THE CONTINUING STORY OF THE EUROPEAN CRISIS

November is a true European crisis month. It started on November 14 with a day of action of the ETUC. In different capitals in the European Union strikes were held, demonstrations and manifestations against the austerity measures. For the occasion, the ETUC has issued a statement:

“The European trade union movement has for years been denouncing austerity measures. They are dragging Europe into economic stagnation and even recession. The result is that growth has stalled and unemployment continues to rise. Wages and social protection cuts are attacks against the European social model and increase inequality and social injustice. The International Monetary Fund (IMF)’s «miscalculations» have had an unbearable impact on the daily life of European workers and citizens. It brings into question the whole basis of austerity policy. The IMF must apologize. The Troika must revise its demands. Europe has a social debt, not just a monetary debt. The promised recovery has not happened. Twenty-five million

Europeans are out of jobs. In some countries, the unemployment rate for young people is over 50 per cent. The sense of injustice is widespread and social discontent is growing. We want action for sustainable growth and jobs. Not just words. The social situation is urgent.”

The ETUC proposes:

* Economic governance at the service of sustainable growth and quality jobs,

* Economic and social justice through redistribution policies, taxation

and social protection,

* Employment guarantees for young people,

* An ambitious European industrial policy steered towards a green,

low-carbon economy and forward-looking sectors with employment

opportunities and growth,

* A more intense fight against social and wage dumping,

* Pooling of debt through Euro-bonds,

* Effective implementation of a financial transaction tax to tackle

speculation and enable investment policies,

* Harmonisation of the tax base with a minimum rate for companies

across Europe,

* A determined effort to fight tax evasion and fraud,

* Respect for collective bargaining and social dialogue,

* Respect for fundamental social and trade union rights.

However, these proposals are still far away to be accepted. The Nordic European countries are resolutely opposed to the pooling of debt through Eurobonds. Great Britain rejects the idea of financial transaction tax as an intent to destroy London city as world financial centre. London city accounts for about 9% of the British gross national product.

The three important players in the European crisis. Left Mr. Europe the Belgian Herman van Rompuy, President of the European Council of European leaders. Next to him the French Cristine Lagarde, Director General of the IMF. On the left the Portuguese José Manuel Barroso, President of the European Commission.

In the meantime the so-called Greek debts crisis continues its own story. This month Greece needs another credit of  € 44 billion to keep its national economy going on. However, IMF and the EU don’t agree about the next steps. One agrees that the given time is too short for the reduction of the Greek debt to 120% of GDP. Therefore Europe is prepared to give Greece more time but this means extra money.  Who has to pay this? The IMF wants no more delays and calls for further debt cancellation. The European politicians find this unacceptable because, as they say, their voters do not want to spend a penny more on Greece.

The story continued Thursday 22 November with a strike of several thousand European officials. They don’t agree with the impending cuts in the EU budget 2014-2020. The officials are worried that the result will be a severe reduction of their wages. The unions point out that the cost of  Europe for its citizens amounts to only  67 cents per day while only 3% of the EU budget goes to salaries. According to the unions there has been savings since 2004 for an amount of  € 3 billion. Another 5% will be saved from now until 2020. The public has difficulties to take serious the strike of the European officials because they earn a lot compared to the officials in most European countries, while at the same time they pay only about 12% tax.

This week, European leaders negotiate the aforementioned European multiannual budget. Until now one could not agree on the budget increase to about €1000 billion. Net fee payers to Europe such as England, Denmark and the Netherlands are opposed. England and Denmark have already threatened a veto. The countries that receive more from Europe than they pay as fee want a budget increase. One wonders what will be the outcome.

If the budget does not increase, Europe will not be able to stimulate economic growth. As we know now this means another defeat for the ETUC that wants Europe to stimulate economic growth more than before.

STRUCTURAL CHANGE FOR EQUALITY IN LATIN AMERICA

Since 2010, the ECLAC proposes to the Latin American governments equality as a guiding principle and strategic long-term goal of their policy. In 2012, during a meeting in El Salvador ECLAC's executive secretary Alicia Barcena reaffirmed this proposal with the report “Structural Change for Equality: An Integrated Approach to Development” ( July 2012, 307 pages ).

So far, Latin America failed to link social equality to economic growth. On the one hand there is Cuba, with its high degree of social equality which due to lack of economic growth in practice amounts to an equal distribution of poverty. On the other hand, there are countries with a neo-liberal model that have economic growth but that is very unevenly distributed. The vast majority of people have to live of an income coming from the informal economy or from precarious jobs.

