Wages in EuropeEssay Preview: Wages in EuropeReport this essayThe Great Recession has had a major impact on how wages are determined in Europe. The implementation of the “six-pack” of 5 laws and a directive, the power given the European Commission to monitor EU Member States economic performance, and the wage cuts and reduction in working hours have been a product of the Great Recession in the EU.
The approval of the “six-pack” in the EU on October 4th 2011 has had a significant impact on the determination of wages in the EU. EU Members States that do not comply with the EU Stability and Growth Pact, or find themselves in a macroeconomic imbalance position, will have broken the “six-pack” of five regulations and one directive implemented by the Council of the European Union and face a sanction of a yearly fine of 0.1 or 0.2 per cent of GDP (Erne, 2012). The Commission was empowered by the EU to create these procedures without democratic influences, and they in turn used broad legal definitions such as “imbalances” to allow the Commission to bend the meaning of the regulation as it pleases (Erne, 2012). This means that a small group of powerful elite EU experts are determining socio-economic priorities such as wages rather than Unions or Governments (Erne, 2012).
The Commission is bound by Article 1.3 of the Regulation No 1176/2011 to respect the bargaining autonomy of the social institutions and national practices of wage formation (Erne, 2012). But in practice, the Commission and the ECB have shown that they can affect the wage setting-processes in various ways, including “the provision of information or wage rules, changes in wage-indexation rules and the signalling role played by public sector wages (European Commission 2010: 15).” The Commission has, through the Troikas memorandum of understanding in Ireland, attempted to make the wage setting process more efficient by reviewing sector minimum wage agreements and attempting to eliminate them where possible (Erne, 2012). This effectively severs the Irish Unions capacity to set binding sector-wide wage rates (Erne, 2012).
Hayek (1997) argues that the use of economic agencies such as the Commission, free from the constraints to domestic popular pressures would enhance the quality of economic policy outputs. But the power wielded by the Commission and ECB over struggling EU member state Governments can lead to the implementation of extreme business friendly measures (Erne, 2012). Measures such as the decreto legge, ordered by Mario Draghi and Jean-Claude Trichet in Italy in 2011, called for out-right wage cuts and the hollowing out of collective bargaining structures in the country, and the sale of local public services (Erne, 2012). The power held by the ECB and Commission to overrule national institutions is evident in implementation of the decreto legge, which disregarded the national referendum held 8 weeks earlier that saw 95.5 per cent of
s of German taxpayers’ money handed over a week after the end of the German government’s bailout of Chancellor Angela Merkel’s conservative Social Democratic Party. In a May 2014 speech in Berlin, Draghi and Trichet made a bold and uncompromising call for European fiscal discipline and “a full retreat”, before giving their full support in the form of further German measures to further reduce the deficit in order to meet the austerity objectives of the euro area. The Commission has been accused of pushing the terms of its austerity in favour of the euro (The Financial Times, August 5, 2008). In addition, Germany and its partners also claim the terms of the budget agreement between Germany and the EU will be enforced by law. The Commission does not accept the validity of such claims, as all the euro area member states implement the terms of the current budget deal rather than accept any of the terms of a specific agreement (Berlin, April 2007). In addition, the “bailout” and transfer agreements the EU and Germany signed in September 2003 had, at the time of signing, included severe financial regulations, as well as strong financial controls on commercial banks. The Commission believes that the euro area’s fiscal policy and the monetary union of the member states will be affected by similar conditions in the future. It stresses that there is little risk of financial problems arising in the euro area given the conditions in which the European Central Bank and/or private banks are being run by the ECB. The Commission also emphasises the importance that the current debt haircut by Germany, the first EU budget after the start of December 2010, has an even higher proportion of the euro area’s GDP (Erne, 2012; The Financial Times, July 2009). This implies that an even more significant proportion of Germany’s gross domestic product (GDP) is already in surplus in the euro area. This is because the economy is already “balanced”, but does not include the huge number of workers who are expected to lose their status of work due to the decision of the European Parliament to limit payments to “bailout” eurozone member states (Bergman, 2005). The commission’s assessment that the ECB has achieved economic stability while retaining and promoting the European economic agenda “is not in itself wrong”, but the fact that these actions have not resulted in a substantial increase in the level of unemployment to the point where it will increase the overall unemployment rate (Wolffsch, 2010). On the other hand, there are some serious problems with the current €500bn Euro-zone “troika” and its financial policies (Bergman, 2005). In the meantime, the euro area must now find ways to deal with the fundamental problem posed by the excessive interest charges imposed by the euro area’s periphery countries and of public debt to their periphery national governments or the private sector within the EU. Therefore, there is considerable pressure on France and Germany to find an effective and meaningful compromise on the debt cap and financing mechanism. Both states need to set aside their differences and take steps to achieve their basic international aims and to take the necessary steps to solve issues within the euro area. The most effective way through which Europe will confront the problem of excessive debt burdens and economic stagnation arising out of this, is through the common effort to make up for the damage in the EU economies. The fiscal problems
