Will Monetary Europe be followed by Social Europe?

By Jacky DeLorme, ICFTU Online..., 002/990106/JD, 6 January 1999

Brussels, January 6 1999 (ICFTU OnLine): On January 1 1999 the euro became the common currency of the eleven countries of the Economic and Monetary Union (the fifteen members of the European Union minus the United Kingdom, Denmark, Sweden and Greece). It promptly took its place alongside the dollar and the yen on the stock markets as a reference currency. For all those in favour of the economic integration of the European Union, the introduction of the euro marks a historic step forward, a view reinforced by Eurostat, the European statistics office, whose figures show that the euro zone represents one fith of world gold and currency reserves. It also has a comfortable trade surplus and is ahead of both the United States and Japan in terms of exports. Furthermore, with inflation brought under control and little sign of damage from the world financial crisis, forecasts for 1999 are positive. In a display of unanimity, the Finance Ministers, who on the evening of December 31 1998 set the convergence rates between the national currencies once and for all, the members of the Commission, the European Central Bank all predict that growth will resume in the second half of 1999. But not all the indicators are set fair. Take the public deficit, for example. The President of the European Central Bank, Wim Duisenberg, recalled the commitment made in 1997 by those countries seeking membership of the euro zone to continue the convergence and austerity measures aimed at achieving a balanced budget, or even a budget surplus, in the medium term. He believes not enough has been done to reduce public deficits.

Does that mean that certain social targets will again have to be delayed? Trade union organisations refuse to accept this. With one person in ten unemployed (at the end of October there were about 16.8 million people seeking work in the EU) the fight against this scourge cannot be put off forever by the community institutions (or by the EU governments, the majority of whom are centre-left). But there is a big difference between Monetary Europe and Social Europe, as can be seen from the many warnings voiced over the past year by the European Trade Union Confederation (ETUC), which seem to have fallen on deaf ears. While Emilio Gabaglio, ETUC General Secretary, welcomed the decision taken by the European Central Bank at the beginning of December to reduce interest rates, he was badly disappointed just a few days later when at the closure of the Vienna Summit, beyond expressing the desire to combat unemployment, the European Council failed to give any real substance to the employment pact announced for mid-1999.

With regard to the 1999 employment guidelines, the ETUC calls on the European Union to prepare a coordinated macro-economic policy, and to add economic and social governance to monetary governance. The ETUC asks to be involved in the preparation, follow-up and evaluation of this employment pact. Its presence will be vital on several counts. First of all, trade union organisations are concerned at the certain prospect of more restructuring, particularly in the banking and insurance sectors. They are also worried that within the euro zone wage policies and collective bargaining will be subject to increased competitive pressures, with the risk of social dumping: there are still wide differences in pay across the EMU, and to increase or recover their competitive position (now they can no longer turn to devaluation) countries may be tempted to lower wages.

To avoid this downward spiral, it is urgent that trade unionists from the different countries reach agreement on the minimum thresholds below which they refuse to go. With its plan of action aimed at a Europe-wide coordinated wage policy, the European Metalworkers Federation (EMF) is setting a good example. If progress is to be made, Europe\u2019s social dialogue will have to resume, of course, but given that the employers refuse that course of action, the political authorities have the right to legislate, believes the ETUC.

The other reason the trade unions wish to be involved, at all levels, in the employment pact, can be found in certain disturbing comments made at the time the euro came into force, beginning with that of Wim Duisenberg: unemployment in Europe is essentially of a structural nature and there is nothing monetary policy can do about it. Unemployment is due to a lack of labour market flexibility and it is up to governments and the social partners to make the necessary changes. That said, the president of the European Central Bank is simply echoing the views of the Commission, and even the IMF. This neo-liberal creed is totally rejected by the trade unions. They believe an appropriate monetary policy can have a considerable impact on employment in the euro zone. They see public expenditure not as an unnecessary luxury, as new infrastructure and new social services create jobs. It is the power of money that should be controlled and the introduction of an international tax on speculative capital movements would also be a positive solution in the euro zone. Finally, the trade unions believe that if there has to be flexibility, it must be in an upward direction, towards higher salaries and better social security. Without that, the euro will never be more than the little common denominator of a euro zone where social justice and cohesion will remain in the wings for a long time to come.