With its report on 'Structural Change for Equality " the ECLAC takes the challenge to find a way between the two extremes, between state capitalism and market capitalism and of course with the complete preservation of democratic values​​. It is the way that Europe attempts to continue to this day despite the debt crisis. The heart of this model is politically supported by political parties with different colors like social democrats, Christian democrats, social liberals and nowadays even with the support of green parties.

According to the ECLAC the road between neo-liberalism and socialism runs along structural change. A broad term that describes ECLAC as “putting qualitative changes in the production structure at the centre of the growth dynamic.” (page 16 preface). These qualitative changes in the production structure according to ECLAC are also needed to respond to the challenges of globalization: “Improved global insertion and virtuous growth in domestic productivity and employment call for greater participation by knowledge-intensive sectors in overall production. This fosters the building of capacities, knowledge and learning in coordination with production and investment across the economy and the social fabric. In this scenario, environmental sustainability will be achieved only if there is structural change entailing a profound and inclusive technological transformation.” (Preface page 16)

Not an easy task when one considers that even traditionally well organized European states like for example Germany and France are struggling to achieve some of the proposed elements of the ECLAC proposal like for example more technological innovation in the production process. ECLAC points out, however, that the macro-economic conditions in many Latin American countries are now better than in Europe because of their small size of the national debt and increased international reserves.

According to ECLAC, the structural changes lead to a more knowledge intensive production structure with higher labor standards and employment. Employment is considered as the instrument to achieve a greater equality in Latin American society: “Employment with full rights holds the master key to equality; and that must come with social policies to tackle the risks on the road to structural change. Industrial policy is a long-term venture; along the way, sector adjustment pressures arising from productivity leaps call for social policies to ensure a well-being threshold for those who cannot, in the early stages, attain wellbeing through quality employment with rights.” (Preface page 17).

The ECLAC therefore advocates a greater role for the state: “ This obviously involves political will, because the State has a key role to play in advancing policies in this sphere. It is worth remembering that during the past two decades, talking about active industrial policy conducted by the State was a virtual anathema in the development lexicon that prevailed under the Washington Consensus. Talking about equality was, too. Underlying that “veto “ was the assumption that the market, supported by the right signals, would take care of optimizing factor allocation in a way that would in the end lead to productivity leaps. Experience has clearly shown that this is not the case, especially when looking at the poor productivity trends for Latin America and the Caribbean over the past 30 years.” (Preface page 17)

As already noted, no small task for states that are still looking for the development model that best suits them and gives the best guarantees for more welfare. What should be the task of the unions in this process is obviously not the ECLAC to determine. The Latin American unions themselves have the task to establish a proper policy and strategy. Perhaps this is an appropriate topic for a Latin American seminar in the near future.

EUROPEAN DEBTS CRISIS

Participants at the KGZE Conference 2012 with on the second row on the right EO/WOW President Guenther Trausnitz.

From June 21-24 the KGZE Conference on trade union cooperation in Europe was held in the city of Brünn, Czech Republic. The theme of the conference was "Europe and the debt crisis". 58 participants from 15 countries discussed the implications of the state debts for the social system and the labour market. The debt crisis has become a crucial test for the EU. The economic performance of individual European countries has diminished significantly and the number of unemployed rises fast (10,6% or about 25 million persons). In particular young people are facing a lack of jobs and therefore future prospects. Despite the fact that young people are educated and willing to work, some states struggle with youth unemployment of 50% or more.

Austerity programs lead to massive impoverishment of broad sections of the population. With confidence in politics decreasing, purchasing power declining and fewer investments, Europe seems to slide deeper and deeper into crisis.

By bursting the economic bubble the European Monetary Union was plunged into a structural crisis. With the European fiscal pact or officially called the Treaty on Stability, Coordination and Governance in the Economic - and Monetary Union, the EU wants to counterattack the crisis. The aim is a common budget, a common fiscal policy, a common guarantee for the debt of the countries of the EU. Together with the European Economic - and Monetary Union the fiscal pact would complete the European Economic Area.

It's not enough to provide permanently money for an ailing area without measures to initiate recovery. The financial and banking sector must be reformed with clear and transparent rules so that speculative excesses and dubious practices will be stopped. How appropriate the bailout of the Banks may have been, downsizing the financial and banking sector is essential.

1.    A strict separation between commercial and investment banking must be made. The risk must be clearly visible and if necessary restricted.

2.    Accounting rules should be more transparent and rigorous.

3.    A meaningful insolvency law for banks must be introduced. It must be ensured that banks can be "handled" without putting states under financial stress.

