A virus is haunting Europe. And it could strike again. This year’s 20th anniversary issue of our flagship publication Benchmarking Working Europe brings to a growing audience of trade unionists, industrial relations specialists and policymakers a simple warning: beside SARS-CoV-2, the virus that has caused the Covid-19 pandemic and thrown Europe’s economies into a sudden and profound recession, ‘austerity’ is the other nefarious agent from which workers, and Europe as a whole, need to be protected in the challenging months and years ahead. At this point in time, a new wave of austerity could not only undermine the post-Covid recovery, but it could also fundamentally undermine the European social and economic integration project.
It is essential to note from the outset that there are enough signs to justify some cautious optimism about the future trajectory of the present crisis. Just as the scientific community appears to be on the verge of producing one or more effective and affordable vaccines that could generate widespread immunity against SARSCoV- 2, it is also clear that policymakers, at both national and European levels, are now approaching this challenging juncture in a way that departs from the austerity-driven responses deployed a decade ago, in the aftermath of the previous crisis (Sabato and Mandelli 2021). It is particularly apt for the 20th anniversary issue of Benchmarking, a publication that has allowed the ETUI and the ETUC to contribute to key European debates (Daly et al. 2020) on the basis of fact-based analysis, to set out our case for a socially responsive and ecologically sustainable road out of the Covid-19 crisis. In doing so, we will explore some of the key (mis) steps in the way Europe responded to the previous crisis so as to further emphasise the paradigm change that the response to the current crisis necessitates.
Right from the opening paragraphs of Chapter 1, this year’s report reminds us that, when the Covid-19 pandemic first hit Europe, ‘different Member States had been facing different policy challenges (…) with some emerging more scarred from the previous crisis than others’. It is worth recalling that those ‘scars’ were the product of at least two decades of deregulatory policies and dogmatic, often mistaken, assumptions about the way economies and markets operate. Prior to the ‘Great Recession’ of 2008, Europe had embarked on a decade-long ‘bonfire of rules’ that had undermined the foundations and functioning of a number of its essential markets, from the financial markets to the labour market, while also hampering long-established processes of wealth redistribution. There was a strong correlation, even a causal link, between those deregulatory reforms adopted at the turn of the century and the 2008 crisis, a point regularly emphasised in previous issues of Benchmarking. Those were the years when a barrage of OECD policy documents systematically recommended that the ‘development of various types of temporary contracts may present several advantages’ (OECD 1993: 111), that ‘there is some evidence that the nature of technological change calls for more flexible forms of employment contract – such as fixed-term contracts – that fall outside the province of traditional employment protection legislation’ (OECD 1994: 145), and that ‘stricter rules applicable to regular contracts may tend to increase the incidence of temporary work and to limit the extent to which temporary contracts will be converted into permanent ones’ (OECD 2004: 87).
The EU was clearly fertile ground for such prescriptions. The European Employment Strategy, the process of coordination of Europe’s labour market policies, included positive words on ‘the possibility of incorporating (…) more adaptable types of contract, taking into account the fact that forms of employment are increasingly diverse’ (Council of the European Union 1997). Benchmarking Working Europe was in fact created by the ETUI and ETUC partly in response to the introduction of this Strategy, as a tool to monitor progress in the implementation of the Lisbon Strategy and its effects on the world of work, and to engage critically with its recommendations.
It should not be forgotten that, year after year, key EU policy documents, adopted in the context of the grand EU scheme of the Lisbon Strategy, advocated that Member States further deregulate their labour markets and ‘facilitate transitions between different statuses, such as work, training, career breaks or self-employment (job-to-job insurance)’, regardless of the qualitative aspects of these forms of work (Kok 2004). In its critical responses to those pressures, the ETUC would systematically mobilise its affiliates across the EU to challenge this downward spiral (ETUC 2008), highlighting the macroeconomic risks associated with ‘decades of misguided structural reform’ and noting that ‘labour market flexibility does not create more jobs’, as well as pointing out that the stakes were not just about the quantity, but also about the quality of jobs. The very first issue of Benchmarking Working Europe (2001) had exhorted EU institutions to begin a ‘discussion (…) on how to benchmark the quality of employment at European level, with attention given to such factors as employment security, social protection, autonomy of workers and work organisation, skills development and demand, isolation and stress’ (ETUI and ETUC 2001: 21), while noting that ‘the degree of inequality in income distribution rose in almost all European countries between 1980 and 1990’ (ETUI and ETUC 2001: 24). And the 2007 edition followed in the same vein, flagging up that ‘building employment growth on sub-optimal solutions such as fixed term contracts, involuntary part-time and false self-employment will only undermine [Europe’s] efforts to become a knowledge-based society’; if ‘working conditions are not improving’, the edition pointed out, then economies simply shift wealth from ‘wages to capital’ (ETUI and ETUC 2007: 3).
