TEN YEARS OF CRISIS ANALYSEN - EUROPEAN ECONOMIC INTEGRATION BETWEEN SILENT REVOLUTION AND BREAKUP - Rosa-Luxemburg-Stiftung
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ANALYSEN GESELLSCHAFT TEN YEARS OF CRISIS EUROPEAN ECONOMIC INTEGRATION BETWEEN SILENT REVOLUTION AND BREAKUP FELIX SYROVATKA, ETIENNE SCHNEIDER AND THOMAS SABLOWSKI
CONTENTS Preface 2 1 Is the unequal development in the EU a consequence of excessively high or excessively low wages? 4 2 Europeanisation of wage relations? 5 3 Crisis resolution at the expense of workers 9 4 The widening of the North-South divide 17 5 Italy: the new locus of the condensation of the euro area’s contradictions? 22 6 Conclusion 24 Literature 27
2 PREFACE1
By the autumn of 2008, the global To ensure debt could be refinanced and
financial system was in complete to prevent the EMU from collapsing, the
meltdown. The ruling classes seemed to eurozone countries gradually increased
have learned the lesson of the 1930s: they debt mutualisation and common liability
were able to avert the total collapse of the for credit risks through the European
financial system and the global economy Central Bank (ECB), the European
through coordinated central bank inter- Financial Stability Facility (EFSF) and the
ventions, bank rescue packages and European Stability Mechanism (ESM).
economic stimulus packages totalling However, new loans and guarantees
many hundreds of millions of dollars. But were only granted in exchange for the
it came at a cost: racking up even higher implementation of strict fiscal restraints.
budget deficits and public debt that The austerity measures imposed by
were already escalating due to spiralling national governments, the European
unemployment, falling tax revenue and Commission, the ECB and the IMF led
increasing welfare spending caused to a slump in effective demand, thereby
by the crisis. As a result, investors lost prolonging the crisis. In 2012/13, the
c onfidence in the solvency of states feared “double dip” recession hit the
with weak production structures such EU, affecting a number of member
as Greece, and the interest rates these states. However, from the perspective
countries had to pay on their sovereign of the neoliberal economic mainstream,
debt shot up. austerity policies were necessary to
The global financial and economic crisis structurally boost competitiveness in the
ruthlessly exposed the internal contradic- affected states.
tions of the European Union in general Now, ten years since the crisis began,
and the Economic and Monetary Union the question arises: what are the main
(EMU) in particular. The asymmetrical impacts and long-term consequences of
financial and trade relations within the the EU’s crisis management strategy that
hierarchical international division of we have been witnessing so far? Although
labour gave rise to a situation in the the unequal development between EU
EU where there were a few countries member states is not primarily a conse-
with large current account surpluses – quence of excessively high or excessively
most notably Germany – and several low wages (Section 1), what is clear is that
states with current account deficits. the “Europeanisation” of wage relations
The macroeconomic imbalances were formed a cornerstone of the European
reinforced by the EMU as countries with crisis management approach. Under
above-average inflation rates suffered neoliberal-authoritarian conditions, it
a loss in price competitiveness and brought about a marked shift in labour
were unable to regain an advantage by market and wage policy competencies
devaluing their currency. Borrowing was at a European level (Section 2). We argue
also encouraged through relatively low that the European debt crisis has been
real interest rates, which pulled more temporarily defused by authoritarian
imports into the deficit countries. management, which has particularlycome at the expense of workers in crisis related to Germany’s neomercan- 3
southern Europe (Section 3); however, tilist export strategy. Overall, the crisis
by disproportionately concentrating management strategy is characterised
on wage development, those aiming by a contradictory development: while,
to solve the crisis have largely ignored on the one hand, the crisis has furthered
its underlying causes: the divergences integration in terms of the regulation
between the EU member states have of wage relations, on the other, it has
not decreased – in some instances, they exacerbated unequal development
have even become more pronounced between EU states, which has brought
(Section 4). The inherent contradictions about a tendency towards disintegra-
of European integration and, most tion. Although these two developments
notably, the Economic and Monetary are intertwined, in this paper, we initially
Union persist and are emerging in examine them separately before carrying
other areas as well: we need only look out an overall evaluation of these trends
to Italy (Section 5) or to the emerging in the conclusion.
1 This is a revised and extended version of a text published in
the 3/2018 edition of the journal PROKLA.4 1 IS THE UNEQUAL DEVELOPMENT IN THE EU
A CONSEQUENCE OF EXCESSIVELY HIGH OR
EXCESSIVELY LOW WAGES?
Unlike conventional interpretations of disintegrated – and therefore peripheral –
the eurozone crisis, we do not assume production systems. This is the reason
that the balance of payments disequi- for structural dependencies on imports
libria are primarily caused by excessively and technology. Similarly, the current
high wages in the deficit countries (as discussion in heterodox economics
per neoliberal theorists) or by exces- and evolutionary economics empha-
sively low wages in the surplus countries sises the importance of technological
(as per many Keynesian approaches). development and product complexity
Rather, the disparity in the balance as opposed to factors concerning price
of payments is brought about by an competitiveness (Tacchella u. a. 2012;
unequal division of labour internationally, Dosi u. a. 2015). Production systems are
which is only partially determined also characterised by their widely varying
by wage d evelopment; the latter is a abilities to generate product innovations
secondary factor in comparison to the and control product life cycles, as well
structural differences that exist between as by different developments in labour
the production systems of the different productivity.
countries (vgl. Storm/Naastepad 2015). Based on these basic assumptions, we
According to the Marxist discussion on locate the causes of the European debt
internationalisation (Deubner u. a. 1979), crisis predominantly in the unequal
these differences within the hierarchical development of the European division of
international division of labour are not labour and production systems, and not
primarily caused by comparative cost in wage development. Still, the European
advantages or price competitiveness, division of labour has been shaped not
but, first and foremost, by the sectoral only by the structural dominance of the
composition of a production system. German production system, but also by
A superior or dominant position in the the transformations in Eastern Europe,
international division of labour stems China and other industrialising countries.
