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STRUCTURE OF THE EUROPEAN SEMESTER AND IMPACT ON WAGES AND COLLECTIVE BARGAINING

Explore how European Semester impacts wages, collective bargaining, and structural reforms. Learn about country-specific recommendations and the push for wage reforms in line with productivity.

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STRUCTURE OF THE EUROPEAN SEMESTER AND IMPACT ON WAGES AND COLLECTIVE BARGAINING

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  1. STRUCTURE OF THE EUROPEAN SEMESTER AND IMPACT ON WAGES AND COLLECTIVE BARGAINING CB TRAINING SEMINARS MARCH 2014

  2. POSSIBLE MOMENTS OF IMPACT ON WAGES IN EUROPEAN SEMESTER • POLICY MESSAGE IN AGS • MARCH SPRING COUNCIL • PUBLICATION OF IN DEPTH COUNTRY REVIEWS • COUNTRY SPECIFIC RECOMMENDATIONS • ….. NOT IN PREVIOUS SCHEME: IF COUNCIL DECLARES MACRO ECONOMIC IMBALANCE TO BE « EXCESSIVE »    ADDITIONAL PROCEDURE

  3. AGS 2014: MAIN MESSAGES • « Keep up the pace of reform » • « Signs of economicimprovement are an encouragement to pursue efforts withdetermination » • « Top priorityisgrowth and competitiveness » so as to « build a lasting recovery »

  4. ON WAGES IN PARTICULAR • « Furtherreform efforts to ensurewagedevelopments in line withproductivity, thussupportingcompetitiveness and aggregatedemand »

  5. PROBLEM WITH THIS WORDING? • IS IT NOMINAL OR REAL WAGES TO BE IN LINE WITH PRODUCTIVITY? • BACKGROUND: ECB OPENLY PUSHING FOR ‘NOMINAL’ WAGES IN LINE WITH PRODUCTIVITY (SEE DRAGHI SPEECH TO EU MARCH 2013 COUNCIL) • THIS IS NOTHING ELSE BUT THE OLD GERMAN MODEL OF ZERO UNIT WAGE COSTS

  6. A DECADE OF WAGE COST STAGNATION IN GERMANY (UNIT WAGE COSTS 1999 = 100)

  7. Structural reforms: Be carefulwhatyouwish for

  8. The problemwith structural reforms… deflationislooming

  9. ANOTHER PROBLEM: REALITY CHECK

  10. IN DEPTH COUNTRY REVIEWS: EXAMPLE OF 2013 CYCLE • Wagestake a central place • Eightmember states • To beadded: 4 MS under a Troikaprogramm • Plus two MS to reducetaxburden on wages • Grand total of 12 (14) member states being ‘advised’ on what to do in the domain of wages

  11. General line • MEMBER STATES HAVE REFORMED AND ARE ON THE RIGHT TRACK…. • … IN PRACTICE THESE HAVE BEEN REFORMS NOT REALLY TO TRADE UNION LIKING…. • …. BUT MORE NEEDS TO BE DONE, FROM MONITORING REFORMS TO DEEPENING REFORMS

  12. WAGE INDEXATION RECOMMENDATIONS • WAGE INDEXATION SYSTEMS: CONTINUE REFORMS • BELGIUM AND LUXEMBOURG • CYPRUS ALREADY IN « THE HOUSE OF EU GOVERNANCE » • ITALY: COMMISSION DISAPROVES OF SETTING THE WAGE COMPENSATION FOR INFLATION AT NATIONAL LEVEL NEGOTIATIONS, STANDS IN THE WAY OF DOWNWARDS WAGE FLEXIBILITY AT LOWER LEVELS

  13. RECOMMENDATIONS ON MINIMUM WAGES • FRANCE: 60% IS REALLY TOO HIGH (BUT TAX EXEMPTIONS TO BE TAKEN INTO ACCOUNT • SLOVENIA: 2010 HIKE IS STILL INDIGESTABLE

  14. RECOMMENDATIONS ON WAGE SETTING INSTITUTION • SPAIN:EVALUATE REFORMS BY JULY, ACT BY SEPTEMBER (ALSO IN EXCESSIVE IMBALANCE) • SPANISH CENTRAL BANK: ALLOW EMPLOYMENT OUTSIDE THE MINIMUM WAGE

  15. GENERAL CALL ON HOW WAGES SHOULD BEHAVE • DENMARK AND FINLAND: MODERATE WAGE AGREEMENTS IN NEARBY FUTURE • FINLAND: AVOID 2007 ROUND OF HIGH WAGE PATTERN BARGAINING

  16. ALL ABOUT DOWNWARDS WAGE FLEXIBILITY…. EXCEPT FOR GERMANY ? • « sustain conditions thatenablewagegrowth to support domesticdemand » • « to thispurpose, reduce taxes and contributions especially for lowwageearners’ • In otherwords, « wages and domesticdemand are beingallowed to rise in strongereconomies » • What has happened to : * « create the conditions for wages to catch up withproductivity » • * the proposal for a minimum wage in Germany?

  17. A LOOK INSIDE DG ECFIN THINKING: « Free prices » • THEIR BASIC MODEL: DO AWAY WITH ALL RIGIDITIES THAT BLOCK OR DELAY PRICE ADJUSTMENT INCLUDING WAGES • THIS WILL PRODUCE DOWNWARDS WAGE ADJUSTMENT…. • …BUT ALSO UPWARDS WAGE ADJUSTMENT (WHERE NECESSARY AND DESIRABLE) • SO, IN THEIR MINDSET, NO SYSTEMIC BIAS AGAINST WAGES IF FOR EXAMPLE MINIMUM WAGES/ERGA OMENS COLLECTIVE BARGAINING/TRADE UNIONS ARE WEAKENED EVERYWHERE • « THE MARKET WILL TAKE CARE OF EVERYTHING »

  18. THIRD MOMENT OF IMPACT: MEMBER STATE DECLARED IN MACRO ECONOMIC EXCESSIVE IMBALANCE • Last year: Spain and Slovenia • This year: Spain out, Italy in and Sloveniaremaining Obligation to present ‘corrective action plan’ Commission examines strictly If MS does not comply, Commission can impose sanctions

  19. RECOMMENDATIONS OR ORDERS? • ‘Recommendations’ are evolving: • Troika country experience: A (hostile) takeover by DG ECFIN, ECB,IMF • ECB and market pressure collide: See secret letters to Italy, Zapatero, withreformsalong the abovelines in return for ECB support of sovereigndebt • Alreadylegallyexisting: Sanctions in economicgovernanceprocedureswith ‘qualifiedreversedmajority’ voting

  20. RECOMMENDATIONS OR ORDERS? • In the pipeline: • Macro conditionalities in the new MFF for structural funds • Contactual arrangements under the disguise of a Euro Fiscal Capacity/Social Europe EU unemploymentfund: « Solidarity in Reform’ • Ex ante coordination of reformpolicy • Background to these: EMU Blueprint • « To makeCSR’sreallybinding » • « To have adjustment programs such as in Troika countries for the whole of europe »

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