Prof. Dr. Ursula Engelen Kefer
Specialist on Economic Policy, Social Policy and Labour Market Policy, Lecturer at the German Federal Employment Agency and at the Free University of Berlin, Head of the Social Policy Working Group of the non-government organization Sozialverband Deutschland, Former Vice President of the German Trade Union Federation (1990-2006).
Social dumping as a policy goal
Comments by Ursula Engelen-Kefer
With the introduction of the euro more than 10 years ago it was clear: a monetary union without coordination of economic, financial and social policy is a risky project. The global financial crisis brought this to light with brutal clarity. People in the highly indebted euro countries Greece, Ireland, Portugal and Spain will be driven into hysteria to save and cut public expenditures.
The “Euro-Plus-Pact”, recently adopted by the European Union Summit is a perversion of its purpose: Not the euro is rescued, but the financial industry – at the expense of taxpayers. This has intensified the divisionary forces in European societies and among the 17 euro countries. It threatens the further integration of the now 27 EU member countries of the European Union as a whole.
For speculators, there is a highly lucrative business to “gamble” on the continued decline in creditworthiness of debtor countries. This is for them under newly established European bail-out facilities – to use financial market terminology – “low risk”. Taxpayers in the financially stronger euro countries are forced to cover deficits of financially weak and highly indebted euro zone countries and their weak banking systems. Instead of stabilizing Eurozone bond markets this has fueled waves of speculation.
It is already clear that the present rescue umbrella of € 440 billion and the agreed permanent institutionalization of the European stability mechanism with a volume of € 700 billion Euro is not enough. Especially for the German taxpayers this mechanism of permanent financial transfers for highly-indebted euro zone countries will be costly. Due to previous agreements, they are already committed to direct transfers of capital of € 22 billion and guarantees of € 168 billion.
The Federal Republic has a large interest in ensuring that the heavily indebted countries are brought back to a sustainable economic competitiveness thus making sure that the Euro is kept stable. However, it is totally wrong that only taxpayers would foot the bill. It is long overdue that the private sector bond investors – mainly banks and insurance companies –also take up a large part of the financial burden. This could be done by the introduction of a financial transaction tax. Such a new tax is still pending.
The sinners are the judges
It seems like whistling in the dark, when Chancellor Angela Merkel praises this pact as a “big step” to stabilize the euro. The accompanying measures for economic and financial integration in Europe will be a boomerang for EU citizens. Since the responsibility for the practical implementation will lie in the sovereignty of the Member States. They will once a year agree on common goals: in particular, promotion of employment, long-term sustainability of public finances and strengthening financial stability. Inspections and sanctions – for example, escalating budget deficits – remain in the hands of Member States themselves, the “sinners” will be – as in the past- the “judges” on the individual member states performance. Under the new pact financial austerity measures will be enforced even more rigorously on the backs of the people in the member countries. So the “debt brake”, which was introduced in the wake of the global financial crisis in the German Basic Law shall, also be introduced into rest of the euro countries.
The proposals for the adjustment of collective bargaining and labor law will destruct working and living conditions of the large majority of the workers. The EU Commission has already issued concrete proposals, in particular: increasing flexibility in working conditions, reducing job protection, wage indexation and labor market policies, deregulation of collective bargaining agreements.
Wage policy should be centralized at the European level. Even for workers in the Federal Republic the wages and working conditions will then deteriorate. The “deregulation” of collective agreements and the transfer of labor market policies to the enterprise level will increase the dependence of workers at the mercy of employers. The “explosion” of temporary work and 400-euro jobs, and the low-wage sectors in Germany would advance even more quickly and be transferred to other European countries.
The main purpose of this Economic Pact Plus for Europe will be: to recover with the help of the export model of Germany. The domestic economy is weakened at the expense of the majority of the population. Consequences will be redistribution of wealth in favor of corporate profits at the expense of wages, social infrastructure and social benefits – as has been the case in Germany since many years.
The adjustment of pension policy to the demographic development will result in more capital oriented pension schemes at the expense of the legal solidaristic “pay as you go” old age retirement system. Consequences will be a further reduction of retirement payments and a huge increase of poverty for pensioneers in the decades to come. The Chancellor, Angela Merkel, would find it easier to introduce the increase of retirement age from 65 to 67, from 2012 till 2029, which is rejected by an overwhelming majority of the German population. Also Nicolas Sarkozy could enforce his intention to increase the traditional low retirement age in France in the Public Service, which is so far failed due to the impressive protests of the people in France.
Not the dismantling of European social and collective agreement policy is required. On the contrary these standards have to be promoted: first and foremost this means the development of a sufficient protection against dumping of wages, working and social conditions. The commitment of EU member countries on minimum wage floors is essential. Almost all euro countries have uniform minimum wages for years now. In the economically comparable countries with Germany, these are now over € 9 an hour. The Federal Republic is a notably grim exception due to the refusal of the CDU / CSU and FDP to introduce minimum wages. It is time to change the course of the financial, economic and social policy. Civil disobedience is urgently required by trade unions and civil society.