Anne Karrass – “Troika for everyone”? EU Commission again proposes financial rewards for cutting social welfare

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EU funds as a reward for raising the retirement age, making labour markets more flexible, or lowering minimum wages? This is exactly what the EU Commission is pushing for, largely unnoticed by the European public.

Anne Karrass works in the EU Liaison Office of the German union ver.di

Originally published at Blickpunkt WiSo

Translated by BRAVE NEW EUROPE



During the euro crisis, the Member States were forced to implement structural reforms under the rescue umbrella in return for “aid payments”. Since this was “successful” in the sense of the perpetrators, in so far as reforms such as raising the retirement age and curtailing the tariff systems against the sometimes massive protest of the population were pushed through, discussions were held in 2012/13 to introduce this instrument permanently for all Member States – also in periods where there was no crisis: Member State governments were to commit themselves by treaty to long term reform programmes and receive money from the EU budget after implementation. “Troika for everyone,” so to speak. This was mainly upon the initiative of the German Federal Government and the EU Commission with a “Competitiveness Pact” and “Contractual Arrangements”.

The trade unions protested strongly against this undemocratic, antisocial, and useless instrument, and many Member States also forbade this type of interference in their national competences, so that the discussions were terminated.

Now, however, the Commission has put the issue back on the agenda – unnoticed until now. In its , „Roadmap for deepening Europe’s Economic and Monetary Union“, of 6 December 2017, it tabled a proposal that could be described as a precursor to a competitiveness pact. “This is hidden behind the bulky title: “Targeted changes in the Common Provisions Regulation to mobilise funds in support of national reforms” This is a concrete legislative proposal which the Commission intends to have adopted by the Council and the European Parliament by the middle of this year.

The overall objective of the Commission is to improve the coordination of national economic policies “in order to achieve greater resilience of economic structures and better convergence in performances” and thus “be able to respond swiftly to shocks”. In their view this requires structural reforms, which – as in the ” Competitiveness Pact” – are to be supported by European funds: If a Member State commits itself to certain reforms and fulfils them under contract with the Commission, it will receive funds from the EU budget after successful implementation. These reforms are explicitly those which fall within the competence of the Member States, where the EU has no say, as the Commission states in the explanatory statement of its proposal:

“Appropriate national policies are essential for the smooth functioning of a more integrated Economic and Monetary Union. Since many critical policy areas that are decisive remain primarily in the hands of the Member States, their coordination and the sequencing of reforms is essential to maximise their effectiveness, not only at national level, but also at EU level.”

The framework for the reforms is to be the so-called European Semester, a process in which the Member States coordinate their economic and budgetary policies. The Commission intends to focus on:

“The focus should be on those reforms which can contribute most to the resilience of domestic economies and have positive spill-over effects on other Member States. These include reforms in product and labour markets, tax reforms, the development of capital markets, reforms to improve the business environment as well as investment in human capital and public administration reforms.”

The Commission would like to anchor this permanently in the future, but plans a test phase to precede it. To this end, the Commission proposes to use all or part of the performance reserve in the current European Structural and Investment Funds for the years 2018-2020 – initially on a voluntary basis – instead of supporting specific projects to promote reforms. This is how the Commission describes the procedure: „The reforms to be supported would be identified in multiannual reform commitment Packages presented and monitored through the National Reform Programmes”. The Commission shall examine them, may request amendments and determine the amount made available for assistance. Implementation would also be monitored and evaluated during the European Semester. After successful implementation, the Member States will receive the money.

The Commission’s request must be rejected for various reasons:

Firstly, it is true that the aim is to coordinate economic policy more closely in the euro zone. However, bilateral agreements between the Commission and individual states will by no means make this possible as would be necessary.

Secondly, it can be assumed that the closer coordination of economic policy, that the Commission is seeking, would simply lead to an increase in cuts. Already with the possibilities currently at its disposal, the Commission regularly calls on individual Member States to freeze public service wages, decentralise collective bargaining systems, make labour markets more flexible, abolish wage indexation, etc. And this, by the way, with German support. Angela Merkel said openly in 2013 that she wanted to intervene in Member States’ wage and social policies with the help of the Competitiveness Pact and force them to focus on greater competitiveness.

Thirdly, even with a more employee-friendly political orientation in Brussels (and Berlin), it would still be difficult to coordinate tax and social policy in this manner. Only binding minimum standards for all could help to combat social and tax dumping. It is very difficult to realise these via the reform commitment packages, as a corresponding package would then have to be negotiated with each individual country – for example on a certain corporate tax rate. If one country were to accept this, another could in turn use it to reduce its taxes and thus gain a competitive advantage. The principle of the competitive states would not be abolished. Common minimum standards are therefore only possible through directives that are equally binding for all.

Fourthly, there is the problem of democracy: the European Parliament is not involved in the Commission’s deliberations, since the packages are negotiated and agreed between the Commission and the individual Member States. There would be neither time nor public consultation to discuss the content of these packages.

These are certainly enough good reasons to fight back. The “Competitiveness Pact” has already been prevented once. It would be to be hoped that the Commission will fail again with its latest initiative.


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