Our respective organisations were therefore hardly surprised to find many of our longstanding concerns validated by the authoritative 2009 United Nations Report on the causes of the Great Recession, led by Joseph Stiglitz. The report duly highlighted that ‘in some countries, the weakening of social protection and the reduction in the progressivity of income tax systems weakened the automatic stabilizers. In others it led to a structural decline in domestic consumption levels, and thus to a decline in the multiplier’. It further noted that the ‘[c]onstraints imposed in the European Union by the Stability and Growth Pact, and concerns in other countries about the size of fiscal deficits and national debt may impair the use of counter-cyclical fiscal policies to respond effectively to shocks’. No less importantly, ‘it is now recognized that in most advanced industrial countries, median wages stagnated during the last quarter century, while income inequalities surged in favour of the upper quintiles of the income distribution’. In effect, the Stiglitz Report continued, ‘money was transferred from those who would have spent to meet basic needs to those who had far more than they could easily spend, thus weakening aggregate effective demand’ (Stiglitz 2010: 22-23).
One would have hoped that such a clear and consistent analysis of the causes of the 2007-2008 crisis would have led to the swift adoption of remedial, structural measures. But far from being a moment of self-reflection for Europe and an opportunity to embrace progressive reforms that would reverse its earlier waves of deregulation, fiscal prudence, and social devaluation, the Great Recession of 2008 became the springboard for testing one of the most painful medicines ever to be administered to an already vulnerable patient: austerity.
The abrupt move to austerity
A comparison between the 2010 and the 2011 editions of Benchmarking Working Europe can help us identify those crucial months as a key turning point on the road to austerity. Early in 2010 there was still enough (cautious) optimism to suggest that ‘the social dimension is an integral element in sustainable growth and that the quality of jobs is a way of fostering the combination of economic, climatic and social considerations within a new growth model’. We proposed to ‘bring in a new social deal according to which workers’ rights act as a beneficial constraint, and social policy as an investment strategy’, and, perhaps most importantly, remarked that ‘a number of reflections along these lines have recently emerged, forming the basis of a renewed vision of the next EU mid-term strategy EU2020’ (ETUI and ETUC 2010: 4). It is worth noting that 2010 (and to a certain but lesser extent, 2009) was also the year in which Benchmarking Working Europe first placed the issue of climate change on the table: as part of what we then referred to as the ‘Sustainable Development Strategy’, we advocated moving it centre stage in the economic recovery and trade union debates (see Chapter 8 of the 2010 issue). By the following year though, the first wave of ‘bailout agreements’ left no doubt as to the intentions of the IMF-EC-ECB ‘Troika’ in shaping the Great Recession into a ‘sovereign debt’ crisis, and imposing on EU Member States ‘the most austere fiscal retrenchment packages, either as part of the financial assistance they received from the EU or in an attempt to “please the markets” and so avoid having to resort to such support’ (ETUI and ETUC 2010: 8).
Since that moment, for the best part of the last decade, Benchmarking Working Europe has painstakingly tracked and scrutinised the incessant demands imposed by the EU on Member States – in various guises such as renewed bailout agreements, the ‘Fiscal Compact’/Fiscal Stability Treaty, or actions subsumed within the European Semester, including successive Country-Specific Recommendations (CSRs) – to deregulate employment protection systems, decentralise national wage bargaining and industrial relations models, and rein in public spending, especially in the social sphere. What the 2017 issue of Benchmarking referred to as ‘seven years of austerity and deregulatory structural reforms’ (ETUI and ETUC 2017: 5) resulted in a weak, uncertain, and job-poor economic recovery, falling wages, rising inequalities, a historic low in the levels of coverage of collective bargaining, and a growing sense of resentment and pessimism about the prospects of the European project as a whole. Rising nationalism, growing support for right-wing populist movements, and even the dramatic fracture of the ‘Brexit’ referendum of 2016, surely owe as much to years, perhaps even decades, of deregulation and austerity as they owe to the unprincipled and calculating ability of demagogues to profiteer from the genuine suffering of Europe’s working classes.
