Conclusions

Ever since the fleshing out and establishment of the foundations for a European single currency, concerns have been voiced as to the sustainability and viability of the euro in a less than complete institutionalized setting. Critics emphasized various shortcomings, including the lack of transfers to absorb asymmetric shocks, the perverse effects of a single interest rate, etc. Initially, however, the single currency seemed able to withstand the obstacles and, during most of the first decade of its existence, to be proving these critical commentators wrong. It was not until 2010, when the great recession turned into a sovereign debt crisis, that the euro was forced to undergo its first significant stress test and that it displayed the fundamental shortcomings in its original design that culminated in a full-blown ‘crisis of the euro’. It is for this reason that, since 2010, the European Union has taken a series of initiatives aimed at strengthening the economic governance framework at the same time as it has been struggling to introduce some features of a Europe-wide effort in crisis management.

The articles in this issue of Transfer embark on a theoretical as well as empirical assessment of whether the diagnoses, as well as the remedies, that have seen the light over the past three years are actually addressing the right issues. An attempt is made to ascertain what might be the expected outcome of these developments at the level of governance, not only in terms of the process of economic integration within the European Union but also in relation to deep, broad, and vital, issues of social justice and democracy.

The contributors to this issue seem to converge upon the finding that, while the efforts to strengthen the economic governance system have focused almost exclusively on keeping public budgets and debt levels in check, these efforts are unlikely – even should they prove successful – to represent any genuinely constructive contribution to helping the European Union out of the current morass, for the simple reason that the factors mainly addressed are not those that engendered the crisis. In other words, a remedy is being offered that quite fails to match the diagnosis of the problems at the root of the distress.

An aspect stressed by the authors, accordingly, is the need for the economic governance framework to obtain legitimacy, to acquire relevance for tackling the problems at stake, and to be made enforceable. Their views differ, however, on whether or to what extent the current approach and mode of construction supplies these requisites.

With regard to legitimacy, the issue of democracy is touched upon in several of the articles (notably, Verdun; Pochet and Degryse). The authors clearly spell out the need to rethink the European democratic model in order to incorporate an appropriate set of checks and balances as required and demanded by democratic institutions and stakeholders. Insofar as an increasing proportion of the decisions previously taken in the context of the national processes affording democratic legitimacy are now being pushed up to the European level, the current approach does not seem appropriate to provide a sustainable foundation for the European Union in the long run, as this democratic shortfall is more than likely to undermine the population’s support for the European Union. While the authors appear to be calling for a rethinking of the economic governance system in terms of its integration into a political union, such an outcome may turn out to be politically problematic to achieve at a time when policies are aimed at resolving the crisis by enhancing competition among European Union Member States, rather than encouraging cooperation and burden-sharing as the path to moving beyond the crisis.

In terms of addressing the problems at stake, the articles adopt various avenues of enquiry, thereby displaying the complexity and diversity of the issues needing to be addressed. At the heart of the contributions lies the notion of interdependency and interaction among the European economies. While the authors unanimously accept that ensuring that euro area countries have sound public finances must indeed be a part of the economic governance framework, they also unanimously reject the current obsessional focus on, and drive towards, balanced public budgets, lower public debt levels, and supply-side policies. The conclusions of their analysis point to the fact that the strong focus on fiscal consolidation and structural reform is a continuation of the policy model prevailing before the crisis and that it does not, as such, seem to incorporate the lessons needing to be drawn from the euro crisis which raised its head in 2010. In the assessment by Philippe Pochet and Christophe Degryse of the policy reforms currently proposed within the framework of the economic governance framework, the authors conclude that these reforms reflect the use of the crisis by specific actors as a window of opportunity to turn what was previously regarded, with legitimate pride, as the European social model into a mere adjustment factor within EMU. The resulting social policy reforms reflect a deepening and consolidation of the already prevailing paradigm of competitive solidarity whereby the purpose of social policies is to enable individuals to cope with fluctuations in the economy rather than to protect them when they encounter situations entailing insecurity. Hence the ‘Roadmap for Europe’ continues to be based on the idea that the unfettered play of the market constitutes the perfect mechanism able to deliver the bliss of equilibrium. The most apparent change of late is that this discourse is now more powerful than ever and that the earlier idea of allowing for different pathways to obtain similar outcomes has been abandoned in favour of a dogma of similar pathways despite different outcomes. The contributors to this issue accordingly advocate caution, for such a focus will not get the European Union out of the crisis. On the contrary, it is much more likely to exacerbate the current problems, destabilize the euro area and undermine the population’s support for the European Union.