from the ability of a few coherent These processes have significantly
production systems to independently intensified the competition in the capi-
create complex production goods and, talist periphery in medium and low-tech
in particular, the production goods to product segments and over participation
create other production goods. These in transnational production systems. In
include, most notably, the manufacturing this specific regard, wage differentiation
of machinery, electrical and electronic between the different countries on the
equipment and chemical products. By periphery with subordinate production
exporting these production goods, the systems does play a considerable role.
dominant production systems are in a But here too, wage costs are far from
position to set the “terms of production” being the only factor determining the
(Schlupp 1979: 18) in all other sectors, profitability of production and location
which are made up of less coherent or decisions. For instance, the capitalturnover time is crucial where the (vgl. Milios/Sotiropoulos 2010). The EMU 5
geographical proximity, for example was a major contributory factor to this, as
of the countries known as the Visegrád it caused real interest rates to plummet in
Group – that is, Poland, Hungary, the Southern Europe before the crisis, which,
Czech Republic and Slovakia – to in turn, made borrowing more attractive.
Germany, fosters internationalised The drawbacks of this debt-financed
production along regional value and boom were high capital inflows from
production chains. abroad and a surge in imports, which led
The Southern European periphery to growing current account deficits.
sustained a considerable loss of impor- The matrix of factors mentioned are
tance as a result of these processes (vgl. largely ignored in the prevailing crisis
Heine/Sablowski 2015; Celi u. a. 2018). management strategy, which dispropor-
Prior to the recent financial and economic tionately focuses on adjusting pay rates
crisis, Southern Europe’s downgrading to increase price competitiveness. As
in the international and intra-European the austerity and structural adjustment
division of labour was concealed by a policies based on this have been in effect
debt-financed boom in demand, which in the EU since 2010, we will first look
was accompanied by high domestic at the impacts of these policies, before
product growth rates and high prof- turning to the unequal development of
itability of capital in Southern Europe the European division of labour since the
compared to the old industrial centres crisis.
2 EUROPEANISATION OF WAGE RELATIONS?
The development of European integra- Opratko 2016; Klatzer/Schlager 2012) –
tion has never been a linear process; focused primarily on the different forms
instead, crises and phases of stagnation of labour market regulation and wage
have been followed by new pushes structures in the member states. Accord-
for integration initiated by political ingly, it led to a substantial expansion of
projects (Bieling 2013: 90–93). As a European competencies, principally in
result of austerity policy-based crisis the area of labour market policy.
management, an increased deepening The crisis narrative underpinning the
of European integration can be observed politics of austerity was based on the
since the onset of the recent crisis, assumption that increasing price com-
particularly in the area of economic petitiveness and greater convergence in
integration. An “integrated macroeco- labour market regulation would tackle
nomic steering structure” (Seikel 2017; the causes of the crisis. As a result, the
Leschke u. a. 2015) was implemented in regulation of wage relations became
the form of a modular system, which –
alongside the focus on austerity-driven 2 The scope of this article unfortunately cannot include other
fiscal consolidation with corresponding areas of the European crisis management strategy, such as fi-
nancial market regulation. For more on this topic, see Kader
implications for gender relations (Hajek/ (2018), Ötsch/Troost (2018) or Guntrum (2019).6 one of the key focal points of the crisis on member states’ voluntary commitment
anagement strategy 2 (Degryse u. a.
m to implement policy recommendations,
2013: 37). Here, trade unions were depic- the introduction of financial penalties saw
ted as obstacles to market coordination a severe sanction apparatus established
and potential economic and employment for the first time (Schulten/Müller 2013).
growth (COM 2012; Keune 2016). From While the recommendations of the Euro
then on, the aim was to diminish their pean Semester are legally non-binding
wage-setting power and weaken their at first, they can be made binding in the
organisational strength (Schulten/Müller context of the Excessive Deficit Procedure
2013). or the Macroeconomic Imbalance Pro-
At the heart of the new European cedure, and non-compliance can lead
economic and labour market policy is the to sanctions. This binding nature was
policy cycle of the European Semester, once again reinforced in 2014 through
which intends to ensure the coordination a regional and structural policy reform.
and supervision of national economic, With the funding period from 2014 to
fiscal, labour and social policies (Rödl 2020, the successful implementation of
2012). It was reformed in 2011 and the respective country-specific recom-
2013 by two legislative packages set mendations became a condition for the
out by the European Commission, allocation of structural funds (COM 2015).
which also strengthened its focus on It is now possible for the European Com-
employment policy. At the time, José mission to use legally binding guidelines
Manuel Barroso, then President of the and recommendations to permeate
Commission, referred to the measures every area of labour policy, despite the
as a “silent revolution”. Known as the fact that the Commission has no right
“Six Pack”, a system of budgetary and to govern such areas according to Euro
macroeconomic surveillance measures pean primary legislation (Schulten/
was introduced in an attempt to identify Müller 2013; Müller/Schulten 2018).
and correct macroeconomic imbalances The European Semester is flanked by two
at an early stage using pre-defined further crisis management mechanisms
indicators. This stipulates that wage that are linked to its reporting system.
growth may not exceed the threshold Firstly, there is the Troika, made up of the
value of 9 % within a period of three years. IMF, the ECB and the European Commis-
This surveillance system is connected to a sion, and (as of 2015) the ESM. Its task is
penalty mechanism: if policy recommen- to stipulate the conditions for awarding
dations made by the Commission are not loans to states affected by insolvency
implemented, it can call for a comprehen- and to monitor their implementation and
sive corrective action plan and impose compliance. Through guidelines described
financial penalties. It is not uncommon for as “structural reforms”, the Troika set out
the policy recommendations given as part to substantially change the labour market
of the “Excessive Imbalance Procedure” and wage structures of the member states
to include guidelines for labour market concerned. Their governments are requi-
and wage policy (Rödl/Callsen 2015). red to coordinate all economic, labour
In contrast to labour market policy coordi- market and socio-political measures in
nation before the crisis, which was based advance with the Troika, such that the“programme countries” are largely obs- country concerned agrees to implement 7
tructed from engaging in independent, structural reforms (Silva u. a. 2017).
