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

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

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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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