Seminar
The new EU economic governance and the regulation of labour

Lorenzo Bordogna (University of Milan), Roberto Pedersini (University of Milan)

23 March 2015
Room A, h. 13.00-14.30
Graduate School in Social and Political Sciences
via Pace 10 - Milan

After 2008, and especially 2011, significant changes have been introduced in the EU economic governance in response to the economic and sovereign debt crisis. The paper sketches briefly these innovations (European Semester, Six Pack, Two Pack, Fiscal Compact) and analyzes their effects on the regulation of labour in the EU countries. In particular, it discusses the implications of such changes on the three scenarios that have been traditionally depicted in the literature as potential adaptations of labour regulation systems to the process of economic and monetary integration: Americanization, Europeanization and Renationalization (Marginson and Sisson 2004/2006).
According to an important stream of literature (Scharpf, Streeck, Martin, Traxler, Schulten, Hancké, Baccaro, among others), inherent to the completion of the Single Market and the institutional construction of EMU was (and is) a logic of 'internal devaluation'. This would be the only way for national economies to adjust to asymmetric shocks, thereby leading to a competition between national industrial relations and welfare systems with a downward spiral of labour and welfare standards. Such 'Americanization' scenario is regarded as an almost, naturally inevitable outcome, given the original asymmetries and incomplete nature of the EMU institutional construction, in a context of integrated market for products, services, capital and labour. First of all, the asymmetry between a single monetary policy for the entire euro-zone, under the responsibility of the European Central Bank (ECB), and distinct national fiscal policies, which remain in the hands of individual governments. In this framework, fiscal policies remain under the strict constraints established by, on one hand, the Stability and Growth Pact and, on the other, the extremely limited scope for fiscal transfers across countries, which contradict one of the basic requirements for an optimal currency area (the EU budget is about 1% of total GDP of Member States). Secondly, the asymmetry in the formal mandate of the European Central Bank between macroeconomic objectives, with price stability as its "primary objective", hierarchically superior to the objective of a high level of employment. This asymmetry was further strengthened by practice and policy focus, since greater emphasis has always been put on avoiding inflation exceeding 2% than on inflation getting close to 0% or even negative (it should be remembered that price stability was and is still defined as an inflation "below but close" to 2%).
Other scholars (Marginson and Sisson 2004/2006, among many) have stressed the possibility of different developments, which would be mostly institution-driven rather than market-driven and would avoid the outcome of strict 'negative integration'. A possible outcome could be 'Europeanization', which refers either to the building of a vertically integrated, supra-national industrial relations system at EU level, equivalent to those existing at national levels, or to trends taking place at several levels (EU, national systems, company level) towards common policies, processes and outcomes, not necessarily leading to a vertically integrated system. Examples are the numerous attempts at trans-national bilateral or unilateral wage coordination. Another outcome could be 'renationalization', which involves a reinvigoration of national industrial relations institutions to cope with the enhanced competitive environment brought about by the economic and monetary integration. Examples are the various waves of national social pacts promoting wage moderation as well as measures aimed to increase labour market flexibility and reform the welfare systems (Advagic et al., 2011).
Insisting more on procedural than on substantive features, these two latter scenarios are open to potentially different outcomes. On one side, they may include forms of 'competitive solidarity' or 'competitive corporatism', which are compatible, at least in principle, with a downward spiral in labour and welfare standards. On the other side, they may involve forms of regime collaboration, as a prerequisite for policies of transnational or even of EU-wide coordination in employment and labour regulation, with the aim to contrast a race-to-the bottom and support instead a 'high road' to international competitiveness (Dølvik 2000 and 2004; Marginson and Sisson 2006: ch. 5; Traxler 2010).
The experience shows that these scenarios are not mutually exclusive, but they can co-exist, although in different combinations and with varying degrees of relative importance. However, since the outbreak of the economic crisis in 2007-08, and especially after 2011, trends in line with the Americanization/negative integration scenario are apparently prevailing. For instance, the multi-employer bargaining system, a traditional element of the European social model, is not only strained by the economic crisis, but is often openly under attack in the private sector (Marginson 2014; EU Commission, Industrial Relations in Europe 2014, chapter 2). Similarly, in the public sector a strong revival of government unilateralism is crowding-out social dialogue institutions and practices in many countries (EU Commission, Industrial Relations in Europe 2012, chapters 3 and 4; Bach and Bordogna 2013).
The paper analyses whether and to what extent the characteristics of the new EU economic governance are favouring or mitigating these trends, by reinforcing on the one hand the internal devaluation logic allegedly inherent in the EMU institutional architecture, or, on the other hand, by correcting and contrasting the original institutional imbalances. In this perspective, attention is paid to the potential effects of the most recent developments at EU level. The latter include: the first steps towards the European Fund for Strategic Investment; the "interpretative" Communication of the Commission of 13 January 2015, which provides new guidelines for a more flexible use of the Stability and Growth Pact, under certain circumstances; the Opinion of the Advocate General of the European Court of Justice (14 January 2015), on request of the German Constitutional Court (BVerfG), stating that the Outright Monetary Transactions (OMT) programme of the ECB is compatible, in principle, with the European Treaties, somehow opening the way to the Quantitative Easing programme of the ECB; the Analytical Note "Preparing for Next Steps on Better Economic Governance in the Euro Area", for the informal European Council of 12 February 2015, signed by J.C. Juncker, in 'close cooperation' with D. Tusk, J. Dijsselbloem and M. Draghi.

This seminar is part of the ResFron ESLS Cycle of seminars - 2015 Edition