sovereign politics. All member states that The European labour market policy has
apply for funding from the European “aid become more binding and more author-
packages” are subject to this form of in- itarian. A comprehensive monitoring,
tervention (Keune 2016; Müller 2015). surveillance and penalty system was
Secondly, attention must be drawn to the created from ad hoc measures, which
political role of the ECB. Over the course presented European institutions with
of the crisis, the ECB repeatedly used its the opportunity to directly influence the
monetary strength to impose political structuring of labour market and wage
demands against the will of democrati policy reform and call for member states
cally elected governments (Schneider to take specific actions (Erne 2015;
2017). Here, the ECB also pushed for Syrovatka 2018). This resulted not only
structural reforms in the areas of labour in a major shift of steering competencies
market policies and collective bargaining from the national to the European level
in particular. Perhaps the most prominent and a general curtailment of national
case of direct political influence is docu- sovereignty, but considerable limitations
mented in a letter to Italy dated 5 August were also placed on the opportunities for
2011, in which the ECB threatened to halt trade union action (Müller/Platzer 2016).
the purchase of Italian sovereign debt Drawing on Müller/Schulten (2018),
unless the Italian government imple- we can thus refer to this as “European
mented the requested structural reforms interventionism”, which addresses the
within two months. These included the labour market, wage and social policy
downscaling of collective bargaining (Lux/Kompsopoulos 2019). Its assertive
from the industry to the company level, power depends on the forces within the
public sector pay cuts, and the scaling nation states that have to support and
back of dismissal protection legislation, implement the European guidelines
among other reforms (Weissenbacher (Syrovatka 2018).
2012). The ECB also addressed a similar European interventionism sees wage
letter to the Spanish government. 3 development as a central macroeco-
Here, nation states were pressured into nomic adjustment factor in its approach.
conforming by the interplay of market The European Commission (2012) reified
mechanisms and the direct threat of this view in a much-quoted report on
a loss of liquidity. The ECB’s move to labour market developments. In this
withhold vital liquidity from the Greek document, the Commission puts forth
banking system in 2015 was a decisive numerous suggestions for “employ-
factor in the Greek government’s ultimate ment-friendly reforms” (ebd.: 71), which
decision to submit to the demands of a include the scaling back of dismissal
third memorandum. While the ECB used
this tactic informally at first, it has been
official Central Bank policy since 2012, 3 Thus far, only the letters to Spain and Italy are publicly acces-
sible. As these are confidential letters, it is not known how ma-
when the ECB announced its intention ny countries to date have received “threatening letters” from
to purchase unlimited sovereign debt the ECB. The former President of the ECB, Jean-Claude Trichet,
emphasised in an interview that the ECB regularly sends such
in case of emergency, as long as the letters to individual governments in the euro area.8 protection, cuts to unemployment reductions to social security (van Gyes/
benefits and the minimum wage, actions Vandekerckhove 2016).
to make collective agreements less In almost all European member states,
binding and the decentralisation of the the labour market reforms of recent years
collective agreement system, among have been set in motion by recommen-
others. All suggestions for labour market dations made by the European Commis-
policy should serve the aim of creating a sion or guidelines from the Troika or the
“business-friendly environment” (ebd.: European Semester. For example, the
12) and reducing the “wage-s etting labour market policy reforms implemen-
power of trade unions” (ebd.: 104). ted in France and Italy can be traced back
Accordingly, the recommendations to pressure and interventions by the Eu-
and guidelines of the new European ropean Commission (Syrovatka 2016;
labour market policy aim primarily to Meardi 2014). The so-called Competi-
instigate a flexibilisation or reduction in tiveness Pact, which was passed in 2016
wages, which, in concrete terms, means and stipulated a wage freeze and an
instigating a decentralisation of wage extension in working hours, was also in-
formation and a downscaling of collec- fluenced by country-specific recommen-
tive bargaining, the structural weakening dations made by the European Commis-
of trade unions and a reduction in sion (Müller/Schulten 2018).
protection against dismissal as well as3 CRISIS RESOLUTION AT THE EXPENSE 9
OF WORKERS4
Although the European level is just one as Greece (21.5 %) and Spain (17.2 %) are
factor in the development of national facing unemployment rates that remain
labour markets, the amended regula- much higher than before the crisis. Even
tions and steering structures have had a in these countries, however, unemploy-
substantial effect on wage development ment has decreased overall since 2013.
in the EU (Lübker/Schulten 2017). In spite Nonetheless, youth unemployment
of the economic recovery in most EU remains high at 15.6 % in the EU and
countries and rising employment, wage 17.3 % in the eurozone. With the exception
development remains subdued. Various of Germany, the Netherlands, Austria and
studies draw the conclusion that the the Czech Republic, youth unemploy-
three classic variables – unemployment, ment is often considerably higher than
inflation and productivity – now have 10 %. Youth unemployment is particularly
less influence on wage development high in the Southern European periphery:
than before the crisis, which indicates 43 % of young people under 24 years of
the effectiveness of the European inter- age are unemployed in Greece, while the
ventionism in wage policy (Hong u. a. figure stands at 31.7 % in Italy and 35 %
2018; Deutsche Bundesbank 2018). in Spain.
The reduced binding effect of collective This has led to increased emigration from
agreements, the decentralisation of the countries most severely affected
wage formation, the surge in precarious by austerity and the economic crisis.
employment and an involuntary shift Without this, the unemployment rates
towards part-time work have brought would be even higher. The number of
about a structural deceleration in wage people emigrating from Greece rose
growth. Although these developments to over 100,000 per year from 2010
were already in motion before the crisis, onwards, considerably higher than the
they have been accelerated and given 40,000 per year who were leaving before
greater impetus by European interven- the crisis. It was not until 2016 that return
tionism. migration numbers began to increase.
