Crisis over? Not for the unions

When European Central Bank president Mario Draghi recently told German tabloid Bild "The worst is over," he was talking about government budgets and European banks’ balance sheets.

It is a completely different story for workers through-out Europe who are finding their trade union rights undermined, their wages squeezed, their retirement age raised and their pensions cut while the employers are granted more and increasing power. 27 European Union members are implementing austerity measures to the tune of about 450 billion euros.

Such austerity measures have been portrayed as a necessary part of bringing national debts under control and making European businesses competitive, but they go beyond what is needed to overcome the debt crisis, the unions say. It’s a reversal from the late 1940s when European nations emerging from six years of war laid the foundations of the continent’s social model of the Welfare State by introducing mechanisms to ensure poorer members of society weren’t left behind as they rebuilt their economies. France brought in state pensions in 1946, the U.K. set up its free-to-use National Health Service in 1948 and West Germany guaranteed unions a third of the seats on company boards in 1952. ECB's Mario Draghi in a Feb. 23 interview with the Wall Street Journal declared that “the European social model has already gone.”

“Europe is turning into an entrepreneur’s paradise,” says Apostolos Kapsalis from the Labor Research Institute in Athens, which is part of the Greek trade unions confederation GSEE. “And Greece is the lab rat in this European reform experiment. In Greece they are testing how far they can go.”

In Greece the minimum wage has been lowered from €750 to €590, while unemployment benefits have been cut from €460 to €320 per month. Collective bargaining through trade unions has been replaced in many sectors by wage agreements between individual companies and their employees. Greek teachers and state workers are witnessing the end of job security.

In Spain the retirement age has been raised from 65 to 67 and companies can now change working hours and wages without consulting the trade unions if a company is facing economic difficulties. Juan José Toribio, of Spain's IESE business school, said the country could no longer afford the welfare state. "We cannot sustain the current model of the welfare state," he said.

In Italy the retirement age has also raised and workers now have to pay contributions for a minimum of 42 years, rather than 40, to receive a full pension. Companies are legally entitled to undercut wage agreements reached by collective bargaining, Italy’s strict dismissal protection is going to be liberalised.

In Portugal new labour laws, which make it easier to hire and fire staff and which cut compensation for workers, mark the biggest step backwards for workers since Portugal's return to democracy in 1974 after military rule. Public sector employees will see their income cut by up to 30 per cent over 2011 and 2012. Social payments have been reduced and taxes, particularly VAT, increased. The unemployed have had their benefits cut.

In Ireland there has been five austerity budgets in four years and it faces at least four more through 2016. A new, flat-rate property tax of one hundred euro was introduced for 1.6 million home-owners. The government also plans to increase the pension age in stages, taking it to 68.

“If you look at measures like the lowering of the minimum wage in Greece, or the relaxing of hiring and firing in Spain, these have no direct impact on the state budget...It is quite obvious that within the European Union and its institutions, the proponents of an unrestrained free market society have the upper hand now...” says Martin Behrens, expert on industrial relations at the Hans Böckler Foundation, a research institution of the German trade unions.

The austerity-focused policies being pursued in Europe will continue to drive down living standards. There have been many strikes and protests in Greece, Italy, Spain and Portugal. Some have been well attended, others not. Most protests have been peaceful, some have not. But governments have pushed ahead anyway, with big cuts in public spending and a range of economic reforms.

Jean-Paul Fitoussi, an economics professor at the Sciences Po institute in Paris, told reporters at a business conference in northern Italy that austerity measures were “a dangerous approach that could trigger social unrest”.
Nouriel Roubini ,the American economist, said “Socially and politically, people are accepting austerity but you need to have light at the end of the tunnel...Growth, jobs, income, otherwise the political and social backlash; that is demonstrations, strikes, weak governments failing,”