Social rights and rebalancing the Eurozone

Inclusive Economy07 Mar 2016Robert Pye, Owen Parker

Although in the long-term the Eurozone needs full democratic control of the monetary union, including competence over labour and social policy, this will not happen soon enough. A feasible alternative is that rights bodies such as the ECSR provide the expertise and authority to re-balance the Eurozone towards social principles.

This expert opinion is part of our living analysis on the Eurozone crisis

Alternative approaches to debt and austerity could rebuild the Eurozone, increase trust and give the European plan a social face.

Click here to visit the living analysis

It is widely recognized that the European Economic and Monetary Union (EMU) is in a state of imbalance. Neoliberal economic objectives on fiscal sustainability and macroeconomic competitiveness have been prioritized at the expense of social objectives. These economic objectives are backed by enhanced enforcement mechanisms in the form of the Excessive Deficit Procedure and Macroeconomic Imbalance Procedure, which have increased the power of executive actors in the European Commission and the Council of the European Union to hand down policy recommendations backed by the threat of financial sanctions.

As social and labour policies within member states are increasingly influenced by policies formed at the European level, they have been re-orientated towards economic objectives. Labour markets are being deregulated in pursuit of flexibility, collective bargaining is being decentralized to promote wage moderation, and spending on social security and healthcare is being restricted to ensure fiscal sustainability. The question is how to introduce a social dimension to rebalance the EMU.

Making use of existing European institutions

Rather than starting from scratch, one of the ways to ‘socialize’ the governance of the Eurozone is to look for support from other institutions in Europe that already engage in these kinds of activities. Under the auspice of the Council of Europe, the European Committee of Social Rights (ECSR) has a long history of doing just that. It has developed clear standards on social rights in Europe highlighting both minimum standards and principles of progressive realization. As it stands, many of the policy recommendations emanating from the EU run counter to the standards developed by the ECSR.

Spain, for example, has been among the countries worst hit by the Eurozone crisis. Yet the response to the crisis devised at the European level has only made the situation worse for many Spanish citizens. Policy directions have been handed down via the European Semester and directly from the European Central Bank. These include measures to decentralize its collective bargaining system and increase labour market flexibility by introducing a new employment contract with minimal severance conditions and expanding of the use of temporary contracts.

From the perspective of the social rights standards developed by the ECSR, these policies are deeply problematic. Forced decentralization of collective bargaining, without consulting social partners, and measures allowing employers to unilaterally derogate from collective agreements are both violations of the minimum standards expected under the right to collective bargaining, according to the ECSR. Furthermore, under the ideal standard for the right to collective bargaining, states should be aiming to establish consultation procedures at the sectoral and regional levels. The policy direction of decentralization runs counter to this. Labour market flexibility measures permitting probationary contracts with long periods without severance pay and the lowering of notice periods violate the right to fair remuneration, as stipulated by the ECSR.

The rights standards of the ECSR and Eurozone’s governance

Yet despite Spain being found by the ECSR to have violated numerous social rights, the Spanish government is still under pressure to implement these kinds of reforms by the EU. It is only by integrating the rights standards developed by the ECSR into the governance of the Eurozone that this situation can be remedied and a social dimension introduced into the EMU.

The actual integration of these standards would not entail significant changes to the European Semester. The European Commission already conducts extensive socio-economic analyses of member states to inform its policy proposals, which are published as Country Reports and In-Depth Reviews. These analyses could be expanded to incorporate a focus on the social impact of policies in a manner akin to the impact assessments already used in the ordinary legislative procedure. The standards developed by the ECSR would be used to provide guidance and thresholds to examine the social impact.

Ideally, to functional in a stable manner in the long-term the Eurozone needs full democratic control of the EMU at the European level, including competence over labour and social policy. But this does not appear to be achievable any time soon. In the short the term, however, rights bodies such as the ECSR are capable of providing the expertise and authority required to re-balance EMU towards social principles in a technocratic fashion that fits with the current governance style of the EMU. It is unlikely that EMU would ever become a champion of social values, but the current destructive path, which threatens to undo the social settlements that underpin EU states, could at the very least be avoided.