Energy and inflation crises in Romania and Slovenia: different institutions,similar responses

Abstract

German

French

The 2021–2022 inflation crisis in the EU offers an opportunity to examine how diverse industrial relations systems respond to similar macroeconomic shocks. This article compares Romania and Slovenia, two post-communist countries whose industrial relations systems are poles apart. The expectation was that, in contrast to the enfeebled Romanian system, Slovenia would not only resort to social dialogue but also adopt comprehensive measures to shield workers from the dual energy- and food-related shock. Yet, there was less divergence than anticipated. In particular, while unilateralism took place in Romania because of the weakness of its unions post-2011, the interruption of tripartite negotiations in Slovenia was the result of the social partners’ actions and not a deliberate government strategy. Hence, while confirming that governments play the main role in supporting social dialogue, this article suggests that the social partners also carefully ponder the costs and benefits of their involvement in tripartite policy-making.

Keywords

Romania Slovenia tripartism social dialogue unilateralism inflation crisis energy crisis Central and Eastern Europe

Introduction

Were the social partners in Central and Eastern Europe (CEE) able to influence how governments dealt with the highest EU inflation in the 21st century? The 2021–2022 inflation crisis provides a unique opportunity to examine the responses of governments and social partners in countries with heterogeneous industrial relations regimes to a common set of macroeconomic shocks across the EU Member States. This article compares developments in two post-communist countries, Romania and Slovenia, whose capitalist institutions are poles apart (Bohle and Greskovits, 2012). Specifically, Slovenia is the only CEE country that has a coordinated market economy and a corporatist system of interest group representation, resulting in almost 80 per cent collective bargaining coverage (Czarzasty, 2024). In contrast, Romania has a neoliberal market economy, with a decentralised and pluralist system of interest representation, resulting in 15 per cent bargaining coverage (Czarzasty, 2024). Accordingly, this study compares the responses of governments and social partners to the inflation crisis in two countries with dissimilar industrial relations regimes.

On the macroeconomic front, the situation in the two countries was mixed. Inflationary pressures were more or less constantly higher in Romania than in Slovenia in the aftermath of the 2008 global financial crisis. They were mitigated by a slightly higher average real GDP growth rate in the former, starting, however, from a much lower basis and slowing down after 2017. Similarly, Romanian budget deficits were almost always higher, but based on a lower public debt (as a percentage of GDP). Whereas energy vulnerability was greater in Slovenia than in Romania, given sparser domestic energy resources, Romania’s sensitivity to external shocks – that is, the dual energy- and food-related crisis following the war in Ukraine – was more pronounced due to the greater weight of these two items in average household budgets. Moreover, energy price liberalisation in Romania in 2021 resulted in massive cost increases for household consumers, reaching €42 per 100 kWh in the first half of 2023, double that in Slovenia (Eurostat, 2023).

Given that institutionally, Romania was in a weaker position to confront the recent inflation crisis than Slovenia, the expectation was that the latter would involve the social partners in concerted action. This would involve measures aimed at widely shielding the population at large, and workers in particular, from the dual energy- and food-related shock. The story played out rather differently, however. Neither the process – unilateral with little involvement of the social partners – nor the output, in terms of content and targeting, and the outcome, both regarding reform effort and efficaciousness, have diverged as much as expected.

Specifically, governments in both countries resorted to unilateralism (through ordinary laws and emergency ordinances) to address the recent inflation crisis. The findings, based on five interviews in each country (see Appendix) with experts, social partner representatives and a Slovenian ministerial official, supplemented by secondary data (for example, concerning policy measures adopted in each country), suggest that the governments required swift decision-making under mounting pressure from the EU to respond to unprecedented external shocks. While unilateralism in Romania was expected given the weakness of the unions post-2011, the limited social dialogue in Slovenia was surprising. The interruption of tripartite negotiations during the inflation crisis was the result of the social partners’ actions rather than a deliberate government strategy. While this article reaffirms that governments play the main role in deciding whether to share their policy prerogatives with the social partners (Baccaro and Simoni, 2008), it also suggests that the social partners carefully ponder opportunities for tripartite policy-making when the cards are stacked against them.

Institutional characteristics and problem load

The logic of case selection

Drawing on Di Carlo’s (2023: 976) study on public sector wage setting, this article identifies six key institutional characteristics that explain the roles of government and social partners in addressing inflation. Romania and Slovenia are poles apart with regard to the type of market economy and industrial relations regimes (Bohle and Greskovits, 2012; Czarzasty, 2024). Despite a decline in union density and influence in both countries after the 2008 crisis, Slovenia is the only CEE country that still has a coordinated market economy and a corporatist system of interest group representation. This includes sectoral and other multi-employer bargaining covering four-fifths of the Slovenian labour force, against one-sixth in Romania.

The southeastern European country sharply contrasts to Slovenia: Romania has a neoliberal type of mixed market economy and a pluralist system of interest representation, in which unilateral state intervention in industrial relations is particularly strong (Trif and Szabó, 2023). The undermining of fundamental union rights between 2011 and 2022 resulted in the decentralisation of collective bargaining, a decline in its coverage and a defanged tripartite national forum (Goran et al., 2024). Despite some tripartite consultation on minimum wages in both countries (Eurofound, 2024), the influence of social partners is weak in Romania but strong in Slovenia (Czarzasty, 2024). Last but not least, since the 1990s, the Romanian government and social partners have sought to increase wages in line with (or above) inflation, while in Slovenia wage moderation has been the norm (Stanojević and Poje, 2019).