This is evidenced by labour policy indica- This amounts to a net population loss
tors. The unemployment rate in the EU of around 270,000 between 2009 and
and the eurozone fell to 7.6 % and 9.1 % 2016 owing to migration. In Spain, the
in 2017 respectively – only slightly higher population loss totalled over 470,000 in
than before the crisis. However, there is the same time frame, and over 120,000
still considerable variation between the in Portugal. As it can be assumed that
member states. While Germany (3.8 %), it is predominantly the young and the
the Netherlands (4.9 %) and other Central well-educated who emigrate in search
and Eastern Europe countries such as of better living conditions, this implies an
the Czech Republic (2.9 %), Hungary unfavourable development for the demo-
(4.3 %) and Poland (4.9 %) are recording
low unemployment rates, countries in 4 If no other source is given, the figures in this section refer to
data from Eurostat, the AMECO database and Eurostat’s 2018
the Southern European periphery such Labour Force Survey database.10 graphic composition of the population between the different social classes (or
with all its resultant problems (population class fractions). On average in the EU,
ageing, increasing difficulties financing the upper strata of wage earners seem
the welfare state). to have largely ridden out the drop in
Considerable differences emerge if employment that resulted from the crisis,
the development of the labour market and women in this group continue to
participation is differentiated according show increasing labour market partici-
to educational qualifications and gender. pation. However, the employment rate
The number of women in employment among the lower strata of wage earners
in the EU has, on average, increased is stagnating.
at the same rate as before the onset of Differentiating employment trends by
the crisis. However, this is true only country once again reveals striking
for women with medium and higher differences. In some countries (including
education qualifications (higher school- France, Italy, Spain and Greece), the
leaving certificate or a university degree), employment rate is not only declining for
and the labour market participation of men with lower and intermediate educa-
women with lower education qualifica- tional qualifications, but also for women
tions (up to lower secondary education) with similar educational backgrounds.
has stagnated or decreased as a result of Despite increases in the number of
the crisis. Of the women with a tertiary women in employment in some areas,
level education in the EU, the share the average unemployment rate for
of employed women increased from women in the EU was just as high in 2017
78.9 % in 2002 to 80.7 % in 2017. Of the as it was in 2007 before the outbreak of
women with medium education qualifi- the crisis, namely 7.9 %, after tempo-
cations (upper secondary education and rarily rising to over 10 %. At 7.4 %, the
post-secondary non-tertiary education), unemployment rate for men in 2017
the share of employed women rose was considerably higher than in 2007
from 61.2 % to 65 %. However, of the (6.6 %). The labour market has therefore
women with lower qualifications, the failed to offer adequate employment
share of women in employment was opportunities for either women or men
just 37.7 % in 2002 and increased to in spite of the upturn in recent years.
39.1 % in 2007 before falling to 37.2 % In some countries such as Italy, Spain,
in 2017. The labour market participation Greece, the Baltic states, but also
of men holding intermediate and higher Denmark and Finland, women’s unem-
education qualifications has remained ployment remained higher in 2017 than it
almost constant, though it has decreased was before the onset of the crisis.
significantly for men with lower qual- Moreover, a large proportion of the
ifications: while 58 % of the working newly created jobs can be classified as
age men with lower qualifications non-standard employment, meaning
were employed in 2002, this fell to just they do not conform to the traditional,
53.3 % in 2017. If we assume that the standard employment relationship,
level of education is closely correlated which is permanent and includes social
to class position, it indicates substantial security coverage. Overall, almost one
variation in labour market participation in two employees in the EU works in anon-standard employment relationship of equal treatment of the core workforce 11 (Eichhorst/Tobsch 2017). While the share and temporary agency workers (Ulber of this form of employment declined 2010). Consequently, the proportion of at the start of the crisis (as employees temporary agency work as a share of total in atypical employment relationships employment rose from 1.7 % (2008) to were generally the first to be let go), it 1.9 % (2017) in the EU and from 2.2 % to increased again with the employment 2.5 % in the eurozone. Temporary agency upturn that started in 2014. The correla- work is especially widespread where tion between non-standard employment fixed-term employment is also common. and unemployment is clearly illustrated As a percentage of overall employment, in the example of fixed-term employ- temporary agency work experienced ment contracts: as unemployment rose, above-average growth in Ireland (+1.5 %), the percentage of fixed-term contracts France (+ 0.9 %) and Germany (+ 0.7 %). decreased in all European member In Ireland and France, this increase can be states as companies stopped creating traced back to labour market reforms that new positions and allowed fixed-term were demanded by the Troika or by the contracts to expire. With the economic European Commission as country-spe- upturn since 2014, an increasing number cific recommendations in the course of of fixed-term employment relationships the European Semester (Kompsopoulos can be observed. Overall in the EU in 2015; Syrovatka 2018). 2017, one in six employment contracts Women are far more likely to be in was fixed-term, though there is consid- non-standard employment relationships erable variation across EU member than men, which becomes particularly states. The Netherlands (21.8 %), Spain apparent if we examine part-time work. (26.8 %) and France (16.8 %) stand out Of the total men in employment, the share due to their high proportion of fixed-term of men in part-time work rose on average contracts. An extremely low proportion in the EU from 5.9 % in 2002, to 6.9 % in of fixed-term contracts can be seen in 2007, and to 8.8 % in 2017. The number states in Eastern Europe, most notably of women in part-time work as a share of Romania (1.2 %) and Lithuania (1.4 %), the total women in employment rose on where labour law was strictly regulated average in the EU from 28 % in 2002, to and fixed-term contracts have only been 30.5 % in 2007, and to 31.7 % in 2017. permitted since their accession to the EU In many countries, reforms have led to in 2007 (Schrag-Slavu 2017: 342). an erosion of the collective bargaining A similar picture emerges for temporary system and to widespread changes in agency work. After dropping off at the wage formation, and the way industrial start of the crisis, the percentage of relations have evolved has been to the temporary agency work as a share of detriment of the trade unions (Bieling/ total employment has risen since 2010, Buhr 2015). The existing collective encouraged by reforms in many EU bargaining and wage formation struc- states (Voss/Vitols 2013). The 2008 EU tures have been destroyed completely Directive on temporary agency work did in countries that received loans from little to change this, defining minimum the European “aid packages” and were standards and introducing the principle placed under the supervision of the
12 Troika (Müller/Schulten 2018). A trend also reflected in decreasing collective
towards the decentralisation of collec- bargaining coverage. 5 It decreased
tive bargaining, as well as a reduction across the EU by 7.9 % between 2009
in the binding effect of collective agree- and 2017; on average, it was 57 % in
ments, can be observed in almost all EU 2012. While more recent data for the EU
member states (Müller/Platzer 2016). The are not available, a negative trend can
two processes are closely linked as the be observed since 2012. In Romania, for
decentralisation of collective bargaining example, which was under the Troika’s
often results in companies’ withdrawal supervision, collective bargaining
from employer organisations (Schulten coverage fell by 63 % between 2007
2012). It therefore instigates a shift in and 2017, which is tantamount to the
the balance of power to the detriment of abolition of collective bargaining. While
trade unions and workers. 98 % of all workers were employed under
According to Marginson/Welz (2015: a collective agreement in 2007, this
436), a decentralisation of the collective number had fallen to just 35 % ten years
bargaining system has taken place in at later.
