The European Social Model Under Pressure

The debate on Europe‘s future has become lop-sided. The fascinating idea of European integration, of finding a peaceful and cooperative order on a continent torn apart by wars and conflicts has deteriorated. We are left with a narrow-minded discussion on sovereign debt and its impact on interest rates and monetary stability. Developing a stable democratic and social environment in each member state and in the union itself will have to wait.

In reality, we are observing an attack of financial markets on the weakness of European institutions. It is these markets that are indirectly responsible for the high levels of sovereign debt, allowing the spread of financial problems across European economic systems.

Thus, the question of the mere existence of the European Union has been put back on the table. A question which is understandably more important than deciding the shape that European Union should take to best please the people of its member states.

However, it has always been my personal opinion, and that of the labour movement as well, that there is no future for European integration unless the Union includes a strong social dimension. The current crisis has put most of the elements of such a social dimension under severe pressure.

For an idea of the most important elements of the so-called European Social Model (ESM) I refer to the “Basic Principles and Proposals for a Reform of The European Social Model” put forward by a research group led by Prof. D.Albers (Bremen), Prof. S. Haseler (London) and Prof. Gian Maria Fara (Rome) of the Network Social Europe (NSE).

In spite of the fact that the implementation and degree of realisation of the European Social Model varies across the European nations the research group identifies a number of key ESM elements:

• A developed and interventionist state representing the primacy of democratic politics over markets
• Free and compulsory education
• A fair distribution of life chances by equal access for everybody to continued education, training and skills development throughout life
• A robust welfare system that provides effective social protection to a considerable degree for all citizens, but especially for those most vulnerable
• The limitation and repression of economic and other forms of inequality
• A key role in the institutional configuration for the “social partners”, especially the unions and other agencies promoting social and environmental interests
• Active protection of the environment by setting an appropriate incentive structure, paying special attention to the threats of climate change

It is necessary to state that the struggle between market forces on the one side and the political efforts of establishing a common framework of social, democratic and environmental standards on the other has been going on for decades. Many observers shared the opinion that the European Union was on its way to becoming a “market state“, as Bobbit named it. The judgement that the social dimension of the Union is underdeveloped compared to the progress made in the fields of competition and markets (passive integration) was widely accepted long before the financial crisis.

However, since the financial crises absorbed the EUs financial resources and political capacity there is no doubt that all the above elements have been moved into the background of the political stage or perhaps off its radar completely.

Let me elaborate further on two of the elements I just mentioned, both related to the role of unions in the context of “social europe“.

The wage setting system and the bargaining system play a major role in determining competitiveness and purchasing power respectively. The right to organise in unions and the right to strike are fundamental and indisputable in a democratic society.

All attempts to refuse these rights have to be rejected. This principal statement does not say very much about the reality of labour relations in a specific country. What is necessary is strengthening the role of collective agreements and extend their range of coverage.

The German example shows very clearly that in spite of all formal rights in place and even with comparatively stable union structures the impact of collective agreements can erode considerably. The range of coverage is on its way down.

At the same time, Germany’s low wage sector is on the verge of exploding. Almost one in four jobs are paid low wages (less than 2/3 of the median wage). This is a development of the last two decades and has contributed to building up the picture of Germany as a low-wage economy.

Aside from stabilizing and defending the collective bargaining system we need a European wide coordination. The coordination rule, which was developed in the nineties, still makes sense. Yet, it needs more commitment. Price increases on the one hand and productivity gains on the other provide the lower limit for increases in wages and salaries. The crises should not drive European unions apart, it should bring them together.

Collective bargaining structures are an indispensable element of a living democracy. The same applies – from my point of view – to an effective employees‘ representation system. The democratic substance of the European Union is not just a question of elections, the constitutional treaty or the role of the European Parliament. It is as well a question of how conflicts in daily life or at the workplace are dealt with and which share of real influence employees do have in resolving them.

It is short-sighted to make employees rights an instrument of competition.

The German example teaches many lessons in this respect. The German system of workers representation, the works‘ constitution and codetermination on the supervisory board, is not an export commodity.

The system is under political pressure in Germany as well. We regard it as being worth defending and developing further. This is why we push for its democratic substance, in our country and in the European context.

European integration is very important among German unions. This includes solidarity among the states, the peoples, the workforces and the unions. Let us further tear down borders and dividing lines. The political, social and environmental future holds many challenges. We can meet them more easily and with more success in cooperation and not in conflict.