It was only in 2017 and 2018 that some cautious optimism, mainly linked to the prospects timidly raised by the ‘Five Presidents’ Report’ and to the adoption of the European Pillar of Social Rights, returned to these pages. ‘These documents should form the basis for establishing a vision of the future of Europe which, as declared on several occasions, has social concerns at its heart’ we wrote back then, while noting that ‘this concern comes somewhat late, but is still of key importance’ (ETUI and ETUC 2017: 5). Last year’s report acknowledged, for instance, that the CSRs issued in 2018 appeared to be less obsessed with ‘implementing supply-side oriented policies which exclusively view wages as costs and collective bargaining as an institutional rigidity that needs to be curtailed’ (ETUI and ETUC, 2019: page 57), while also pointing out that this could well be due to the fact that, after a decade of incessant demands, most of the work – or damage, depending on one’s perspective – had already been done.
Benchmarking Working Europe 2020: special in more than one respect
This year’s report would have probably continued in that genre of careful analytical work, dissecting a variety of EU economic policies and, as the title of our publication suggests, ‘benchmarking’ their effects against the needs and the living conditions of European workers. However, we have instead had to turn our full attention to the economic and social fallout of the Covid-19 pandemic, which has proved to be the harshest of ‘stress tests’ for the European Union, probing policymakers’ ability and willingness to emerge from this new crisis without repeating the mistakes of the past.
There is no underestimating the challenges posed by the Covid-19 pandemic on European economies and on the world of work (see also Myant 2020). Chapter 2 highlights the effect that the pandemic has had on unemployment levels in Europe, with some 1.15 million workers losing their jobs between January and July, a figure that would have no doubt been far more dramatic had it not been for the fact that, by the end of April 2020, there had been more than 42 million applications for supporting workers on short-time work or similar schemes in the EU27. The chapter also suggests that these levels of unemployment are likely underestimates, with a far larger and, indeed, rising figure of economically inactive persons across the EU. As evidenced in Chapter 1, the additional expansionary measures and the operation of automatic stabilisers, coupled with serious drops in income and contributions to GDP, pushed government budget deficits deeply into the red, while, inevitably, the public debt as a share of GDP has been forecast to expand everywhere. On average, the chapter notes, the budget deficit for the second quarter of 2020 was 11.6% of GDP for the euro area and 11.4% for the EU27. National budget deficits varied extensively. The biggest increases were recorded in the UK (22.1%), Poland (20%), and Austria (17.3%), while a budget deficit reduction was registered in Denmark (-3.5%). As Figure 1.19 in Chapter 1 explains, the Commission calculates that in 16 out of 27 Member States the public debt/GDP ratio is expected to be above the stipulated 60% of the existing fiscal rules.
As Chapter 5 demonstrates, a substantial proportion of this additional public expenditure was used to address another key legacy of austerity, namely shortages in the health and care sectors (on the policy response of the EU to Covid-19 in the public health domain, see Brooks et al. 2020). While it was difficult enough to bolster the capacity of healthcare systems, often debilitated by decades of cuts and underfunding, the biggest challenge caused by austerity was the shortage of qualified medical professionals, nurses and doctors, required to service the sudden needs of both the care and health sectors. These staffing shortages – that as Chapter 5 notes had already been identified a decade ago – clearly could not be adequately addressed at such short notice. Coupled with a lack of adequate protective equipment, they led, in various Member States, to unacceptable and unnecessarily high levels of Covid-related casualties, in particular among medical and healthcare professionals, as well as in the wider population.
What makes this time different (so far)?
It is worth acknowledging that, for the time being, both national and European responses to this crisis appear to have distanced themselves from prior, austerity-driven, emergency responses and ‘recovery’ policies. In this sense there is a high expectation that this crisis may not necessarily mark a descent into years of recession but an opportunity for, and a stepping stone on the way to, a substantial rethinking of the economic and social paradigms guiding the EU in the post-Covid world. Three differences in particular are worth highlighting.
Firstly, while both crises threw millions of workers out of work, on this occasion the immediate reaction of national governments and of supranational institutions was to bail out the production capacity of their (real) economies as a whole (including physical and human capital), and not just banks and financial institutions. It is emblematic that one of the first EU policies adopted as an immediate response to the pandemic was the ‘Support mitigating unemployment risks in an emergency’ (SURE) programme, endowed with €100 billion euros to be loaned to Member States to support their short-time work and job retention schemes. The loans are backed by €25 billion of guarantees provided by the Member States to the EU budget and, in October 2020, the Commission raised its first funds for SURE by issuing ‘social’ bonds to the tune of €17 billion. These sums, however, pale compared to those financing the subsequently approved Recovery Plan, engaging both the next Multi-Annual Financial Framework (MFF, i.e. the EU Budget) for the period 2021-2027 and the Next Generation EU pillar, respectively endowed with €1.074 trillion and €750 billion, €390 billion of which are to be provided as grants and €360 billion as loans to Member States (see also Anderson and Heins 2020).