least ten EU countries: France, Bulgaria, The situation is similar in Greece, where
Greece, Ireland, Italy, Austria, Romania, there was a dramatic decline in collective
Slovakia, Spain and Cyprus. Portugal bargaining coverage from 83 % to 40 %
and Hungary should also be included as of all workers. Since then, the Greek
here the decentralisation was brought state has not collected any further data
about by limitations on the scope and on the status of collective agreements.
operating mechanisms of collective According to information provided by the
bargaining (ebd.). For example, due to research institute INE (2017: 114) from
reforms in France, Greece and Spain, the Greek confederation of trade unions,
company agreements now generally GSEE, only 6.6 % of all collective agree-
take precedence over sectoral collective ments were exceeding the company
agreements (Syrovatka 2018). The legal level; the majority of all wage negotia-
possibilities to make sectoral collective tions take place between the individual
bargaining agreements generally binding workers and the employers.6 In Portugal,
have been restricted (Keune 2016) and the number of employees on collective
the favourability principle has been agreements nosedived from 1.9 million
abolished or reversed. The decentralisa- to 240,000 in 2013 following a collective
tion of the collective bargaining system bargaining reform in 2011, which came
that took place in Ireland, Romania and
Greece is considered the most radical. In
all three countries, the established wage
formation mechanisms were completely
5 There are no harmonised and comparable data available on
demolished, and collective bargaining the collective bargaining coverage in the EU. The data used
here are based on figures from the OECD and the ICTWSS
was abolished at industry level and database. As a consequence, it was only possible to analyse
downscaled to the company level data from 27 of the 28 EU member states, and there was also
variation in the age of the data. For the methodological dif-
(Chasoglou 2015; Kompsopoulos 2015). ficulties in generating collective bargaining statistics in Europe,
The assaults on trade unions and existing please see van Gyes/Vandekerckhove (2016). 6 We would like
to thank Ioannis Kompsopoulos for this pointer and the trans-
collective bargaining structures are lation from the Greek.close to abolishing sectoral collective collectively-agreed wages, also in times 13
agreements (Coelho 2018: 5). of economic recovery, are an expression
The decentralisation of collective of the structural, long-term weakening of
bargaining and the decrease in the trade unions by labour market reforms
binding effect of collective agreements during the crisis years (Müller/Schulten
have had a negative effect on the devel- 2018).
opment of collectively-agreed wages. A closer look at real wage development
As a result, the trade unions in the also reveals the structural weakening
euro area were only able to negotiate a of trade unions. In the crisis, there was
modest increase of 1.6 % in collectively- a considerable drop in real wages and
agreed wages between 2013 and 2017. the recovery since 2013 has only been
In comparison to the early 2000s, the moderate. In nine European member
collectively-agreed wage growth fell by states, the real wage level was still lower
more than 1 % during the crisis and is in 2017 than 2008. Greece (– 26.0 %),
currently stagnating at around 1 %. This Croatia (– 13.3 %), Cyprus (– 7.5 %),
may be surprising because economic Portugal (– 4.8 %), Spain (– 1.0 %), Italy
development in the eurozone has clearly (– 2.0 %), the United Kingdom (– 1.5 %),
gained momentum since 2013, and the Hungary (– 4.7 %) and Belgium (– 0.6 %)
leeway of distribution has increased saw a decrease in real wages between
significantly (Lübker/Schulten 2017: 2009 and 2017.
421). The decline and stagnation of
7 However, it is important to emphasise that the wage share in
Germany declined rapidly from 2000 to 2007 as a result of the
deflationary wage policy of the coalition between the Social
Democratic Party and The Greens.14 Figure 1: Wage share development in selected countries
60 %
58 %
56 %
54 %
52 %
50 %
48 %
46 %
44 %
42 %
40 %
2010 2011 2012 2013 2014 2015 2016 2017 2018
Germany Greece Spain France
Italy Portugal Romania
Source: AMECO and own calculations.
The decline in the wage share offers a years of stagnation, unit labour costs
basis to presume an increased profit- have fallen in the Southern European
ability of capital by implication. Another programme countries, sometimes
indicator for this is the development of dramatically. For example, unit labour
unit labour costs. If wages grow faster costs increased by over 14 % in Germany
than productivity, then the unit labour between 2012 and 2017, while they fell
costs also increase. However, the by 12 % in Greece and 4 % in Spain over
converse situation causes the unit labour the same period. In other countries such
costs to sink. In a simplified representa- as Italy (+5 %) or France (+7 %), there
tion, the gap between productivity and was only a slight increase in unit labour
wage development can be understood costs. Interestingly, these countries
as the profit share per product unit. As recorded negative productivity devel-
a result, the development of unit labour opment during the crisis. Real labour
costs indicates the distribution of the productivity dropped by 2.3 % in France
newly created value product and also between 2009 and 2016, and by over
the balance of power between capital 17 % in Greece.8 The fact that the unit
and labour (Altvater 1978: 55). There labour costs did not increase in Greece,
is considerable variation in unit labour for example, in spite of the collapse in
cost development across the EU. While productivity, is due to the fact that wages
countries in northern Europe have seen fell even more steeply than productivity.
relative growth in unit labour costs after
8 Eurostat: Labour productivity per person employed and hour
workedFigure 2: Development of unit labour costs since 2010 for selected countries 15
120 %
115 %
110 %
105 %
100 %
95 %
90 %
85 %
80 %
75 %
2010 2011 2012 2013 2014 2015 2016 2017
Germany Greece Spain France
Italy Romania Slovenia
Source: AMECO and own calculations.