Given the fundamental institutional divergence, the selected countries are considered ‘most different cases’, as summarised in Table 1.

Table 1.

Institutional characteristics compared, Romania and Slovenia.

	Romania	Slovenia
Model of capitalism	Neoliberal (with strong state intervention)	Coordinated market economy
Degree of corporatism	Low	High
System of interest representation	Pluralist	Corporatist
Predominant level of collective bargaining	Decentralised (company)	Centralised (sector)
Role of the state in industrial relations	Strong	Weak
Role of the social partners in minimum wage setting	Weak	Medium
Dominant wage vs inflation policy over the past three decades	Indexation (wage increases at a similar or higher rate than inflation)	Moderation (wage increases at a lower rate than inflation)

Sources: Czarzasty (2024); Trif (2016); Stanojević and Poje (2019).

Overview of Romanian and Slovenian industrial relations regimes since the 1990s

Bohle and Greskovits (2012) argued that Romania had a distinctive type of neoliberal society with weak state institutions, high centralisation and coverage of collective bargaining, and relatively high trade union mobilisation power. Until 2011, Romania had a multi-layered collective bargaining system based on the favourability principle, meaning that lower-level agreements could not worsen employees’ terms and conditions set at higher levels. The starting point was the national collective agreement negotiated by the representative unions and employer confederations which set minimum standards, including wage indexation linked to inflation (Trif, 2016). The second layer consisted of sectoral agreements, negotiated by the representative unions and employer federations (Goran et al., 2024). Finally, terms and conditions of employment were established at the company level. The law required employers to initiate collective bargaining annually within any company with more than 20 employees. Despite pressure by foreign investors for the government to remove this obligation and to reduce other employment rights, unions managed to preserve a multi-layered collective bargaining mechanism during the EU accession process (Goran et al., 2024). Yet, their success was short-lived.

The 2008 crisis was followed by extreme disorganised decentralisation of collective bargaining in Romania (Guga and Trif, 2023). Boc’s centre-right government deregulated the labour market primarily by adopting the Social Dialogue Act (LDS), which undermined fundamental rights to organise, strike and bargain collectively (Goran et al., 2024). This ‘frontal assault’ on multi-employer bargaining led to a transformation of the regulatory framework from a statutory system that supported collective bargaining at national, sectoral and company levels to a so-called ‘voluntary’ system that made it almost impossible to negotiate new national and sectoral collective agreements after 2011 (Trif, 2016).

Besides, the government also weakened the national tripartite institutions in 2011. A new National Tripartite Council for Social Dialogue that includes representatives of social partners, government and the National Bank of Romania was established under the LDS (Hayter et al., 2013). Despite being weaker than the Economic and Social Council (CES), this forum should have enabled nationally representative social partners to be consulted on minimum wage and other government policies concerning wages and inflation. This institution co-exists with CES, established in 1997, which became dysfunctional after the government ceased to participate in 2011 and civil society groups were added as members (Hayter et al., 2013). The CES had to be consulted on all legislation affecting labour, but the social partners were often ignored, which led all five union confederations, together with the four largest employers’ organisations (out of 13) to withdraw from it during that year. Accordingly, the tripartite bodies had little capacity to address the inflation crisis post-2018.

Collective bargaining also played a limited role. First, it was almost impossible to coordinate wage setting in a context in which cross-sectoral bargaining was prohibited between 2011 and 2022 (Guga and Trif, 2023). Second, despite significant de jure changes introduced in 2022 to support multi-employer collective bargaining, its de facto influence in 2023 was minimal (Goran et al., 2024). Although the unions played a role, it was EU pressure via the Recovery and Resilience Facility that triggered these legal changes in 2022. Specifically, as the EU grants funds to deal with the green and digital transitions in exchange for economic and social reforms, such financing became contingent on the Romanian government reinstating fundamental union rights (Goran et al., 2024).

The 2022 legal provisions strengthened collective bargaining at all levels. At the company/workplace level, the representativeness threshold for unions (required to negotiate a collective agreement) was reduced from over 50 to 35 per cent. Also, both unions and employers are now allowed to initiate collective bargaining in undertakings with at least 10 employees/workers (previously 21). Finally, a company/workplace collective agreement applies to workers indirectly employed by the organisation. In practice, however, unions are generally able to conclude collective agreements only in large companies (Goran et al., 2024).

At the sectoral level, the representativeness threshold for union federations decreased from 7 to 5 per cent. At the same time, sectors eligible for collective bargaining have become more circumscribed, thereby allowing smaller union federations to become representative and negotiate (for example, the Free Trade Union Federation in the shipbuilding sector, previously part of the metal sector). But there was still limited sectoral collective bargaining in 2023, as unions often lacked an employer counterpart (Goran et al., 2024).

Finally, at cross-sectoral level, the 2022 law reinstated the right for representative union and employer confederations to negotiate multi-employer collective agreements. These apply solely to employees/workers employed by the members of the signatory employers’ organisations, whereas before 2011 an erga omnes extension of cross-sectoral and sectoral collective agreements was in place. The five union confederations started discussions about the reintroduction of a cross-sectoral agreement in 2023, but it is unclear whether employers will be willing to participate in collective bargaining.