s of German taxpayers’ money handed over a week after the end of the German government’s bailout of Chancellor Angela Merkel’s conservative Social Democratic Party. In a May 2014 speech in Berlin, Draghi and Trichet made a bold and uncompromising call for European fiscal discipline and “a full retreat”, before giving their full support in the form of further German measures to further reduce the deficit in order to meet the austerity objectives of the euro area. The Commission has been accused of pushing the terms of its austerity in favour of the euro (The Financial Times, August 5, 2008). In addition, Germany and its partners also claim the terms of the budget agreement between Germany and the EU will be enforced by law. The Commission does not accept the validity of such claims, as all the euro area member states implement the terms of the current budget deal rather than accept any of the terms of a specific agreement (Berlin, April 2007). In addition, the “bailout” and transfer agreements the EU and Germany signed in September 2003 had, at the time of signing, included severe financial regulations, as well as strong financial controls on commercial banks. The Commission believes that the euro area’s fiscal policy and the monetary union of the member states will be affected by similar conditions in the future. It stresses that there is little risk of financial problems arising in the euro area given the conditions in which the European Central Bank and/or private banks are being run by the ECB. The Commission also emphasises the importance that the current debt haircut by Germany, the first EU budget after the start of December 2010, has an even higher proportion of the euro area’s GDP (Erne, 2012; The Financial Times, July 2009). This implies that an even more significant proportion of Germany’s gross domestic product (GDP) is already in surplus in the euro area. This is because the economy is already “balanced”, but does not include the huge number of workers who are expected to lose their status of work due to the decision of the European Parliament to limit payments to “bailout” eurozone member states (Bergman, 2005). The commission’s assessment that the ECB has achieved economic stability while retaining and promoting the European economic agenda “is not in itself wrong”, but the fact that these actions have not resulted in a substantial increase in the level of unemployment to the point where it will increase the overall unemployment rate (Wolffsch, 2010). On the other hand, there are some serious problems with the current €500bn Euro-zone “troika” and its financial policies (Bergman, 2005). In the meantime, the euro area must now find ways to deal with the fundamental problem posed by the excessive interest charges imposed by the euro area’s periphery countries and of public debt to their periphery national governments or the private sector within the EU. Therefore, there is considerable pressure on France and Germany to find an effective and meaningful compromise on the debt cap and financing mechanism. Both states need to set aside their differences and take steps to achieve their basic international aims and to take the necessary steps to solve issues within the euro area. The most effective way through which Europe will confront the problem of excessive debt burdens and economic stagnation arising out of this, is through the common effort to make up for the damage in the EU economies. The fiscal problems
s of German taxpayers’ money handed over a week after the end of the German government’s bailout of Chancellor Angela Merkel’s conservative Social Democratic Party. In a May 2014 speech in Berlin, Draghi and Trichet made a bold and uncompromising call for European fiscal discipline and “a full retreat”, before giving their full support in the form of further German measures to further reduce the deficit in order to meet the austerity objectives of the euro area. The Commission has been accused of pushing the terms of its austerity in favour of the euro (The Financial Times, August 5, 2008). In addition, Germany and its partners also claim the terms of the budget agreement between Germany and the EU will be enforced by law. The Commission does not accept the validity of such claims, as all the euro area member states implement the terms of the current budget deal rather than accept any of the terms of a specific agreement (Berlin, April 2007). In addition, the “bailout” and transfer agreements the EU and Germany signed in September 2003 had, at the time of signing, included severe financial regulations, as well as strong financial controls on commercial banks. The Commission believes that the euro area’s fiscal policy and the monetary union of the member states will be affected by similar conditions in the future. It stresses that there is little risk of financial problems arising in the euro area given the conditions in which the European Central Bank and/or private banks are being run by the ECB. The Commission also emphasises the importance that the current debt haircut by Germany, the first EU budget after the start of December 2010, has an even higher proportion of the euro area’s GDP (Erne, 2012; The Financial Times, July 2009). This implies that an even more significant proportion of Germany’s gross domestic product (GDP) is already in surplus in the euro area. This is because the economy is already “balanced”, but does not include the huge number of workers who are expected to lose their status of work due to the decision of the European Parliament to limit payments to “bailout” eurozone member states (Bergman, 2005). The commission’s assessment that the ECB has achieved economic stability while retaining and promoting the European economic agenda “is not in itself wrong”, but the fact that these actions have not resulted in a substantial increase in the level of unemployment to the point where it will increase the overall unemployment rate (Wolffsch, 2010). On the other hand, there are some serious problems with the current €500bn Euro-zone “troika” and its financial policies (Bergman, 2005). In the meantime, the euro area must now find ways to deal with the fundamental problem posed by the excessive interest charges imposed by the euro area’s periphery countries and of public debt to their periphery national governments or the private sector within the EU. Therefore, there is considerable pressure on France and Germany to find an effective and meaningful compromise on the debt cap and financing mechanism. Both states need to set aside their differences and take steps to achieve their basic international aims and to take the necessary steps to solve issues within the euro area. The most effective way through which Europe will confront the problem of excessive debt burdens and economic stagnation arising out of this, is through the common effort to make up for the damage in the EU economies. The fiscal problems