The previous crisis has of course taught us to be vigilant whenever loans are offered to Member States, and aware of the devil contained in the details of the accompanying social and fiscal conditionality clauses, which often require painful and damaging structural reforms. Nevertheless, and this is the second difference worth highlighting, so far these rescue packages have not appeared to come with any explicit (anti-)social strings attached. As Chapter 2 also reports, in March 2020, the EU approved the activation of the general escape clause of the Stability and Growth Pact, allowing the Member States to deviate from the Union’s usual budgetary rules. Moreover, the analysis of the 2020 CSRs indicates a renewed emphasis on social protection systems and would appear to be devoid of any demands for greater labour market flexibility or the decentralisation of wage-setting. This is important, as the EU has made it clear that the new ‘National Recovery and Resilience Plans’ (NRRPs) that Member States are being asked to produce in order to be able to access the Recovery and Resilience Facility must be coordinated with existing CSRs (Article 15 of the Regulation) (European Commission 2020c).
Thirdly, it would appear that this time trade unions are not being sidelined from the planning stages of the recovery strategy and could play a role in its implementation. While the Regulation on the Recovery and Resilience Facility falls short of recognising a consultative role for national, let alone European, social partners, the accompanying EU Commission Guidance expressly provides that, in drafting their NRRPs, ‘Member States are (…) invited to outline (…) how the social partners, and as appropriate civil society organisations, have been consulted and involved in designing the reforms included in the plan’ (European Commission 2020a). This is an important novelty, and one that we would want to see reflected in the Regulation itself, but that in any case we will be monitoring closely in the forthcoming months in order to ensure that it is concretely implemented and not reduced to mere lip service. As noted in Chapter 6, it is also a recognition of the important role that national social partners played in the design of the early national responses to the pandemic, in March 2020 (see also Anderson and Heins 2020). At the same time, the cautiously positive evaluation of the social partners’ involvement at national level is diluted by (a persistently) lacking reference to the potential offered by workers’ involvement at company level (Chapter 6).
We conclude this foreword by identifying three main reasons why a certain degree of caution is still justified when it comes to the EU policy response to this crisis, and by outlining the key elements of an alternative way forward.
Firstly, it is self-evident that the levels of public spending that will be required to address both this crisis and the constantly deepening (as outlined in Chapter 3) environmental crisis in the years to come are unprecedented and will render the Stability Pact, and even the older Maastricht criteria, relics of the past. At the same time, however, it is also evident that the substantial levels of debt and government deficits that, in the short term, need to be incurred will leave a substantial legacy of indebtedness (see Chapter 1). We venture to suggest that the forces that, just a decade ago, saw neomonetarism and fiscal rigour as the natural response to growing levels of debt have not quite disappeared. It is true that these days even the IMF proclaims that austerity is not the inevitable answer to easing the pandemic’s impact on public finances and that nations that can borrow freely could stabilise debt without fiscal adjustment (Giles 2020) But in reality this simply acknowledges the fact that in a low-interest economy such as the current one, it is relatively easy for some, but not for all, to borrow – without clarifying what should be done to address the long-term problem of indebtedness. ‘Small government’ is no longer an option, but states (and Europe as a whole) will need more than low interests and liquidity access to emerge from this crisis and be able to invest in a carbon-free, sustainable future.
Clearly, the elephant in the room in this discourse is a different socialisation of these liabilities, including through progressive tax reform, whereby societies identify the vast pockets of wealth that have accumulated in recent years (and in recent months in particular) and demand a fair contribution to human progress and a sustainable future. It is now more vital than ever to recognise and tax properly, in particular, the rent income enjoyed by a small minority of individuals and multinational companies thanks to the artificially created monopolistic and monopsonist positions emerging in a number of essential markets and sectors of the economy, and especially across the value chains developing in the context of the new digital revolution, often to the detriment of workers’ rights and fair wages. The very few cursory references to ‘the fight against aggressive tax planning’ contained in the Member States’ Guidance on the NRRPs – ‘more than ever, the upcoming economic recovery requires Member States to secure tax revenues for public investment and reforms and avoid distortion of competition between firms’ – clearly pale in light of the magnitude of the challenge ahead (European Commission 2020b). And the recent decision of the EU General Court in Cases T-778/16 and T-892/16, Apple v Commission, manifest the weakness of the existing EU legal framework in dealing with certain corporate tax practices. If these issues are not addressed, we fear that the scenario that Chapter 7 describes as a ‘conservative rebound of austerity’ could become far more likely than the ‘progressive leap’ and ‘green road’ scenarios the chapter implicitly advocates.