On average, the gender pay gap has The gender overall earnings gap in the
remained almost constant in the EU EU, which stems from women having
since the start of the crisis: in the areas lower average wages, fewer paid hours
of industry, construction and services of work and lower labour market partici-
(excluding public administration), the pation, amounted, on average, to 44.2 %
gender pay gap averaged 17.3 % in 2008 in 2006 and 39.6 % in 2014. Again, there
and 16.3 % in 2016 according to data are considerable differences between
from the Structure of Earnings Survey. individual countries. For example, the
However, these average values say gender overall earnings gap in Germany
little about the significant differences (2014: 45.2 %) and Austria (2014: 44.9 %)
between countries. The gender pay gap is still significantly higher than the
has undergone a significant decline in average.
some countries, but has nonetheless Since the onset of the recent crisis, the
seen considerable growth in others. EU average rate of men and women
For example, the gender pay gap in considered “at risk of poverty” has
Portugal was just 8.5 % in 2007 but increased in most member states. At the
rose to 17.5 % in 2016. To explain these same time, the risk of poverty remains
figures, the developments would have higher for women than for men (Table 1).
to be examined in closer detail for each
individual country.16 Table 1: Rates, as a percentage, of men and women at risk of poverty in 2007
and 2016
2007 2016
Men Women Men Women
EU 27 (before Croatia’s accession) 23.1 25.7 23.9 26.2
Germany 21.1 24.4 22.5 26.1
France 20.1 21.5 20.0 22.7
United Kingdom 24.7 28.0 23.4 25.8
Italy 25.4 29.1 27.2 29.3
Spain 26.4 29.4 29.6 30.2
Portugal 24.5 26.7 25.4 27.3
Greece 27.1 29.0 28.0 28.2
source: Eurostat. Note: here people are considered at risk of poverty if their income is lower than 70 %
of the median equivalised income.
The erosion of collective bargaining feasible in only a handful of European
structures and the weakening of trade member states. Under European inter-
unions have had a massive impact on ventionism, instruments for limiting wage
the macroeconomic steering capacity growth have been implemented exclu-
of the eurozone. As Keune (2016: 213 ff.) sively, while instruments for effective,
explains, widespread distribution of macroeconomic governance have been
collective bargaining opens up centralised weakened. Correspondingly, it was
possibilities for economic governance. not possible to achieve convergence in
However, strong trade unions and state wage development. On the contrary, the
interventions in wage policy, for example d ivergences between member states
in the coverage of collective bargaining have been consolidated and, in certain
agreements, are also necessary. A cases, even widened. In 2008 the average
look at the organisational level of the wages and salaries in the manufacturing
trade unions and the options available industry in Greece were roughly 48 % of
in state wage policy reveals, however, those in Germany; by 2017, this figure
that governance of this kind would be had fallen to just 35 %.4 THE WIDENING OF THE NORTH-SOUTH DIVIDE 17
As highlighted in the previous sections, account deficits has been aided by oil
crisis management strategies of the EU prices, which have been falling since
have predominantly focused on policy 2012: between 2013 and 2017, oil
adjustments to the wage and labour imports as a share of the eurozone GDP
market to the detriment of Southern sank from around 3.5 % to 1.5 % (ECB
Europe’s workers. But to what extent 2017). Moreover, the Southern European
were they successful in contributing to periphery’s ability to reduce its current
a sustainable recovery and in reducing account deficits does not necessarily
macroeconomic imbalances within the imply an increase in their international
eurozone and the EU as a whole?1 competitiveness. Both the crisis and
An initial glance at the development subsequent austerity policies led to a
of the current account disequilibria, decrease in effective purchasing power
which are often used as indicators of the and, consequently, imports into the
overall development of macroeconomic southern periphery of the eurozone,
imbalances, suggests that the dominant thus significantly contributing to these
crisis management strategy has been countries’ ability to balance their books
extremely successful. While the current (vgl. u. a.Lindner 2017; Gräbner u. a.
account of the euro area was initially 2017; Heine/Sablowski 2015: 579). While
negative during the crisis, it has been all this was taking place, Germany’s
recording increasing surpluses since export surpluses shifted: since 2012
2012. Although these are decreasing Germany has recorded a higher trade
again slightly, they still far exceed the surplus with the rest of the world than
pre-crisis level. These current account with the euro area; in 2016, the former
surpluses of the euro area are due, on was already twice as high as the latter
the one hand, to the reductions in the (Deutsche Bundesbank 2017: 21).
current account deficits of the Southern However, a comparison of the growth
European periphery, and, on the other, of imports and exports in the Southern
to Germany’s growing current account European periphery reveals an ambiv-
surpluses (EZB 2017). alent picture: imports into the Southern
This overall current account trend is, European periphery plummeted in
however, based on specific development 2008/09 because of the crisis and again in
tendencies that are more important 2012/13, primarily as a result of austerity
for assessing how effective the crisis measures; at the same time, exports
management strategy has been in have increased since 2013 (with the
comparison to aggregated current exception of Greece) (Fig. 3). They now
account data. First of all, it is essential exceed pre-crisis levels and therefore
to note that the reduction in the current help balance the current accounts.
9 We would like to thank Jakob Hafele for his valuable contri-
butions to this section.18 Figure 3: Imports (a) and exports (b) of selected crisis countries
in USD billions, constant prices (2010)
(a) (b)
600 600
500 500
400 400
300 300
200 200
100 100
0 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Spain Portugal Greece Italy
Source: World Bank, compiled by the authors.
