Introduction to Chapter 1 – Mobilising for Social Europe and Fair Economic Governance, and the resolution of the Executive Committee "Solidarity in the crisis"

Athens, 16/05/2011

You heard this morning about the problems we have firstly with the bail out packages of Greece, Ireland, Portugal, Latvia, Bulgaria and Romania, and, second, about the Euro Plus Pact which will enter into general force in the eurozone, plus six other countries, in 2013.

The matter of central concern in this Pact is the extent to which it will affect wages and collective bargaining.

The aims are clear. In euro plus countries whose unit labour costs and productivity levels do not equal the best, there will be downward pressure on public sector pay, minimum wages, public services, pension entitlements and unemployment benefits. Countries will not be allowed to continue to run significant deficits indefinitely. Austerity is being built into the system. The autonomy of the social partners is at risk.

We have been highly critical of the hard terms being applied to the distressed countries and now being institutionalised in the Euro Plus Pact. The so-called bail outs of distressed countries are requiring repayment of debt on a too much, too soon basis. The challenge being given is just too hard, the terms too tough.

Greece is the cradle of European civilization – Europe is a Greek invention. But now it is a cradle of the sovereign debt crisis. Rescuing banks was easy to arrange – the major political decisions were taken quickly. Rescuing countries is proving much more tortured and difficult. ‘Moral hazard’ was conveniently ignored when the banks were in trouble, but not with countries in trouble. Some in creditor member states are regarding debtor states as spendthrifts, requiring as much punishment as help. To misquote Voltaire, “pour décourager les autres” could be the EU/IMF slogan.

What is already evident is that the austerity measures are not working. Growth in Greece and Ireland, (and in the UK where the Government there is prescribing similar medicine) is stagnant.

Of course, we must recognize hard facts. If you are in a single currency, you must observe the rules. If your country is in trouble, you must work together, with the broadest shoulders carrying the heaviest burden. You cannot build up deficits and debts indefinitely, as even the USA is finding. We know too that Europe is in danger of falling behind, new, hungry, cheap competitors in Asia and Latin America. We have the added problem that our population is ageing and that is likely to mean lower growth.

But Europe can be competitive. The Nordic countries, Germany, Netherlands, Austria, Belgium and some new member states are growing strongly. France is coming through as well. They are high wage, high welfare, positive balance of payments, societies who run social markets, not simply shareholder value, market economies.

By contrast, the Anglo-Saxon economies, until recently, the example that everyone else was urged to follow, are burdened with high debt and low growth, and apart from Ireland, a poor balance of payments outlook.

The success of countries who put their faith in producing real goods and services, not in an overblown banking sector, and who have a strong social State, should stop the neo-liberals and their anti-union agendas. It is strongly unionised societies with extensive and mature collective bargaining who are leading the way in Europe, not the cheapest or the least regulated.

But some countries are in deep trouble and must be helped. We can do this by expanding the present small scale issue of Eurobonds. Some of you are unconvinced but this is an issue to work on in the future. We can provide distressed countries with cheaper credit than is currently the case.

The EU Budget needs to be directed more to the jobs of the future and to people in trouble, to new sustainable industries and to unemployed young people who are the major victims so far of the crisis. A long overdue tax on financial transactions – the Robin Hood Tax – would be an important way to help finance a much needed major European Investment Plan.

As the Executive Committee statement makes clear, wages are not the enemy of the economy but its motor, building demand, growth and jobs. They can help the move from austerity to prosperity.

So the key challenge for this Congress in the next mandate will be to fight austerity, and, at the same time, examine in detail the implications of the Euro Plus Pact for pay and living standards. This examination will include various propositions on minimum wages which were submitted during the preparatory phases of this Congress.

To those who favour an evolution towards minimum wages in Europe to cut down social dumping, you will have to be convincing on the practicalities and deal with the argument that such wages at European level could interfere with some successful collective bargaining systems.

To those of you sceptical or hostile to the idea, you have to consider that the Euro Plus Pact might well in any case affect your autonomy on pay bargaining just as the ECJ cases have done. Europe is having an effect on national systems. And also, you must consider that a social Europe that avoids any mention of pay is a Europe which looks like it tolerates large inequalities.

I wish you well with reconciling these arguments and building up a common position.

It is not, however, for me the most urgent question. That is the restrictive nature of the Euro Plus Pact. The European Parliament has often been our best friend among the European institutions and it is currently considering the Pact. Work with it, and with its help, some of the worst features can be altered. So before the final decisions in June, I ask that you too work in your own country, and work in the ETUC, for a better deal for Europe’s workers than the poor quality menu currently on offer from Europe’s leaders.

I move the introduction, chapter 1 and the Executive Committee resolution. Thank you.