Although the 2022 legal changes restored the social partners’ statutory rights to negotiate and, under certain conditions, extend (cross-)sectoral agreements, rekindling multi-employer collective bargaining is a gradual process (Goran et al., 2024) that requires the (re)consolidation of the social partners’ capacity and willingness to conclude similar agreements. Summing up, social partners were unable to use national collective agreements to address the inflation crisis between 2018 and 2023.

In contrast to Romania, Slovenia has developed the strongest industrial relations institutions in CEE (Bohle and Greskovits, 2012). Following the country’s independence, a neo-corporatist regime emerged. Until EU accession in 2004, it was ‘based on a system of political exchange, in which the unions agreed to a policy of wage restraint as a tool to curb inflation in return for being granted access to political decision-making processes’ (Stanojević and Poje, 2019: 546–547). The system relied on two pillars: the Economic and Social Council (ESS) and centralised collective bargaining.

The ESS was established through a social pact in 1994 as a political exchange between the government, employers and unions. Its main role was to discuss national socio-economic policies. Given that the Parliament could only discuss legislation that had already been debated within the ESS, the forum had a strong influence also on measures addressing inflation. Complementing the ESS, a centralised collective bargaining system developed, underpinned by cross-sectoral collective agreements for the private (1990) and the public sector (1991). Coverage was 100 per cent, guaranteed by the employers’ compulsory membership of the Chambers of Commerce and Industry (GZS) and of Craft and Small Businesses (OZS), as well as relatively high union density (40 per cent). Although all employees were covered by collective agreements in both countries before joining the EU, the social partners set wages at the national level in Slovenia and at the company level in Romania. There, only minimum standards were agreed via multi-employer agreements.

Since Slovenia’s accession to the EU, support for the exchange underpinning the previous period has changed dramatically. Stanojević and Poje (2019) single out three contributing developments: (i) giving up monetary policy under the EMU; (ii) political polarisation after 2004; and (iii) the fallout from the sovereign debt crisis.

Eurozone membership from 2007 meant that competitive currency devaluation became unavailable. Centrally agreed wage moderation in exchange for involvement in decisions concerning social policy gave way to concession bargaining after 2005. The decentralisation at the industry level was supported by GZS, which refused to enter into a general collective agreement for the private sector in 2005, on the grounds that lower-level bargaining would better reflect local productivity conditions. Additionally, there was a fragmentation of employers after membership of GZS and OZS became voluntary in 2006 and 2013 (Guardiancich, 2021), leading to a hardening of their stances vis-à-vis labour, in their pursuit to retain members.

The 2009–2013 sovereign debt crisis triggered a further deregulation of the labour market, thereby exacerbating de-unionisation (Stanojević et al., 2023). Union density dropped to 20 per cent and collective bargaining coverage to 75–80 per cent. The new reality of a decentralised private and centralised public sector was reaffirmed through the Social Agreement 2015–2016, which established collective bargaining at the industry level as the basis for private sector wage setting. Nevertheless, most workers remained covered by multi-employer collective agreements (Interview 10). According to the respective labour ministries, in 2024 there were 45 sectoral agreements in Slovenia, 27 in the private and 18 in the public sector, but only three in Romania, two in the public and one in the private sector (banking). Despite the erosion of centralised bargaining, Slovenia still maintained the strongest sectoral bargaining in the region.

As for the ESS, its fortunes ebbed and flowed. Major clashes broke out between the Association of Free Trade Unions of Slovenia (ZSSS) and the centre-right Janša government in 2005, owing to its neoliberal reform agenda (Guardiancich, 2012). Six years later, in 2011, the ZSSS brought down the centre-left Pahor government on the basis of unwanted labour and pension reforms (Guardiancich, 2016). Finally, a bitter dispute erupted between the employers and the centre-left Šarec minority government in 2018. The latter crisis happened because the leftist party ‘Left’, an external supporter of the government, tabled legislative proposals to the National Assembly, bypassing the ESS. Given the unforeseen situation (crucially, ESS rules of procedure were not infringed), the social partners decided to reinforce the institution, whereby the ESS would screen not only all relevant draft laws emanating from the government but also those from the opposition.

Previous research suggests that governments are willing to involve social partners in decision-making only under certain conditions. In an extensive study of 15 European countries between 1974 and 2003, Baccaro and Simoni (2008: 1323) found that ‘governments are willing to share their policy-making prerogatives when they are politically weak and when unions, while still representing a credible threat to policy implementation, have been declining in the recent past’. Given that Slovenia had a minority centre-left government in power in 2018 and declining union density, it was foreseeable that the government would involve the social partners in policy-making on inflation. In contrast, the Romanian unions no longer represented a threat to policy implementation following the undermining of their fundamental rights in 2011. Moreover, Slovenia entered the twin COVID-19 and energy crises with a collective bargaining system capable of keeping wage-price spirals in check and one of the strongest tripartite social dialogue institutions, whereas both were very weak in Romania. Accordingly, it was expected that the Slovenian social partners could engineer a concerted, balanced response to the inflation crisis, while their Romanian counterparts would be granted limited involvement, if any.