Secondly, it is essential to recognise the redistributive function of decent working conditions and fair wages. In recent decades, redistributive mechanisms have faltered in two important ways. Firstly, as we just mentioned, by failing to identify wealth and tax it properly. Secondly, by permitting wealth created in increasingly complex and global value chains to flow upwards, rather than trickle downwards and into fair wages and decent working conditions. As Chapter 4 vividly points out, the steep decline in the levels of collective bargaining coverage observed in the last two decades in Europe is an important part of that story. To reverse these trends it is essential for Europe to play a key role in ensuring that every European worker is paid an adequate and quantifiable minimum wage and that, after decades of pressures on collective bargaining systems, both the EU and Member States recognise and protect the essential role that collective agreements must play in a fair and sustainable economic and social recovery. It is certainly comforting to see that a certain consensus on the pivotal importance and role of collective bargaining is now emerging in areas beyond the more traditionally union-friendly environments (OECD 2019). We feel that the current proposals for a Directive on adequate minimum wages in the EU (European Commission 2020b) could be an important step in this direction, but without some much-needed improvements it is just as likely to turn into a missed opportunity. It is a matter of urgency for Europe to rediscover the redistributive function of labour rights and collective bargaining. The Digital Services Act Package currently being discussed by the Commission could provide a further opportunity to address some of the challenges in the context of platform work and the gig economy. Europe will not be ‘fit for the digital age’ until it recognises the contribution that human labour makes to wealth and capital accumulation in the digital economy, and compensates and protects that contribution fairly. And, as pointed out in virtually all the chapters of this edition of Benchmarking, the challenges posed by this pandemic to the world of work, from the exponential growth of teleworking and the emergence of new psychosocial risks, to the unequal impact of the virus on different sectors of the economy and groups of workers, will obviously require a more comprehensive review of the existing regulatory frameworks at the national and European levels.
Finally, it is essential for Europe to truly fulfil its democratic vocation, which crucially – as forcefully argued by Chapter 6 – calls for industrial democracy to be recognised as a key pillar of the current recovery strategy and of the Green Deal. Social dialogue, collective bargaining and workplace democracy are fundamental tools to build social justice and inclusive societies, and in the fight against inequality and populism. Strong, democratic and representative unions offer the best opportunity for developing the practices of democratic participation in running workplaces, companies, and societies at large. Social dialogue and participation does not just provide well-designed and consensual solutions to the management of 21st century capitalist societies. It ensures that democracy is a value and practice that is honed on a daily basis, and does not descend into a stale rite to be performed perfunctorily every four or five years. In this respect, it is more important than ever that the voice of labour is represented both in the shaping of national responses to the pandemic (and we will continue to advocate for a greater role to be recognised by the Regulations and future Guidance on the NRRPs), and in the forthcoming Conference on the Future of Europe, where social partners’ involvement should be guaranteed.
We conclude by recalling the fundamental importance of developing and reconciling the aforementioned three priorities with what is arguably the greatest challenge that Europe needs to embrace in the years to come: a just transition to a new, green economy. As noted elsewhere, ‘this would require accelerating the ecological transition and rapidly rethinking our growth model, with a return to public services, common goods and solidarity at the heart of the economy and social affairs (see also Laurent 2020; Sabato and Mandelli 2020). We are seeing the seeds of this, with several governments and civil-society players supporting the Green Deal and certain cities, such as Paris and Brussels, showing the way to a faster transition — albeit one very difficult to complete amid high unemployment and economic crisis’ (Pochet, 2020).
Unless these fundamental priorities are placed at the centre of Europe’s recovery plans from the pandemic, a decade from now the 30th anniversary edition of Benchmarking Working Europe will be dealing with the consequences of a new and deeper crisis that is at once economic, environmental and political in nature: the umpteenth product of an economy that has continued to be as unequal, carbon-intensive, socially destructive, and unsustainable as what we now inherit from the virus of austerity and decades of destructive neoliberalism.
Luca Visentini
ETUC General Secretary
Nicola Countouris
ETUI Director of Research Department
Philippe Pochet
ETUI General Director