4.    In the long term, the financial sector should pay back the money that has been spent by the State in order to overcome the crisis.

5.    If banks are supported, the state or the international community should exercise relevant owner rights.

6.    Total assets should not exceed certain limits related to the GDP.

These are the main requirements for a new regulatory framework, which brings back the financial and banking system to its original function as savings and loan system.

Source: INITIATIVE, 37 JHG, NR. 165. 

             Informationsblatt der Fraktion Christlicher GewerkschafterInnen in der Gewerkschaft der 

             Privatangestellten, Druck, Journalismus, Papier. Austria

THE FALL OF THE AUTOMOTIVE INDUSTRY IN BELGIUM

Workers at Ford Genk after having received the message that the plant will be closed.

Once again, a car plant in Belgium will be closed. This time it's the Ford plant in Genk, where 4500 workers will lose their jobs. Most probably, the same amount of jobs will be lost at the suppliers. In total, approximately ten thousand people are threatened with unemployment. Since 1997 it is the fourth major car brand that closes its plant in Belgium. In that year, workers, trade unions and politicians were surprised by the closure of the Renault Factory. More than 3000 workers lost their jobs. The decision to shut down was taken in France. Belgium had no other options than to accept it.

The result of this abrupt closure was the creation of ‘the Renault law’ that tightened the rules on collective redundancies. The Work’s Council should be informed extensively on plans to close the factory. Thereafter, the Work’s Council can forward questions and only after this the company can submit a plan for collective redundancies. The law did not prevent the closure of the Renault factory and will have no impact on the proposed closure of the Ford plants, it only helps unions and workers to get a more or less fair financial compensation for the loss of jobs.

In 2006, in Germany the decision was made that the Volkswagen plant in Brussels would be heavily restructured. Of the more than 5000 workers about 4000 lost their jobs while as many jobs were lost in subcontracting. The production of the Volkswagen Golf was moved to Germany. Thanks to the German car manufacturer Audi 1000 jobs could be saved by the production of a small car in the same plant. According to the newspapers the paid compensation for dismissal was "historically high".  Approximately 900 workers received early retirement payment with help of the government. AUDI demanded a 20% saving on the costs of production for which the remaining workers primarily had to accept a longer working week (38 hours instead of 35).

In 2010, the Opel plant of General Motors in Antwerp was closed. This meant a loss of 2600 jobs plus probably as many jobs at suppliers. According to the GM management sales of cars had dropped since the start of the credit crisis in 2008. Only the GM plant in Belgium was closed, not the ones in Germany, England, Poland and Spain. It is supposed that to maintain employment the governments of these countries had given financial support to GM. According to the unions, the crisis was also used to transfer production capacity to a lower wage country like South Korea.

The argument of overcapacity in car production and to high wages is now also being used by the management of Ford for the closure of the plant in Genk. Specialists confirm that there exists indeed a structural overcapacity in the production of cars in Europe but Ford itself is not suffering from this problem. The company suffers nowadays from cyclical overcapacity in Europe caused by the credit crisis. Car sales have been fallen by one quarter. But Ford as a multinational is still making profit in the US because it has been restructuring on time and unlike other car manufacturers such as Renault, has made flexible the production of many car components by way of outsourcing to suppliers.

Ford has announced that part of its car production will move to Valencia, Spain where wages are lower than in Belgium. The strong unions in Belgium are preparing for hard bargaining on the coming collective redundancies in 2014. A maximum compensation of 77,000 euros per worker, depending on the number of years that he or she has worked, has been mentioned. However, the compensation payment will not compensate the loss of thousands of jobs, especially not if we take in consideration the loss of jobs at suppliers.

The Belgium experience shows that unions (including European and international unions), national politics and even the European Union are rather helpless when they are confronted with the closure of a plant belonging to a multinational with the size like Ford. Besides the closure of plants of Renault (France)  and Volkswagen (Germany) in the heart of Belgium has made clear that the country of origin supports the opportunistic move of the multinational to save jobs in their own country.

In general one can conclude that large multinationals operate on a global market and that there is no national government or in this case the  European Union that can change decisions taken at the board of such a multinational. Besides, international unions are confronted with different loyalties of their member unions. Which union would support the closing of a plant in its own country because of solidarity with workers of a plant in another country especially when unemployment is on a high level?

The last 15 years the Flemish part of Belgium has lost tens of thousands jobs in the automotive industry. The country has to design a new industrial policy. In which sectors new jobs can be created, who wants to invest money in such sectors, what level of education is needed etc.?  These are long-term issues that politicians, employers and trade unions have to prepare for today or was it yesterday?