Energy vulnerability

Before the war in Ukraine, both Romania and Slovenia relied primarily on fossil fuels in their energy composition. Oil was the predominant source in both countries’ total internal energy consumption, followed by natural gas in Romania and nuclear power in Slovenia. As for the energy-related problem load, Romania fared better than Slovenia in 2020, as it satisfied over 70 per cent of its energy needs with domestic energy sources, against 54 per cent for Slovenia. What the figures do not show is that the Romanian energy sector had been slowly degrading. In particular, inefficient coal plants were closed at the behest of the EU but not replaced by renewable energy sources. Thus, from being a net exporter in 2018, net imports reached 32 per cent of its total consumption in 2022 (Enerdata, 2023).

As Table 2 shows, Slovenia’s energy dependence with regard to natural gas as well as oil and petroleum is total, while Romania imports less than 17 per cent of the former and around 65 per cent of the latter. Despite such differences, the dependence on Russian imports was similar in the two countries, at 17–18 per cent, with Slovenia importing more than 80 per cent of natural gas from the Russian Federation, some 14 per cent directly and the rest through Austria. Russian oil and petroleum also featured prominently in the two countries’ energy mixes, representing a quarter of total imports in Slovenia and 37 per cent in Romania.

Table 2.

Energy import dependence in 2020, total and from Russia.

Energy import dependence
	Total	Solid fossil fuels	Natural gas	Oil and petroleum	Renewables and biofuels
Romania	28.2%	22.0%	16.6%	64.7%	3.4%
Slovenia	45.8 %	17.6%	99.4%	99.5%	8.2%
Russian imports in GAE
	Total		Natural gas	Oil	Coal
Romania	17.0%		15.5%	37.0%	11.8%
Slovenia	17.6%		81.0%	24.9%	0.8%

Source: Eurostat (2024a).

Energy dependency does not tell the whole story for Romania, however. Its energy prices had started to increase even before the war in Ukraine, not only because of international developments, but also due to the energy price liberalisation undertaken in early 2021.

Inflation and wage dynamics

As Table 3 shows, inflation dynamics in Romania and Slovenia differed considerably. The former has experienced more or less consistently higher inflation rates than the latter throughout the past decade. Also, Slovenia has been part of the eurozone since 2007, while Romania still has its national currency (and a lower public debt). This gives it more room for manoeuvre in fiscal and monetary policy.

Table 3.

Harmonised Index of Consumer Prices and minimum wages (2012–2023).

	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
RO HICP	3.4	3.2	1.4	−0.4	−1.1	1.1	4.1	3.9	2.3	4.1	12.0	9.7
RO minW	4.0	13.0	11.0	14.0	16.0	14.0	24.0	9.0	7.0	3.0	10.0	23.0
SI HICP	2.8	1.9	0.4	−0.8	−0.2	1.6	1.9	1.7	−0.3	2.0	9.3	7.2
SI minW	2.0	2.7	0.7	0.2	0.0	1.8	4.7	5.2	6.1	8.9	4.9	12.0

Source: Eurostat (2024b).

As collective bargaining in Slovenia held steady, wages never spiralled out of control. Wage growth outpaced the EU average in 2000–2008, but remained in line with productivity developments. There were a few exceptions, such as in 2008, when salary rises made up for wage disparities in the public sector and higher inflation generated by EMU accession, and in 2010, following a substantial hike in minimum wages.

To keep public spending in check, in 2012, the centre-right Janša II government managed to hammer out an agreement with public sector unions that cut basic wages by 8 per cent and froze the public wage bill until 2015. Since then, wage pressures have been mostly muted, as public wage bargaining indirectly influences also the private sector. Thus, Slovenian inflation was under 2 per cent between 2013 and 2020, and there was even deflation in 2015, 2016 and 2020.

Finally, minimum wages in Slovenia have often prompted recommendations for moderation from the European Commission, mainly because of spillover effects on lower-paid private sector jobs. Their definition was changed recently. In 2015 and 2018, the Minimum Wage Act was amended, thereby (i) excluding all allowances from minimum wages from 2020 onwards; and (ii) setting the net minimum wage at between 20 and 40 per cent above the minimum cost of living – calculated every six years – from 2021 onwards (Poje, 2019).

In sum, Slovenia was not entirely unprepared when the inflation crisis hit in 2021–2022. According to IMAD (2023), it consisted of three concomitant developments. First, disruptions in the energy market and supply chains led to a surge in energy costs and the prices of non-energy industrial products, spilling over onto additional categories of goods and services. The conflict in Ukraine further escalated these pressures. Tighter energy market conditions and higher raw materials costs caused a significant increase in food prices, which jumped by 18.9 per cent year-on-year in December 2022, accounting for a 2.9 percentage point contribution to overall inflation. In line with European Central Bank (ECB) analyses, corporate ‘profit maximisation’ contributed to the surge.

Second, the strong rebound from the COVID-19 crisis in 2021 and 2022 (8.2 per cent and 2.5 per cent real GDP growth, respectively) and increased household spending, related to the government’s financial stimulus and elimination of pandemic-related restrictions, have had a significant impact on core inflation.