What seem to be needed are policies and instruments that can restore growth within the European Union and the articles in this issue of Transfer make various contributions as to the most appropriate complementary or alternative way of addressing the policy issues. A common feature of the contributors’ arguments is the need to create a dynamic that would lead to growth and jobs in order to ensure a convergence of the European economies, while allowing at the same time for a fruitful combination of different policy objectives. Eurobonds are proposed by several authors, including Waltraud Schelkle and Iain Begg, as an instrument suitable for reconciling different policy objectives while contributing to restoring Europe to a path of growth. The issue of how to create sustainable growth in an interdependent European Union is addressed by Stefan Collignon who calls for a mechanism able to create solidarity in the form of a transfer union, or to foster ambitious programmes that would increase productivity. An important prerequisite for any progress in this direction would – it is important to note – be effective wage coordination.

The contributions adopt an essentially critical stance on the current economic governance framework, while at the same time calling for deeper economic and fiscal integration in order to redress the imbalances in competitiveness and structure between the economies. Integration along these lines would necessitate the creation of instruments for effecting transfers across the European Union as well as ways of pooling the risks associated with public debt. In the current situation, such proposals would seem to be politically very difficult, since fiscal austerity and deregulation of the welfare states are perceived in many EU Member States as having been imposed by the European level and taken out of the hands of national politicians. Even if such a negative view of the role of the European Union may not be totally justified, insofar as the crisis management has led to a positive impact on some counts – the interventions of the ECB, for instance, have successfully caused prohibitive interest rates to fall, thereby ensuring liquidity for both banks and states – popular support for the European Union is nonetheless on the decrease (cf. Eurobarometer survey findings), the European level having come to be seen as itself the problem rather than as a route to solution of the problem.

As to the implications for trade unions, these are manifold. While most trade unions across the European Union have, for the past 10 years, been calling for a better economic governance structure, they tend to be quite forceful in their rejection of the framework currently being set up and proposing alternative routes out of the crisis, e.g. The Social Compact (ETUC, 2012). This should come as no surprise, for the principles of the current economic governance system are certainly far removed from the trade unions’ own conceptions of macroeconomic governance, welfare state and labour market modernization. Trade unions are concerned about the economic impacts of the current set-up as it is focused on ‘collective austerity’ (Liddle and Diamond, 2012), as well as about the strong interference in wage-setting mechanisms and the push to make social policies and wages bear the full brunt of economic adjustment. What is more, the economic governance system is modifying, and in some instances calling into question, the trade union role in policy-making at both the national and the European level.

The question is how trade unions can engage with these policy issues and, in particular, at what level they can do so. The implications of economic governance for trade unions is not merely a question of the direct impact of the economic governance system on how wages are set at the national level, and of how industrial relations and welfare systems are being dismantled on the basis of a letter from the ECB; it is also very much a question of how organized labour can engage in public policy-making (Bernd et Traxler, 2011).

Several obstacles or tipping points seem to arise from the way the current economic governance system is being constructed and implemented. First, as described above, the current ‘Roadmap for European Integration’ is almost completely at odds with organized labour’s ideas about how the economy and society should be organized. What is more, the current mode of construction, given its flaw of democratic deficit, leaves little scope for the exchange of ideas and solutions as to the best or most appropriate way forward for the European Union. Secondly, the strong focus on supply-side policies, wage moderation, and a general increase in all forms of labour flexibility, leaves little room for the role of organized labour, given that the role of ensuring price stability has been entrusted to a single central bank. ¹ Thirdly, trade unions are organizations that continue to have their roots in the national soil, even though policies of direct relevance to the capacity of trade unions to represent worker’s interests are increasingly being decided at the European level.

These few points should suffice to indicate the important challenges currently facing the trade unions. Expressed in more specific and down-to-earth terms, the trade unions’ difficulties range from not being explicitly invited to take part in the policy-making process; through disagreement with the favoured approach to building the future; to the need to adjust to a new distribution between the national and supranational levels of decision-making. None of these difficulties are new, for trade unions have always had to cope with and adjust to the changing understanding of how economies function and how this impacts on their own role (Bernd and Traxler, 2011). The issue here is the size and complexity of the challenge. There has always been a tension between the European integration process and the nationally rooted trade unions. The unions have, however, found ways of navigating between leverage on the European level and leverage on a national level, using whatever structures of opportunities were available at the time (Hyman, 2005).

The major challenge for trade unions today is to identify opportunities that may lie concealed in this new trajectory. On this basis, they will be faced with the need to create consensus within their ranks on the best ways of continuing and coordinating the effects of leverage on a European and national level. In the absence of some common understanding of how to coordinate the existing and upcoming opportunities for leverage, the complexity and potential strength of the economic governance structure now in place will make it extremely difficult for trade unions to rely entirely on national-level leverage.

Richard Hyman wrote in 2005 that, ‘European trade unions are confronted by serious strategic dilemmas, and new modes of engagement both with the EU institutions and with their own memberships are urgently required’. Today, as we approach the end of 2012, this observation would seem to be even truer now than it was then.