Nonetheless, there are several indicators A further indicator of the increasing
that the subjacent imbalances have not erosion of production structures in the
been redressed since the crisis. Instead, Southern European periphery is the
there has been further erosion of produc- development of the sectoral export
tion structures in the periphery and structure. In Germany and Austria,
greater polarisation within the euro area machinery and automotive, electrical
(vgl. auch: Gräbner u. a. 2017; grund engineering and chemical industries10
legend: Becker u. a. 2015; Schneider made up 61.4 % and 50.1 % of the total
2017: 28 ff.). The development of indus- exports in 2007 (i.e. pre-crisis), and their
trial production is indicative of this. share continued to increase (to 63.1 %
While it did not take long for Germany and 51.8 %) until 2016. In the Southern
and Austria to return to (and even European periphery, by contrast, the
better) pre-crisis levels (2007), industrial share of these industries in the export
production took a serious and persistent structure declined – though to varying
nosedive in the Southern European degrees. As a percentage of total exports,
periphery. In Spain and Greece, the figure these industries’ share fell from 37.9 % to
has yet to even reach 80 % of its pre-crisis 35.5 % in Portugal over the same period,
levels. In both Portugal and Italy, and from 50.5 % to 48.3 % in Spain, and
industrial production is also far below continued to drop in the already heavily
its pre-crisis levels (Fig. 4). Given the de-industrialised Greece from 24.3 % to
persistent nature of the collapse, it can 19.6 % (UN 2018).
be assumed that production capacities in
the periphery have not merely remained
underused, but have also been perma- 10 Code 5 (“Chemicals”) and 7 (“Machinery & Transport Equip-
ment”) according to the Standard International Trade Classifi-
nently downscaled. cation (SITC1).Figure 4: Industrial production (excluding construction), 19
2007 = 100, *average
150
140
130
120
110
100
90
80
70
60
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Germany Greece Spain Italy
Portugal Austria Viségrad countries*
Source: OECD and own calculations.
According to the so-called Economic Sweden and Finland continue to boast
Complexity Indicator 11 (ECI) and the the most complex production systems in
Product Complexity Indicator (PCI), the the world alongside Japan, South Korea
Southern European production struc- and the US.
tures have also become less technolog- The opposite trend can be observed in the
ically complex. Gräbner u. a. (2017: 16 ff.) Visegrád Group of countries. Here indus-
use the PCI to show that the German trial production developed even faster
share of EU exports features a higher than in Germany and Austria and has
than average percentage of products overtaken pre-crisis levels by more than a
with high technological complexity. In third (Fig. 4), even if this growth has gone
contrast, the Spanish and Portuguese hand in hand with increasing internal
share of EU exports comprises a lower polarisation and structural heterogeneity
than average percentage of complex (Hürtgen 2015). In the ranking based on
products. In line with this, from 2000 the ECI, the Visegrád states maintained
to 2016, Portugal slipped down from the same positions or even moved up
position 32 to position 36 in the interna- slightly. The percentage accounted for
tional ranking based on the ECI, Spain by mechanical and automotive, electrical
from position 20 to 33 and Greece engineering and chemical industries
from position 47 to 58 (CID 2018). Not also increased from 57 % to 59.6 % on
only does this indicate the Southern average, and even from 57 % to 64.7 % in
European periphery’s decline within the case of Slovakia (UN 2018). However,
the international division of labour; it
is also an indicator of the polarisation 11 The Economic Complexity Indicator from the Harvard Cen-
within the European division of labour, ter for International Development consists of the level of di-
versity of a country’s exports and the level of their rarity or uni-
as countries such as Germany, Austria, queness (CID 2018).20 Figure 5: Shares of different countries (and country groups) as a percentage
of total German exports; emerging markets* = China (incl. Hong Kong),
India, Brazil, Indonesia, South Korea, Turkey
14
12
10
8
6
4
2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Southern European periphery emerging markets* France USA Italy
Source: IWF Direction of Trade Data, own calculations.
as this predominantly concerns the austerity policies (Fig. 5). The Central and
export of intermediate goods within Eastern European periphery has bene-
production chains, these indicators do fitted from this development as it is inte-
not suggest a dominant position in the grated in the German production system
European division of labour but rather and export model through Foreign Direct
an even closer subordinate integration Investments and offshoring (Simonazzi
into the German production system and u. a. 2013; vgl. Gräbner u. a. 2017).
export model. If we also compare the development
This development is consistent with of the Southern European periphery’s
the profound upheavals in the regional and the Visegrád Group’s share of the
structure of foreign trade within the euro imports of the largest economies in the
area. The Southern European periphery eurozone and the total eurozone since
has lost its relative and absolute 2000 (Fig. 6), it is clear that the Visegrád
significance as a market for German Group (with the exception of Poland) has
exports, even if the Southern European become even more deeply integrated
periphery’s share in German exports is into the German production system
currently showing slight growth once since the onset of the crisis and that
again. At the same time, German exports its economic clout has grown across
have shifted increasingly towards the the entire eurozone (Becker 2018). In
emerging markets of newly industri- contrast, the percentage of imports from
alised countries – a development that the Southern European periphery has
started before the crisis and was further increased only in Italy and – to varying
reinforced by the slump in demand in the degrees – France, while their share in the
euro area brought about by the crisis and imports of the entire eurozone stagnatedFigure 6: Imports from the Southern periphery (a) and 21
the Viségrad group (b) as a percentage of total imports
(a) (b)
9 14
8 12
7 10
6 8
5 6
4 4
3 2
2 0
2016
2017
2000
2010
2011
2012
2001
2002
2003
2004
2005
2006
2007
2008
2009
2013
2014
2015
2016
2017
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Euro zone Germany France Italy
Source: IWF Direction of Trade Data, own calculations.
and their share of German imports – also a growing asymmetry in the Fran-
despite the slightly increasing trend at co-German axis, which, until now, has
the moment – have remained compara- been the essential pillar for the European
tively low. integration process (Heine/Sablowski
As a result, from the perspective of the 2015; Schneider/Syrovatka 2017). In
dominant German production system, addition, the increase in political signifi-
the Southern European periphery remains cance of the Viségrad Group is also due
marginal in terms of imports and is to a shift in economic significance from
increasingly marginalised in terms of south to east, which has received much
its significance as an outlet for German less attention from the media. However,
exports. At the same time, a deepening this growth in significance is dependent
of the long-standing dualisation between on the development pattern of the
Northern and Southern Europe can be German production system, which, in
observed: while the trade relationships turn, limits the Viségrad Group’s political
within the Southern European block scope for action – particularly in the
(including France) as well as within the case of the more strongly foreign-trade
bloc comprising the German production oriented countries of Slovakia, Hungary
system and its supplier economies are and the Czech Republic. This led the
consolidated, the economic relations Orban administration, for example, to
between these blocs diminish in relative take on foreign bank capital and the IMF,
importance. while the overpowering dominance of
On a political level, first and foremost, foreign direct investment, in particular
this contributes to a relative weakening from Germany, has not been challenged
of Southern Europe and, consequently, (Becker 2018).22 5 ITALY: THE NEW LOCUS OF THE CONDENSATION
OF THE EURO AREA’S CONTRADICTIONS?