Third, the Slovenian labour market staged a dramatic resurgence. Wage pressures were felt where shortages were most acute, that is, in labour-intensive sectors, such as construction, accommodation and food service activities (IMAD, 2023). But although nominal wages picked up, Slovenia recorded a real wage decrease in 2022, mainly because of high inflation. The story was rather different in 2023. The recalculation of the minimum cost of living in October 2022 (9.2 per cent increase on 2017) led to a substantial 12 per cent minimum wage hike in 2023, which had a noticeable spillover effect onto the rest of the wage distribution.

In contrast to Slovenia, the Romanian government and social partners were used to operating in a context of high inflation. The transition from central planning to a market economy generated an annual rate of inflation above 30 per cent during the 1990s, falling to under 10 per cent only in 2005 and remaining above 5 per cent until 2011. Consequently, during the past three decades, Romanian inflation was relatively under control only between 2012 and 2021, surging again in 2022–2023 (see Table 3).

In Romania, the government sets the minimum wage once a year, except in high-inflation times (for example, twice in 2021 and 2023), following consultation with nationally representative social partners. By and large, their influence has been limited (Guga, 2024), as there are no institutional mechanisms to pressure the government into considering their views. While minimum wage increases were well below the inflation rate in the 1990s, their growth exceeded it since 2000, except for 2001, 2010 and 2021–2022. Contributing factors to the surge included the labour market shortages linked to massive emigration since Romania joined the EU in 2007. As for the hikes, the minimum wage almost doubled between 2015 and 2017, while the inflation rate was below 2 per cent. A shift in most social contributions from employers to workers led to a minimum wage hike of 24 per cent in 2018, although the operation was fiscally almost neutral. Finally, there was a 23 per cent minimum wage increase in 2023, more than twice the inflation rate. In sum, minimum wages were consistently employed to protect the purchasing power of low-paid workers rather than to reduce inflation.

While domestic policies were the main drivers of price fluctuations in the 1990s and 2000s, post-2018 inflation was perceived to be driven by international factors, particularly the prices of energy and fuel, which in turn, spilled over onto food and other goods and services (Guga, 2024; Stoiciu, 2023). A crucial factor that added to the surge was the liberalisation of energy prices, enacted in January 2021 by Cîțu’s centre-right government in compliance with EU competition law. This was soon followed by the war in neighbouring Ukraine, triggering a ninefold increase in the average monthly wholesale electricity price between early 2021 and August 2022, with a gradual decline thereafter. Compared with other countries, not only were average electricity prices for Romanian households the third highest in Europe in the first half of 2023, but also gas prices exceeded the EU average (Eurostat, 2023).

Policy responses

The policy-making process

In both Romania and Slovenia, two governments with different political orientations took charge of designing crisis response packages. In Romania, because of the price surge, Cîțu’s centre-right cabinet was forced to resign after a no-confidence motion, submitted by the Social Democratic Party (PSD) in October 2021, entitled ‘Stop poverty, price increases and criminals! Down with the Cîțu Government!’ Cîțu’s cabinet was replaced by a ‘grand coalition’ between the centre-right National Liberal Party (PNL) and the PSD. The coalition agreement included a provision for rotating the prime minister every 18 months before the next elections, with Nicolae Ciucă handing over to Marcel Ciolacu, leader of PSD. In Slovenia, the right-wing Janša III government was in charge from the beginning of the COVID-19 emergency and through the inflationary crisis until the Slovenian Democratic Party (SDS) was defeated at the April 2022 elections. Robert Golob, leader of the Freedom Movement (GS), and his centre-left coalition took charge, championing liberal and green policies, as well as making the energy crisis a key priority.

Rather surprisingly, the policy-making modes in the two countries did not differ substantially. Both governments acted almost unilaterally, relying on social dialogue only to a limited extent.

In Romania, neither of the two national tripartite advisory bodies that should have involved the social partners worked effectively. The unions indicated that their views were generally not considered in the Tripartite National Committee for Social Dialogue. For instance, they asked the government to cap the level of profits for companies producing and selling energy in Romania, but their suggestion was ignored (Interview 1).

Within the reformed CES, the social partners lacked the necessary leverage to block or influence relevant bills and policies (Interview 1 and 4). The unions sought to maintain workers’ purchasing power automatically by indexing wages to inflation, but neither the employers nor the government were in favour (Interview 1 and 2). Despite their opposition, the employers were less averse to minimum wage increases than in the past. For example, in 2018, they campaigned against wage increases in the public sector because of potential spillovers (Interview 4). As, following the EU Directive on adequate minimum wages, minimum wages had to reach 50 per cent of the national average wage, the employers accepted the rises proposed by the government, while the unions were pushing for somewhat more (Interview 1 and 2). Rather than discussing wage levels, the social partners debated when and how often minimum wages should increase each year (Interview 4).

Finally, the prohibition of cross-sectoral collective bargaining from 2011 to 2022, combined with limited sectoral collective bargaining, thwarted the social partners’ ability to coordinate a response to the surge in inflation (Goran et al., 2024). In practice, unions have been able to act solely in large unionised companies via firm-level collective bargaining (Interview 3 and 4). For instance, in 2023 a large metal company forged an agreement whereby the difference between actual and forecast inflation would be compensated through an una tantum bonus to employees (Interview 5). At the same time, this respondent reported that the 2022 legal changes did not affect its collective bargaining processes. Accordingly, most measures to address inflation were introduced by governments unilaterally, often via emergency ordinances (Guga, 2024), with limited input from the social partners (Interview 1 and 2).

