Grigor Gradev, ETUI28 January 2015, Tbilisi

Changes and challenges to the European Social Model (ESM)

What relation to Georgia?

● The AA and DCFTA agreements – framework for approximation

with EU standards and practices to gradually integrate into the EU

Internal Market.

● Main areas of change – governance modes and regimes of

operation of economic and social systems, much less in trade per

se.

● Chapter 14 - Employment, social policy and equal opportunities

○ Article 354: Georgia will carry out approximation of its legislation to the EU

acts and international instruments referred to in Annex XXX to this Agreement

in accordance with the provisions of that Annex.

● Georgia will introduce key elements of the ESM (about 40 directives)

within 3-4 years.

The EU at a glance – what it is all about? August Landmesser

The EU as a peace project seems completed. Is it irreversible?

J C Juncker (2012):● The demons have not been laid to rest – they are only sleeping.

Now they are awakenig both West and East. (France – IPSOS poll 2014)

● Europeans are dwarfs. No one can make it in the globalised world on their own. We all must come together – core, periphery and the extensions to show to the world something big and important. This is the EURO.

B. Segol, Genral Secretary ETUC (2014):● The crisis and EU policy response is undermining the very concept

of Europe. Unless a radical change, “we will have to file for a divorce”.

The big question: how to get EU and its social model back on track?

Why ESM ?● The founding treaties define the EU as:

● a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment.

● … shall combat social exclusion and discrimination, and shall promote social justice and protection

● … shall promote economic, social and territorial cohesion, and solidarity among Member States (Art 2, p. 3)

● Title IX – Employment● Title X - Social policy – social dialogue on EU level obligatory

The Lisbon Treaty entered THE CHARTER OF FUNDAMENTAL RIGHTS IN THE EU as integral part of the text.

● Europe 2020 strategy - for smart, sustainable and inclusive growth, … to improve the EU's competitiveness while maintaining its social market economy model … (COM(2014) 130 final/2)

ESM – what is it?Also referred to as: ● Social Europe; Social dimension of European integration which makes

the EU project unique in the world.● EU - ”convergence machine”, at least until the crisis - reversals● Often compared to the US model for proof but not always correctly.

ESM operates as a kind of political construct based on a loosely defined normative concept – “a complex of homological structural and functional similarities” (Aoust, 2002)

In simple words, the necessity for ESM was recognised with the setting up of the EU Single Market (mid 1980s) to rebalance and stabilise economic and political governance and avoiding unfair competition through social dumping.

Work started mid 1980s under famous Jacques Delors EC involving the social partners (European employer organisations and ETUC) in the policy process - de facto launching the European Social Dialoogue (Val Duchesse process)

● The multi-layer Social Dialogue process in the EU – backbone and motor of the ESM - the fundamental difference with US and all other models in the world

● In the new European Commission the Euro is in a special new unit: EURO and Social Dialogue – EC Vice President

ESM – one model or more?

● On EU level – the EU insttitutional channel:● The Commission shall have the task of promoting the consultation of

management and labour at Union level and shall take any relevant measure to facilitate their dialogue by ensuring balanced support for the parties.

● To this end, before submitting proposals in the social policy field, the Commission shall consult management and labour on the possible direction of Union action

● On initiative of the social partners when they make an agreement on a proposal, the EC can take it to the Council for adoption as EU law (directives).

● The second channel – autonomous social dialogue● On the same legal basis and pattern operate 42 committees for

sectoral/branch social dialogue in specific economic areas.

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On national level – five pillars of labour-inclusive industrial relations regime (W. Streek; J. Visser)1. strong and publicly guaranteed trade unions;

2. routine participation in tripartite policy arrangements based on formal rights;

3. a high floor of universalistically defined and publicly secured social rights;

4. a degree of solidaristic wage setting based on coordination at the sectoral level or above;

5. a reasonably generalized arrangement of information, consultation, and perhaps codetermination at the firm level based on the rights of workers and unions to be involved.

Current state of affairs in the conposition of the ESM/social dialogue:● Two major types: classical, neo-corporatist / CEE hybrid● Four-Five clusters/models: Nordic, Continental, Southern (Mediterranean)

and Anglo-Saxon + CEE hybrid.● 28 national systems of labour and social policy.

Main dynamic trend: weakening of efficiency of ESM; EU “convergence motor” shifted to reverse gear by the austerity policy response to the crisis; social issues – intercepted by populist/extremist forces.

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EU at crossroads?

● J C Juncker programme speech at election by EP – A New Start for Europe

● The complex set-up:● EU competences vs national sovereignty – labour / social

systems still nationally based

● EU institutional legitimacy vs the “democratic deficit”

● Governance centralisation vs divergence pressures and core-periphery disposition (econ governance/semester vs strengthening social dialogue, ESM). The future EU is in the Euro area (R. Sikorski) –Greek puzzle

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Some key challenges - policy priority areas

● Employment crisis and its effects on poverty, social exclusion, incentives for better education and work realisation, social protection systems, etc.

● Deteriorating demographics – active ageing?, migration – freedom of mobility challenge

● European level automatic stabilisers – pooling part of unemployment benefit funds, minimum wage, social floors/ basic income schemes,etc.

● Social economy and effective public services ● Informalisation of the formal economy● The rising wave of new technologies, the sharing economy – effects

on work, employment and social relations (low interest rates, QE)

Cumulative effect: (multiple) inequalities

The challenges ahead: rising inequalities – Sweden in the lead

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The German Puzzle – wealth distribution (ECB)

P De Grauwe - Per capita wealth in selected European countries

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The relationship between income equality and GDP per head, 2010

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The new multilateralism - 3 priorities for 21 century: demographics, inequality, climate change

●  It is not surprising that everyone from the Confederation of British Industry to Pope Francis is speaking out about it — because it can tear the precious fabric that holds our society together.

● Let me be frank: in the past, economists have underestimated the importance of inequality. They have focused on economic growth, on the size of the pie rather than its distribution. Today, we are more keenly aware of the damage done by inequality. Put simply, a severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential.

● It is easy to diagnose the problem, but far more difficult to solve it.● Think about making taxation more progressive, improving access to health and

education, and putting in place effective and targeted social programs. Yet these policies are hard to design and—because they create winners and losers—they create resistance and require courage.

● Nevertheless, we need to get to grips with it, and make sure that “inclusion” is given as

much weight as “growth” in the design of policies. Yes, we need inclusive growth.

● More inclusion and opportunity in the economic life also means less cronyism and corruption. This must also rise to the top of the policy agenda.

(Ch. Lagarde, Managing Director IMF, 2014)

Perspectives from the EC and European trade unions

● Juncker’’s programic speech and the new workplan of the EC.● Growth and jobs, youth employment a special focus.● Energy Union● Digital Economy● Fairer market and taxation systems

European trade unions welcome the shift in orientation but underline that a radical change in policy is ther only option.

Optimistic about the new Commission but not uncritical and boundless.

● Juncker’s Investment plan – financial magic? The relevant Commissioner did not really answer questions in Parliament. Is it too little too late?

ETUC proposal of 2% of EU GDP invested over 10 years can make a difference.

● REFIT – how transparent and reasonable the process will be to strengthen and not further undermine ESM.

What policy EU needs most at the crossroads?

Europe will not be made all at once, or according to a single plan. It will be build through concrete achievements which first will create a de facto solidarity. Robert Schuman Declaration ( 9 May 1950)

Thank you for the attention