Austerity Europe: Opaque Governance and Ambiguous Politics

The Absorption of Social Policy in Economic Governance

Due to high economic interdependence across the continent, the choice for austerity has been increasingly coordinated at the supranational level. Reforms of the EMU in response to the financial crisis can be regarded as a new cycle of centralization in the EU. The new mechanisms which make governance more stringent do not only concern monetary policy or economic integration. An increasing number of social policy issues have been submitted to stronger European surveillance, with the effect of a greater subordination of social policy to economic policy and fiscal discipline. This is notably a result of the increasingly hybrid nature of EU governance. While called ‘coordination’, the European Semester also involves a number of stringent and legally binding procedures. It is not clear to what extent social policy, which formally remains a national domain of competence, should be affected by such mechanisms. Though indirect, the post-crisis governance has a very real impact on welfare services.

Since 2010, fiscal discipline across Europe is steered through a cycle of macro-economic surveillance called the European Semester. Within this framework, the EU Commission monitors the economic and social situation in the Member States and formulates so-called country-specific recommendations which outline the nature of reform which should be undertaken by national governments. These recommendations are endorsed (and sometimes amended) by the Council thus ensuring collective oversight of reform. The policy guidelines should then be taken into consideration when drafting national budgets which should comply with EU rules on deficit. The new governance framework also involves potential sanction mechanism in the form of an excessive deficit procedure whereby the Commission can propose to the Council to enforce financial sanctions in the case where Member States fail to take ‘corrective action’ to tackle excessive deficits. The excessive deficit procedure, therefore, embodies the hardening of the rules enshrined in the Stability and Growth Pact, which was mainly soft law and relied on the good will of the Member States. In this new constellation, the surveillance and sanction powers conferred upon the Commission are significant (Closa 2014 ; Dehousse 2015). At the time of writing (2015), an excessive deficit procedure is opened against nine Member States: Croatia, Cyprus, France, Greece, Ireland, Portugal, Slovenia, Spain and the UK. Seventeen further Member States have had to face an excessive deficit procedure in the recent past. So far, no procedure has gone as far as to impose sanctions against a member State. In this regard, it appeared that there is room for manoeuvre for political negotiations. It is striking that two of the largest Member States, namely France and the UK, have had procedures opened since 2009 and 2008 respectively, and have obtained from the EU Commission a respite until 2017 to bring their deficit back below 3 % of GDP, that is a longer delay than other EU countries. All in all, the European Semester accounts for a new blend between soft and hard law (Armstrong 2013).

In this new landscape comprising hybrid forms of governance, social policy has been increasingly subordinated to economic policy and, more precisely, fiscal discipline. In fact, the functioning of the European Semester has been in a constant state of flux and has witnessed many changes since its inception in 2010: in a first phase, the European Semester absorbed (and neutralized) existing policy making on social policy. Copeland and Daly show how the existing Open Method of Coordination on social inclusion as well as the poverty and social exclusion target agreed upon in the framework of Europe 2020 have rapidly been overshadowed by the focus on budget discipline of the European Semester (Copeland and Daly 2015). In a second phase, social policy has been tied into the European Semester. This has resulted from a counter-mobilization of social actors. Lazlo Andor, then Commissioner for Employment and Social Affairs, promoted the elaboration of ‘the social dimension of the monetary Union’, as reflected in a communication from 2013 (European Commission 2013c) . As result of a struggle between DG EMPL and DG for Economic and Financial Affairs (DG ECFIN), two different scoreboards were included in the so-called macro-economic imbalance procedure, whereby a series of socio-economic indicators are monitored and an ‘alert mechanism’ can be launched should the situation in certain Member States give cause for concern (Vanheuverzwijn 2014).

The macro-economic imbalance procedure now includes the monitoring of unit labour costs, the activity rate for different age groups (notably young people), the people at risk of poverty or social exclusion rate (including after social transfer), the rate of severely materially deprived people, the rate of people living in households with very low work intensity and so on. Scholarly assessments are divided with regard to the possible implications of this trend. Copeland and Daly (2015) find that the scoreboard brings no novelty and is nothing more than ‘an analytical tool’ to secure the Commission’s ‘measurement right’, but does not entail sanctions if Member States fail to comply with the social benchmarks. This echoes the view of the ETUC. Bekker (2014) on the contrary, stresses that some socio-economic issues addressed in the country-specific recommendations may be linked to the sanction mechanism embedded in the European Semester. For Zeitlin and Vanhercke (2014), changes in the practical functioning of the European Semester since 2011 can be seen as a ‘socialization’ of macro-economic governance. This has been reflected in the greater involvement of social policy actors (including the drafting of the country-specific recommendations), on the one hand, and in the continuous increase of recommendations related to social policy, in particular poverty and social inclusion, healthcare and pensions.

Hence, according to them, these developments should be seen

not only as a response by the Commission and other EU institutions to rising social and political discontent with the consequences of post-crisis austerity policies, but also as a product of reflexive learning and creative adaptation on the part of social and employment actors. (Zeitlin and Vanhercke 2014, p. 3)

However, the greater involvement of social policy actors or the greater inclusion of social policy issues in the country-specific recommendations gives no indication as to the nature and direction of reform promoted at the EU level. In other words, it does not automatically mean that the Commission and the Council support progressive or socially minded policies implying a rebalancing of fiscal austerity towards more socially sensitive budget politics. Hence, for the time being it is not entirely clear to what extent the post-crisis economic governance shall shape national social policy. Various actors within EU institutions seem torn apart between two objectives: enforcing the control of social policy expenditure in order to enforce budgetary austerity, on the one hand; and the desire to monitor the effects of austerity on European societies in order to make sure that they do not spin out of control, on the other. These contradictions and dilemmas are evident when looking at how welfare services are being addressed in the framework of the European Semester.

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