In Slovenia, energy-related responses were supposed to rely on consultations and even negotiations within the ESS, as these issues fall squarely within its mandate, but the involvement of the institution was limited. This requires a thorough explanation.

The Janša III government had to grapple with the pandemic through 10 ‘anti-COVID packages’ or protikoronski paketi (PKP). These were omnibus laws that subsidised firms and vulnerable individuals, promoted short-time working and temporary lay-offs, granted additional resources to the health-care system and so on. Little time was allowed for deliberation – four days according to ZSSS (Interview 6) – and there was no room for further negotiations as the laws were passed through emergency procedures.

Although the Janša government at first relied on ESS-based concertation, social dialogue broke down during the legislative process for the fifth PKP, when the government inserted a number of amendments without consulting the social partners. The representatives of the ZSSS union walked out of the ESS meeting that took place on 16 October 2020. From then on, the Janša executive involved the ESS less and less in the drafting of PKPs and in the allocation of NextGenerationEU funds assigned to Slovenia. The unions’ complaints to Commissioner for Jobs and Social Rights Nicolas Schmit and the European Trade Union Confederation (ETUC) had little effect. Finally, ZSSS and other representative unions started boycotting ESS meetings. After an ESS meeting was called off in May 2021, the institution did not again convene until July 2022, after the election of the Golob government. In sum, the social partners did not participate in any energy-related decisions taken by Janša, whose government, however, did not feel the full effects of the inflation crisis. In fact, he lost the parliamentary elections exactly two months after the Ukraine war broke out on 24 February 2022, and was formally replaced one month before the ECB started raising interest rates in July 2022.

Hence, the incoming centre-left Golob government faced a radically different situation of skyrocketing prices – especially for basic consumption, such as food and beverages – and increasing debt servicing costs. In this context, the preferences of the social partners and the government started to diverge.

The unions blamed the employers for using the energy crisis as a pretext to pad their profits, arguing, for example, that they required only limited energy or employment subsidies. Additionally, they pointed out that core inflation was disproportionately hurting low-paid workers, who were largely excluded from state subsidies and not benefiting from any caps on food prices (Interviews 6 and 7).

The government’s stance shifted over time. At first, in 2022, Labour Minister Luka Mesec sided with the unions in condemning excessive profit-seeking by business, implementing a 12 per cent minimum wage hike to help low-paid workers. In 2023, however, spillover effects on the wage distribution intensified inflationary pressures (Interview 8). As indexation is a major driver of Slovenia’s budgetary overruns, Premier Golob and Finance Minister Klemen Boštjančič sought to partly de-index the economy via capped energy prices. The Labour Minister obliged by allowing only a limited minimum wage increase, which followed the standard consultation process, albeit outside the ESS. At the same time, in the public sector, a collective agreement was hammered out in early 2024, adjusting wages to only 80 per cent of inflation (3.4 versus 4.2 per cent).

Under these circumstances, not upsetting the social partners represented a major problem for the Labour Minister (Interview 9). Moreover, Luka Mesec was accused by leftist factions of the Left party of drifting towards the centre and pushing for substantial labour market and social policy reforms, including the complete redrawing of public pay scales. Only two emergency Acts were discussed extensively with the social partners between December 2022 and September 2023. In both cases, the ESS exhorted the relevant ministry to consider the social partners’ proposals when amending the laws. The interaction was thus limited, more akin to information than to consultation (Interviews 5 and 9).

After months of friction, the fragile balance at the tripartite level was upset in mid-2023. In an open letter to Premier Golob, all five key employer associations claimed that ESS operational rules were violated repeatedly as key ministers seldom attended its meetings. Next, the employers resented a number of unanticipated amendments to the Labour Relations Act (the so-called ‘small workers’ constitution’), as well as the inappropriate handling of key legislation such as the Long-Term Care Act and the Pension and Disability Insurance Act. The boycott of the ESS that started in July 2023 is still ongoing at the time of writing in 2024. Nevertheless, collective bargaining at the sectoral level, as well as tri- and bipartite dialogue outside the ESS, were never really interrupted during the period, and strikes, if any, happened only at firm or industry level.

The policy output

Romania

Similar to Slovenia, the Romanian governments adopted (often via emergency ordinances) a combination of targeted and untargeted measures to support households and companies in dealing with increasing inflation (Eurofound, 2024; Sgaravatti et al., 2023). The most important untargeted measure was the cap on energy and gas prices introduced in 2022, which was extended with a few amendments in 2023 (Sgaravatti et al., 2023). Among temporary targeted measures, the government introduced support for the energy and natural gas bills of vulnerable consumers in November 2021. This compensation scheme was expected to help from 65 to 85 per cent of the Romanian population (Pricop, 2021). The same decree provided support to public and private hospitals, schools and public social service providers. The popular measure was extended in March and November 2022 (Stoiciu, 2023) and currently applies until March 2025 (Eurostat, 2024a). In January 2022, a new scheme for household consumers of up to 300kWh was introduced, including a VAT reduction to 5 per cent (Sgaravatti et al., 2023).

