Whither Europe? Looking ahead to the future of Social Europe

Stockholm, 25-28/05/2012

The invitation to contribute to this celebratory anthology of the LO prompted me to discuss my vision for a European future from a trade union perspective that takes into account matters dear to my heart and emphasizes Social Europe.

“Whither Europe?” is the pivotal question that I will attempt to address in my contribution. To explore the future, one must firstly assess the past and take stock of where we currently stand in Europe. In the extraordinary times we live in, this can be a taxing exercise for trade unionists particularly when the social dimension of Europe is at stake.

Europe is in the grip of a serious crisis which can jeopardize the future of the European project itself along with hard won achievements that defined the European social model. The worrisome signs were there before 2008: the disproportionate growth of the financial sector, the decline in GDP wage shares and the deepening inequalities. Over the last decades the falling share of growth channeled to real economy investment implied fewer jobs, less entrepreneurship and less innovation. Yet, the initial alarm was swiftly replaced by a “business as usual” complacency that chose to neglect the combined harmful potential of growing inequalities, dysfunctional financial systems and the receding real economy.

Indeed, reflecting on the recent past and the present can only cause concern. Persisting long-term unemployment, underemployment and the increasing numbers of the working poor acutely test social cohesion and expose the fundamental challenges we face in Europe today. Since spring 2011 some 1.6 million Europeans have joined the ranks of the unemployed, with the unemployment rate hitting a new high at 10.1 % in January 2012. The protracted qualitative and quantitative huge jobs deficit hurts families and communities and puts to waste the skills and the talents of our youth. Youth unemployment reached a historic high EU rate at 22.4%. The Commission’s first annual review of Employment and Social Developments in Europe shows how the economic crisis exacerbated Europe’s structural weaknesses such as income inequality: 115 million Europeans – 23 % of the EU population – face the risk of poverty or social exclusion. 60 percent of Europe’s wealth is held by just the 10 percent its population. Gender inequality too, dies hard: European women earn 16.4% less than men, according to figures released by the Commission to mark European Equal Pay Day.

The crisis is deeply scarring the economic and social fabric of Europe. The labour movement has been for years ringing bells of alarm while businesses and politicians ignored the destructive dynamics of a finance driven capitalism that configured economic and social development in Europe and in the world.

The crisis is deeply scarring the economic and social fabric of Europe. The labour movement has been for years ringing bells of alarm while businesses and politicians ignored the destructive dynamics of a finance driven capitalism that configured economic and social development in Europe and in the world.

Not only were the causal elements of the crisis disregarded but policy choices further destabilized an inherently crisis–prone system. Leaving the financial system largely unreformed under the pressure of financial markets, policy responses increasingly focus on fiscal consolidation through austerity. As the competitiveness mantra resonates across Europe, wage deflation has become the key instrument of adjustment. Measures that deplete public expenditure, remove subsidies, cap pensions and shrink social benefits spawn disillusionment and distrust among Europe's citizens.

Policies of economic recession are coupled with social policy regression. Among others, extensive structural adjustment is under way across Europe to reduce alleged labour market “rigidities” by dismantling vital labour rights and contesting the collective institutional framework that is a core element of the European social model. Trade unions are unavoidably disempowered. Not only workers are asked to pay disproportionately for the crisis but they are also deprived of their crucial institutional capacity to address its dire consequences.
Against this background, the question “whither Europe?” takes on a demanding urgency as Europe appears to be forgoing Social Europe. “The European social model has already gone”, declared ECB President Mario Draghi, as the Bank announced a further €500 billion cheque to help the banks. The statement echoes Andrew Mellon, the US Treasury secretary who, as the USA plunged into depression, advised President Hoover to “liquidate labor” and cut down the “high costs of living and high living”. The “high living”, which Mr. Draghi particularly opposes, is the job security and the social safety nets of the European social model that primarily accounts for Europe’s outstanding achievements after the Second World War.

The idea that slashing government spending and depleting wages can actually create jobs and cure depressed economies may please Thatcherites but it remains deeply flawed. The doctrine that predominantly shaped policy options in Europe rests on equally flawed premises: the belief that markets can replace public policy in balancing economic, social and environmental needs. Yet, the outcomes, economic and social, indicate stark failure. Austerity erodes recovery prospects and amplifies the risk for a protracted crisis in Europe with grave economic and social consequences. The recessionary impact is most acutely felt across the heavily indebted countries of the European periphery. The failure to provide sustainable solutions is confirmed by the latest OECD Economic Outlook that warns about collapsing growth with the Eurozone and UK economies trapped in a recessionary “muddling through” scenario.

On what grounds then are we asked to give up Europe’s distinguished record of economic and social achievement that has really set our continent apart in a globalised world? What justification can failed policies provide to the proposed sacrifice of Social Europe on the altar of competitiveness?

The European trade unions believe that Europe does not need further experiments at the expense of society with ideas that have repeatedly failed. For the ETUC and its affiliated organisations Social Europe is not a liability but an inalienable asset for the future of Europe.

The European trade unions believe that Europe does not need further experiments at the expense of society with ideas that have repeatedly failed. For the ETUC and its affiliated organisations Social Europe is not a liability but an inalienable asset for the future of Europe.

The current state of play imposes its own imperatives. As the ETUC General Secretary, I am guided by my strong conviction that we should reach well beyond than merely demonising speculator greed and casino capitalism. Under this prism, our response to austerity is defined by the imperative to offer credible alternatives. The alternative advanced by the ETUC proposal for a new social compact sets out the way forward for Europe and puts the accent on a strong social dimension in the economic union through a genuine recovery project aimed at employment and sustainable growth.

We urge for wage increases to boost demand and offset inequality, for investment in innovation, for greener quality jobs and for better public services. Social safety nets and solidarity are indispensable to this vision because socially just economies are better equipped to resist shocks and competition. Social partnership and dialogue are just as essential to foster and motivate effective balanced policies. For ailing public accounts the ETUC advocates a longer term approach that encompasses far-reaching action by the ECB, mutual support in the form of Eurobonds, a financial transaction tax, fair taxation, combating tax evasion and tax fraud, together with the elimination of tax havens.

ETUC policies and campaigns aim at a socially fair, economically viable and environmentally sustainable Europe. This vision is not Utopian. The Nordic experience demonstrates that, even when a global crisis rages, it is possible to maintain a social model that delivers both efficiency and equity, where efficiency is defined by the capacity to generate high rates of employment and growth and equity signifies high norms of social protection and a relatively low risk of poverty. The working men and women in Europe are entitled to a sustainable social model. They are entitled to a future that is anchored in the respect of fundamental social rights and in democracy. In this respect, I feel it is only appropriate to conclude by recalling the words of Olof Palme: “The rights of democracy are not reserved for a select group within society; they are the rights of all the people.”