How the Eurozone disempowers trade unions: the political economy of competitive internal devaluation

Abstract

<jats:title>Abstract</jats:title> <jats:p>The marginalization of trade unions was a notable feature of the sovereign debt crisis in the Eurozone periphery. However, governments have recently imposed liberalizing reforms against union protests in the Eurozone core too. We argue that organized labour loses influence across the core-periphery divide because the ‘new economic governance’ puts national governments under enhanced pressure to compete against each other on wage and labour market flexibility—a process known as competitive internal devaluation. The article illustrates this argument through comparative quantitative indicators of liberalization and qualitative process-tracing in three core countries. Whereas Germany’s outstanding competitiveness position allowed its unions to extract significant concessions, their counterparts in France and Finland faced unprecedented defeats from governments aiming to restore economic growth by closing down the competitiveness gap to Germany. Our findings highlight the class power implications of the Eurozone’s reliance on the labour market as the main economic adjustment variable.</jats:p>

The Effects of the Economic Adjustment Programmes for Greece: A Quasi-Experimental Approach

“…During the debt crisis in 2010, those who defended the approach of financial assistance to Greece subject to strict fiscal austerity and structural measures argued that it would allow the country to access financial flows for a period long enough to avoid bankruptcy. It would allow to put in place measures to return to fiscal sustainability, besides facilitating the structural reform of the economy that, via an internal devaluation, would lead to an improvement in competitiveness as well as to future sustainable growth driven by the increase in the external demand [6,15].…”

“…These measures seemed to improve the situation in the Eurozone by mid-2009, but the imbalances had not been corrected and there were no common economic policy tools to compensate for them. As such, given the absence of autonomy to devalue their currency, in the event that the economic situation worsens, countries with competitive vulnerability and dependence on external financing were bound to face an internal devaluation process [14,15]. This was the case in Greece.…”

The evolution of Portuguese trade unionism: Political economies and power resources

“…Nevertheless, the structural constraints of asymmetric European integration (Reis, 2018), with a political economy of competitive internal devaluation that disempowers trade unions (Rathgeb & Tassinari, 2020), by weakening its associational, structural and institutional power of trade unionism, are still in place. Several reflections have indicated the routes for, as well as the difficulties of revitalising Portuguese trade unionism (Costa, 2012(Costa, , 2015bStoleroff, 2013Stoleroff, , 2016Stoleroff, , 2019.…”

The management of the Eurozone in crisis times: Actors, institutions and the case of bailout packages

“…Two features characterize the stringent conditionality of bailout packages in the Eurozone: the imposition of austerity measures, and the introduction of important legal changes in the sphere of industrial relations in the form of the decentralization of collective bargaining and the liberalization of collective redundancy schemes. The selection of these two forms of conditionality reflected the prevalence of the concept of internal devaluation (Armingeon and Baccaro, 2012; Rathgeb and Tassinari, 2020).…”

“…Newly created supranational institutions of financial assistance, the temporary EFSF (European Financial Stability Facility, established in May 2010) and the permanent ESM (European Stability Mechanism, agreed to in March 2011 and made operational in September 2012) provided financial assistance only on stringent terms (Blyth, 2013; Hall, 2014). The formal bailout packages provided to Greece (May 2010, March 2012 and July 2015), Ireland (December 2010) and Portugal (May 2011) required them to implement extensive austerity measures and introduce liberalizing reforms of their industrial relations systems, that is, internal devaluation strategies designed at improving international (price) competitiveness by reducing labour costs (Armingeon and Baccaro, 2012; Rathgeb and Tassinari, 2020). Reforms in the sphere of industrial relations took the form of the decentralization of collective bargaining and the liberalization of collective redundancy schemes (Marginson, 2015).…”