengthened and transformed into a central decision-making body: because EU finance ministers are participants in the macroeconomic dialogue, it has the potential to play a crucial role.

A further possibility could be to create a coordinating body for solidarity-based wage policy that above all improves the capacity of conflicting parties to act together.

Fourthly, the roof of the European house would be comprised of examples of how the Directive on Adequate Minimum Wages might become more concrete, putting the support of collective bargaining into practice. There is plenty of money distributed throughout the EU — we only have to think of the Next Generation EU. Why are there no collective bargaining agreements required here, for example?

Those who receive European funding should be obliged to apply collective labour agreements, or should be bound negotiated rates. It is surely feasible to create a European-wide unemployment insurance scheme, or to permanently regulate part-time work through structures such as the SURE package.

These suggestions all represent possible ways to build up a solidarity-based Europe in order to support good work. Of course, this requires a European Left and strong European trade unions that can assert themselves against lobbies, as well as against a European space that is heavily influenced by precisely those economic-oriented considerations and structures that need to be countered most.

Today, the rise of the right wing across Europe is a reality — underscored once again by the recent parliamentary elections in Italy and Greece. Could the strengthening of social rights help fight against this development?

The rise of the radical right is a complex phenomenon. Its causes are certainly more complex and go far beyond unsatisfactory social-political integration into the European project.

That said, I would support the argument that the EU’s approach to integration, which prioritizes competition between nation-states, has contributed to the rise of the radical right. This has been particularly exacerbated by its authoritarian handling of the eurozone crisis. The one-sided, market-based approach towards European integration has been a factor in establishing a “new political economy of social inequality and insecurity”. Hans-Jürgen Bieling coined this concept in order to describe the spread and increase of the fear of decline and loss — as well as social insecurity and a sense of individual powerlessness — in the context of social and economic upheaval that have been around since the 1980s.

This general shift is closely tied to the increase in social inequality and societal forms of exclusion due to deregulated working conditions. Frank Deppe and Hans-Jürgen Bieling already warned in 1996 that integration achieved through the domestic market project only would lead to “social explosions”.

The eurozone crisis and how it was dealt with added fire to this “explosive material” and exacerbated the dynamics of insecurity and social inequality at play. The New European Labour Policy razed important institutions of social equality and justice, including collective bargaining autonomy — in countries like Greece, such structures were totally erased.

Particularly in Southern Europe, the perception prevailed that the EU’s handling of the crisis was an undemocratic intervention that played into the hands of big capital, generally undermining the EU’s legitimacy. At the same, we can observe the failure of the political Left — for example, in Greece and Spain — accompanied by the visible decline of social democracy in many larger EU countries such as France, Italy, and in Germany, too.

Will the rise of the radical right lead to a “Europe — no thanks” attitude at some point?

The rise of the radical right in the EU is the result of a complex political crisis, in which the competitive state form of integration has played a key role since the 1980s. It now presents an existential threat to market-based integration and, ultimately, to the European project.

The large number of radical and right-populist MEPs is already making it difficult for a majority to be formed in the European Parliament. The numerous national governments with far-right parties in power puts pressure on the formal processes in the Council and impedes the negotiation of procedures to protect minorities. In particular, the policy areas of human rights, asylum, and equality are affected, as well as social and labour policy.

As a result, the EU and its functionaries are already aware today that the EU must accomplish more in the social realm. When interviewing an expert while conducting research for my dissertation, one Commission member said to me: “The EU has to finally deliver, otherwise it will soon no longer exist.”

However, this requires a true change of course: isolated, modest social policy initiatives such as the current Directive on Adequate Minimum Wages are not enough. No less than a full reworking of the EU treaties is required, together with the reform of the domestic market and monetary union. Introducing a social progress clause — as has been called for by the European Trade Union Confederation for years — would certainly be an important first step. A second step would be revising or doing away with the Maastricht criteria and integrating the European Pillar of Social Rights into European primary law.

Of course, we can already observe substantial policy shifts, for example in industry, competition, and climate. However, the main issue is whether the coming year will mark a reform of the Maastricht criteria, starting a true reform of the European integration process.

Felix Syrovatka is a political scientist and researcher at the Freie Universität Berlin. His most recent publication is Neue Europäische Arbeitspolitik: Umkämpfte Integration in der Eurokrise (Campus Verlag, 2022).

Top photo: AP Photo/Sylvain Plazy

Translated by Bradley Schmidt and Sonja Hornung for Gegensatz Translation Collective.

This article was first published on December 4, 2023, on rosalux.de.