The Support for Romania programme was launched in April 2022, introducing a broader package of measures for vulnerable people and companies amounting to around €3.5bn (1.3 per cent of GDP) (Stoiciu, 2023). It provided financial aid to cover the energy bills of small firms and farmers, as well as enabling companies affected by the war in Ukraine to apply for state grants (Eurofound, 2024; Sgaravatti et al., 2023). The package included vouchers worth €50, disbursed every two months, supporting low-income families, pensioners and the homeless in purchasing food and medicines and paying for public transport and housing, as well as monthly €30 vouchers for students on social scholarships (Stoiciu, 2023).

The government also put forward additional measures to support vulnerable people. First, a one-off payment of €150 in July 2022 aimed to help pensioners pay their energy bills (Eurofound, 2024). Second, since March 2023, all social benefits have been increased by indexing the Reference Social Indicator to average inflation (Stoiciu, 2023). Finally, from December 2023 to March 2024, an energy card was given to vulnerable groups, such as low-income pensioners, disabled people and families receiving social benefit allowances, to cover part of their energy costs (Eurofound, 2024).

Slovenia

The Slovenian response to the energy crisis included: (i) targeted one-off subsidies to groups of vulnerable citizens; (ii) targeted subsidies to businesses; and (iii) a mix of targeted and untargeted price caps and tax reductions.

In January 2022, the Janša III government introduced a one-time solidarity allowance of €150 for low-income pensioners, recipients of a disability allowance, recipients of financial social assistance or income support, beneficiaries of a child allowance and foster parents. The energy allowance was to be disbursed to around 710,000 persons at a cost of €106.5m (MOPE, 2022a). Similarly, in August 2022 the Golob government allocated €41.1m for a one-off energy allowance to recipients of financial social assistance or income support (around 63,000 households), the amount depending on household size and the presence of children (MOPE, 2022b). Additionally, an energy allowance of €200 was foreseen for disabled persons, covering 13,500 persons.

Subsidies to help businesses were substantial. Both governments subsidised the most affected sectors, mainly agriculture and fisheries (Janša around €70m and Golob €22.3m) (Sgaravatti et al., 2023). In September 2022, the Golob government passed a guarantee law (capped at €1.6bn) to back the financial obligations of major energy companies for loans taken out to ensure additional liquidity and to purchase natural gas from outside the EU market. Furthermore, it established an aid programme for businesses affected by the increase in electricity prices for 2022–2023. The first package co-financed electricity costs exceeding twice the price increase (MOPE, 2023a). A total of €80m was allocated to small and medium-sized enterprises (SMEs), large enterprises and energy-intensive companies. A second package followed in December 2022, worth €1.2bn (MOPE, 2022c). Of this, €850m were allocated for subsidies to offset the high costs of electricity, natural gas and technological steam. Next, €100m were earmarked to preserve jobs, for example, by partly reimbursing wages for employees working reduced hours or temporarily laid off. Finally, €250m were allocated to improve the liquidity of businesses in 2023–2024.

In response to high wholesale electricity prices, the Golob government introduced electricity price caps for 2024, mainly for household consumers, setting maximum tariffs for 90 per cent of consumption with the intention of encouraging energy efficiency and competition among suppliers. Price limitations applied also to small business consumers and specific public institutions, such as schools and health-care facilities. For SMEs, price caps were extended to encourage conservation, applying to only a limited quantity of electricity to promote savings (according to Sgaravatti et al. (2023), the measure cost up to €350m). Additionally, a separate regulation was introduced for large business consumers for 2023, establishing a pricing mechanism based on market conditions and capped costs (MOPE, 2023a). Natural gas prices were also regulated for several users, including households, communal heating systems, kindergartens, primary schools, health centres, small businesses and providers of district heating. These measures were extended into the 2024 heating season, leading to an estimated energy bill reduction of 13 per cent. Essential services such as education, health care and social support across both public and private sectors operating under public mandates were also eligible (MOPE, 2023c). In June 2022, Slovenia temporarily regulated fuel prices at service stations outside motorways. In late 2023, the maximum allowed margins for petrol and diesel were also reduced temporarily (MOPE, 2023b).

Complementing these regulations, the Slovenian government reduced the VAT rate from 22 per cent to 9.5 per cent for all consumers of electricity, natural gas, district heating and purchasers of wood for heating from September 2022 to May 2023. Beyond tax cuts, both governments reduced the contributions for supporting electricity production from renewable sources and cogeneration. This policy was further enhanced in November 2023 by fully exempting household consumers from such contributions, leading to a decrease in electricity bills by around 9 per cent until the end of 2024 (MOPE, 2023c).

Given the complexity of the measures adopted, Table 4 provides a schematic comparison of expectations versus process and output in the two countries.

Table 4.

Romania and Slovenia: a comparison.

