THE FUNCTIONING OF THE TROIKA : MAIN MESSAGES FROM THE ETUC REPORT Athens, March 2014 rjanssen@etuc.org
THE PICTURE THAT EMERGES…. • … IS A PICTURE OF A COUNTRY BEING TAKEN OVER • NOT A « SILENT » TAKEOVER…. • …. BUT AN OPEN AND HOSTILE TAKEOVER …..
ONE KEY AIM : « THE SANCTITY OF DEBT » • ALL EXTERNAL DEBT IS TO BE REPAID • AND TO MAKE SURE DEBT WILL BE REPAID, LIVING AND WORKING STANDARDS NEEDED TO BE CUT MASSIVELY • ALL STANDS IN THE WAY OF THIS POLICY HAD TO GO
FIRST THING TO GO: ECONOMIC RATIONALITY • DANGERS OF AN OBSESSIVE POLICY OF FISCAL AUSTERITY WERE WELL KNOWN… • …. BUT WERE BEING IGNORED • CONSEQUENCE: VICIOUS CIRCLE OF CUTS, ECONOMIC COLLAPSE, MORE CUTS
AUSTERITY ON A MASSIVE SCALE…. Total of fiscal cuts from 2010 to 2014, in % of GDP (1) 30 25 20 15 10 5 0 Greece Portugal Ireland Spain UK Italy Euro Area France Netherlands Finland Belgium Austria Germany
…. TRIGGERING ECONOMIC COLLAPSE WHAT HAPPENED TO ECONOMIC ACTIVITY SINCE ENTERING THE TROIKA REGIME (includes 2014 forecast) 10 5 0 Portugal Greece Cyprus Ireland -5 -10 -15 -20 -25 -30 -35
SECOND THING TO GO: ALL THAT IS SOCIAL UNEMPLOYMENT RATES 30 25 20 15 10 5 0 Portugal Greece Ireland Cyprus year before troika entering 2013
SECOND THING TO GO: ALL THAT IS SOCIAL Anchored poverty rates (2008) 30 25 20 15 10 5 0 Portugal Greece Ireland year before troika entering 2011
THIRD THING TO GO : WAGES AND COLLECTIVE BARGAINING SYSTEMS • THE TROIKA « LOGIC »: A DEVALUATION OF WAGES HAS A DOUBLE DIVIDEND: IT KILLS DOMESTIC DEMAND AND IMPROVES COST COMPETITIVENESS; • EXPORT LED GROWTH IS TO SAVE THE ECONOMY FROM THE EFFECTS OF AUSTERITY • IMPORTANT: THIS IS NOT JUST ABOUT SQUEEZING WAGES DOWN AT THIS PARTICULAR MOMENT IN TIME …. • … BUT ALSO ABOUT WEAKENING THE SYSTEMS OF WAGE FORMATION THEMSELVES SO AS TO MAKE MONETARY UNION ‘FIT’ FOR FUTURE SHOCKS
THIRD THING TO GO: WAGES AND COLLECTIVE BARGAINING SYSTEMS • ALSO, THIS IS NOT JUST ABOUT THE « DECENTRALISATION » OF COLLECTIVE BARGAINING • BUT ALSO ABOUT PUTTING INTO QUESTION THE PRINCIPLE OF COLLECTIVE BARGAINING BY REPRESENTATIVE TRADE UNION • REFORMS SUCH AS: • FREEZING MINIMUM WAGES • CUTS IN MINIMUM WAGES • CUTS IN PUBLIC SECTOR WAGES • REVERSING HIERARCHY IN LEVELS OF COLLECTIVE BARGAINING • MAKING A LEGAL EXTENSION OF BARGAINING AGREEMENTS MUCH MORE DIFFICULT • CREATING A LEGAL VACUUM WHEN THE BARGAINING CONTRACT COMES TO AN END • SUBSTITUTING REPRESENTATIVE TRADE UNIONS WITH « GROUPS OF WORKERS »
EVOLUTION OF NOMINAL AND REAL WAGES PER EMPLOYEE SINCE START OF TROIKA PROGRAM AND UP TO 2014 0 Portugal_ Greece Ireland Cyprus -1 -2 -4 -3,7 -3,7 -5,1 -6 -8 -10 -12 -14 -13,6 -15 -16 -16,8 -17 -18
Number of published collective conventions in Portugal 350 300 250 200 150 100 50 2007 2008 2009 2010 2011 2012 2013
FOURTH THING TO GO: AUTONOMY OF SOCIAL DIALOGUE • A WIDESPREAD MISPERCEPTION THAT SOCIAL DIALOGUE WAS TRIED BUT THAT SOCIAL PARTNERS (TRADE UNIONS) FAILED TO REACH AN AGREEMENT • NOT SO • IN SEVERAL CASES (GREECE,PORTUGAL), A CONCENSUS BETWEEN SOCIAL PARTNERS WAS REACHED • TROIKA, HOWEVER, DECIDED IT WAS NOT ENOUGH, IGNORED THE SOCIAL PACT AND PUSHED THROUGH ITS OWN IDEAS OF DEREGULATION
FIFTH THING TO GO: TRUST AND SUPPORT FOR DEMOCRACY…
...AS WELL AS SUPPORT FOR THE EUROPEAN PROJECT
WHAT HAS THE TROIKA TO SHOW FOR ALL OF THIS? • HAS MARKET CONFIDENCE BEEN RESTORED ? • HAVE PUBLIC DEBTS BECOME MORE SUSTAINABLE? • HAS ECONOMIC GROWTH POTENTIAL BEEN INCREASED?
Spreads only falling after Draghi intervention, not because of fiscal cuts
Public debt ratio’s continue to increase Gross Public Debt since start of Troika Regime (% of GDP) 170 150 130 110 90 70 50 2009 2010 2011 2012 2013 Portugal Greece Ireland Cyprus
HAVE FUTURE GROWTH PROSPECTS BEEN IMPROVED? • MASSIVE EMIGRATION OF (MAINLY YOUNG SKILLED) PEOPLE DOES NOT BODE WELL FOR POTENTIAL GROWTH • EUROPEAN POLICY MAKERS DO NOT BELIEVE THIS THEMSELVES, SEE THEIR ESTIMATES OF STRUCTURAL UNEMPLOYMENT 2007 2013 GREECE 10,1 19,3 PORTUGAL 9,3 15,3 IRELAND 6 12,9 SPAIN 11,7 23,2
TO CONCLUDE • ONE KEY CONCLUSION: WE HAVE TOMAKE SURE TROIKA CAN NEVER HAPPEN AGAIN IN EUROPE/MONETARY UNION • WAKE UP DG EMPLOYMENT AND SOCIAL AFFAIRS • APPEAL ON THE ILO AND COE • EP TO USE ITS RIGHT TO ACCESS ECJ TO INTRODUCE COMPLAINTS AND TO MAKE SURE EU TREATY AND SOCIAL AQUIS ARE NOT ‘JUST A PIECE OF PAPER’ • SOCIAL RECOVERY PLAN FOR TROIKA COUNTRIES TO REFIX FAIR WAGES • ECB OUT • SOCIAL PARTNERS IN ESM ADVISORY BOARD
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