In spite of decreasing current account neering, and the chemical and pharma
disparities, the more fundamental ceutical industries, Italy competes with
patterns of unequal development countries such as Germany, France, Japan
persist in the euro area. The North-South and the US, while facing growing compe-
division – a crucial factor in the process tition from the more peripheral, newly
of European economic integration – is industrialising countries in its “traditional”
widening. While the crises in Greece, sectors of light industry. Using a range of
Portugal and Spain have, to some methods, Italian producers were able to
extent, been defused, contradictions defend their competitive edge for a long
of this unequal development are now time in spite of being under pressure from
primarily condensing in Italy. In contrast both sides. Firstly, it is important to note
to Portugal, Spain and Greece, at first the specific forms of industrial organi
glance, Italy does not appear to have sation in Italy: for instance, industrial
suffered a significant decline within the districts emerged in a range of industries,
international division of labour. In the i. e. local networks of flexible specialised
ECI ranking, Italy came 13 th in 2000 small and medium-sized enterprises that
and 16 th in 2016. The combined share developed intense cooperative relations
of mechanical engineering and the along commodity chains and a high level
chemical and automotive industries as of adaptability to changing market condi-
a percentage of Italy’s exports has even tions. Secondly, prior to the formation of
risen slightly since the start of the recent the European monetary union, Italy was
crisis – from 47.1 % in 2007 to 48.7 % in able to maintain the competitiveness
2016. Nonetheless, the drop in industrial of its domestic industry by repeatedly
production indicates that Italy is currently devaluing its own currency.
also experiencing an erosion of its indus- However, the conditions for competition
trial production system. have changed drastically since the 1990s
In the hierarchy of the European division owing to the transformations taking
of labour, Italy is situated between place in Eastern Europe and China, as
Germany and the periphery countries well as the European monetary union.
in Eastern and Southern Europe. It has While German exporters demonstrated
a production apparatus that is almost as as early as the 1980s that they could
diverse as Germany’s; however, there is a live with currency revaluations under
greater emphasis on “traditional” sectors the European Monetary System, Italian
of consumer good production such as producers came under increasing
clothing, shoes, leather goods, furniture, pressure after losing the option of
and food products. The mechanical engi- devaluing their currency. The differ-
neering industry is also strong, though it ences in the specialisation profiles of
is not as diverse as in Germany and has the German and Italian producers in the
closer links to the light industry sectors, monetary union are particularly beneficial
which are traditionally strong in Italy. In for German producers because, for
automobile production, mechanical engi- them, the euro is relatively undervalued,while Italian producers grapple with a Almost one million jobs were lost in the 23
relative overvaluation of the euro. This manufacturing sector between 2001 and
increases the pressure to reduce costs. 2011 (from 4.8 million down to almost
The reaction not only from large but also 3.9 million). From a total of approximately
small and medium-sized enterprises in 527,000 enterprises, over 100,000 enter-
Italy has been to move manufacturing prises disappeared during this time. The
facilities abroad, primarily to Eastern job losses were particularly pronounced
Europe. While the growth rates of Italian in the textile and clothing industry (from
direct investments abroad did fall in the over 600,000 jobs down to fewer than
crisis-stricken years between 2008 and 370,000). Overall, the “traditional” light
2012 compared with the period from industry sectors suffered greater job
2003 to 2008, they were higher than losses than vehicle manufacturing or
those of Germany, France and the United mechanical engineering, for example
Kingdom throughout this entire period (Istat 2011).
(Heine 2015: 40 ff.). 12 While low-wage These economic transformations
countries such as Algeria, Egypt and provide the backdrop for the political
Poland have been key recipients of Italian crisis and the upheavals in the Italian
direct investment for some time, there party system, as well as for the political
has been significant growth in Italian rise of players who wish to see Italy out
direct investment into countries such of the EMU. Italy is not just the place
as Albania, Bulgaria, Croatia, Romania, where the contradictions inherent to the
Serbia, Hungary, Czech Republic and European crisis management strategy
Turkey in recent years (Banca d’Italia condense; at present, this is where they
2017). For example, measured on the escalate. Unlike the centre of the euro
basis of the number of investment area, relevant capital fractions in Italy
projects and the value of foreign direct are turning away from the euro. At the
investment, the largest investors in same time, an exit from the eurozone
Serbia are Italian enterprises (RAS 2017: would – unlike the case of “Grexit” – put
4). In addition to Fiat Chrysler’s joint the continued existence of the EMU as a
venture in automotive production as well whole into doubt, if only due to the size of
as banks and insurance, investments in the Italian economy. For now the current
Serbia have predominantly come from coalition government, comprising Lega
companies in the textile and clothing and Cinque Stelle, has taken a step
industry (Radenković 2016: 33). The back from their initial aim of leaving the
significant extent to which foreign monetary union, but the government’s
production sites are being integrated announcement to breach the EMU
into the production chains of Italian
enterprises and their suppliers is opening
up gaps in the production networks in 12 Foreign direct investments are realised for a variety of
r easons. A large proportion of foreign direct investments aim
Italy. While Italy, similarly to Germany, to open up markets or are carried out as part of mergers and
was able to maintain an unusually high acquisitions, so it is primarily played out between the centres
of capitalism. Only a smaller proportion are made to reduce
level of industrial employment for a long costs or involve the construction of new production facilities
time, it is now showing a trend towards (“greenfield investments”). In this respect, the figures on for-
eign direct investment are of only limited significance for the
partial deindustrialisation. problem examined here.You can also read