	Key factors	Romania	Slovenia
Expectations and problem interpretation
Expectations	Institutional	Limited involvement due to overall weakness	Substantial involvement due to overall strength
	Distributive	Higher impact on vulnerable groups (due to exposure to energy and food prices)	Impact both on more and less vulnerable groups due to high redistributive capacity
Problem interpretation	Drivers	External: liberalisation of energy prices and war => inflation (especially increased food prices)Internal: some wage pressures due to labour shortages	External: war => inflation (especially increased food prices)Internal: some wage pressures due to labour shortages
Policy-making process
Mode	Government	Unilateral, ruling by decree	Unilateral, comfortable parliamentary majority
	Social partners	Uncoordinated via decentralised collective bargaining in large (unionised) firmsLimited impact of CES, but some information granted	Limited impact of collective bargainingSome information/consultation within the ESS
Output
Key measures	Targeted	Subsidies to small businesses and farmers affected by the energy crisis and war in UkraineSubsidies and food vouchers to vulnerable groups	Subsidies to business > subsidies to vulnerable groups (only)
	Untargeted	Retail and wholesale price capsReduced energy taxes / VAT	Retail and wholesale price capsReduced energy taxes / VAT
	Minimum wage	Increased more than inflation	Increase at the minimum (2023)

Discussion of the findings and concluding remarks

Despite the divergent expectations, Romania and Slovenia displayed surprisingly similar policy-making processes, policy outputs and, to a certain extent, preliminary outcomes. In the past, the role played by joint regulations in addressing inflation was dissimilar in the two countries: whereas Slovenian social partners often espoused wage moderation, their Romanian counterparts often demanded wage increases exceeding the inflation rate.

Concerning the output, in both countries the anti-inflationary responses encompassed reduced energy taxes, retail price regulation, transfers to vulnerable groups, windfall profit taxes and business support. The main differences were that while Romania relied on substantial minimum wage increases throughout the period, Slovenia allocated more funds to targeted interventions, especially for vulnerable groups, and thoroughly regulated wholesale prices. Both measures displeased the unions, which asked for greater help for low-paid workers and saw energy subsidies as an unwarranted gift to employers.

These concerns are reflected in the outcomes. The overall reform effort stood at around 3.17 per cent of 2022 GDP spent on energy-related measures between 1 September 2021 and 31 January 2023 in Romania and 3.63 per cent in Slovenia (Sgaravatti et al., 2023). While in Romania, these measures were cumbersome and difficult to implement, especially the compensation for energy bills, disinflation was achieved in Slovenia, but at considerable fiscal cost (see Tkalec, 2023).

According to IMAD (2023: 29–30), energy-related measures led to a 2 percentage point reduction in inflation for 2022. Simulations by the Ministry of the Economy, Tourism and Sport show that the regulation of motor fuel prices curtailed inflation by about 0.4 percentage points, while the Slovenian Statistical Office found that the energy price caps and tax reductions were responsible for a further drop worth 1.3 percentage points. In Romania, we did not come across precise estimations, but, at least partly as a result of government measures to cut energy bills, by early 2024 wholesale energy prices had declined to levels last seen during spring 2021.

As for inflation inequality, Figure 1 shows that Romania and Slovenia fared similarly throughout the period (see Claeys et al., 2024). In September 2023, however, the Romanian bottom quintile started to experience lower inflation rates than the top one. The fact that Slovenian governments did not cap food prices has probably played a role in keeping inflation high for the least well-off. But other indicators for 2023, such as material deprivation (8.0 and 9.0 per cent in Slovenia and Romania, respectively) and energy poverty (12.5 per cent in Romania and 3.6 per cent in Slovenia) imply that the distribution of the impact is difficult to tease out.

Figure 1.

Inflation inequality in Romania and Slovenia (2021–2023).

Most important for this article, however, is the unexpected similarity in policy-making. Despite the institutional differences, in neither Member State were the unions and employers extensively involved in policy decisions, beyond information and limited consultation on their preferences. Regarding the process, this was chiefly government-led in both countries. But while in Romania unilateralism and ruling by decree fit the expected narrative, in the Slovenian case they do not. Have Slovenian governments suddenly become averse to tripartism? Of course not. A plausible explanation is that both Slovenian coalition governments enjoyed a solid majority in the National Assembly (48 out of 90 seats for Janša and 53 for Golob), allowing them, especially the latter, easily to pass ordinary laws, with or without tripartite consultations. Rather than any executive intention to sideline the social partners, it was the latter’s actions – the boycotts by the unions first, and employers later – that interrupted Slovenian tripartism.

The corollary is that, under exceptional circumstances, the social partners assess the costs and benefits of participating in tripartite social dialogue. The Slovenian case demonstrates that when one of the social partners perceives that the government favours the other, this can lead to a boycott of social dialogue. Also in Romania, both unions and employers have voiced criticisms of tripartite discussions because the government disregarded their joint decisions. Further research is needed to find out under what circumstances similar distancing may occur and what its consequences for the social partners may be.

In sum, as a result of an unprecedented crisis that demanded rapid decision-making under increasing pressure from the EU, the conditions that would have made social dialogue essential were simply not present (see Baccaro and Simoni, 2008). There is a silver lining to these exceptional circumstances, however. We firmly believe that convergence towards unilateralism is not happening. Not only have bilateral relations in Slovenia and, to a certain extent, tripartite meetings – albeit outside the ESS – continued unabated, but also it is the intention of all concerned parties to resume negotiations within the ESS soon. Even Romania has experienced positive developments in its industrial relations landscape. Nevertheless, the road to proper resumption of social dialogue at all levels is still fraught with obstacles and will require a ‘requalification’ of the social partners, who were devastated by the global financial crisis.

Footnotes

Appendix

Funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

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