Attack on labour: The Belgian showcase

Economic affairs commissioner Olli Rehn seems eager to test just how far the relatively new rules on “economic governance” can reach, and when it comes to attacking labour rights, Belgium has been deemed the test-case.

In the days preceding the commission's launch of its recommendations, there were rumours in the Belgian press that the country would be fined for its breach of the rules on member states’ deficit. Had that happened, the fine could have been as much as €780 million. In the end, the commission opted for a different solution: delay the fine until 2014 unless the Belgian government makes deep spending cuts and introduces severe “structural reforms”.

It is possible the commission felt it would be difficult to fine Belgium, while at the same time giving a longer leash to France and the Netherlands, both of which are faring no better than Belgium in terms of deficits.

In fact, a comparison between the Netherlands and Belgium makes the attack on Belgium look absurd.

Both countries were subjected to the “excessive deficit procedure” – the first step of the EU correction procedure - in late 2009. They were both asked to reduce the deficit by the same pace, and judging by 2012, their deficits are the same.

So why the separate treatment? The commission is clearly fond of the promises made by the Netherlands. Here, it will be made easier to fire people, and the maximum unemployment benefit term will be shortened. Belgium is less willing to engage in this kind of reform, and has presented a programme with different tools.

Olli Rehn and his staff have targeted the Belgian wage setting system for years now, but have not been listened to. This might explain why on the commission’s website Belgium is asked to “fundamentally reform” its “wage norm mechanism”, and at Wednesday’s press conference Rehn highlighted wage setting reform as key.

It is not that the Belgian government has not introduced cuts. Cuts have been deep, and financial markets are actually happy with Belgium. It is not even that the Belgian government is sparing labour. Not long ago, a government imposed freeze on wages brought tens of thousands to the streets. But in principle, a system of automatic adjustment of wages to prices still exists, and is a major nuisance in the eyes of the commission.

Over the past years, it has become EU policy to make wages adjust to “competitiveness”, and with a low wage development in countries such as Germany, Belgium is under political pressure. At the press conference, commission president Barroso stressed once again that the rules are not there to make Germany “less competitive”, but to make others adjust to low German wages.

There’s nothing new or groundbreaking about that.

The EU has drifted towards frontal attacks on collective bargaining and wage setting for years, with the warm support of the powerful business lobby in Brussels. And a recent Belgian complaint to the commission about German wages led to no more than a polite reply from the commission that indeed there is a problem.

What is new is that now the commission is testing the powers it has acquired over the past years to push wage-setting in member states, and Belgium has been singled out to be the guinea pig.

This is not because the commission has discovered the panacea of economic recovery. In terms of solving the crisis, there is no reason to believe attacking wages will do the trick.

On paper, Greece has indeed improved its competitiveness, as wages have been brought down dramatically, but there is no sign of improvement. In fact, the attack on Greek wages is more likely to have led to a weakening of the overall economy.

Why should the commission interfere in wage-setting?

But the worst part is not that it’s bad crisis economics, but that the commission has the nerve to interfere in wage-setting at all.

Setting wages is not like setting the price of a candy bar or a tractor, but is linked to right of wage earners to be part of the bargain – they too can determine at what “price” their labour can be sold.

For a century, the trade union movement has fought for that democratic right, and against the idea that labour be considered a random parameter to be adjusted downwards by employers, or bureaucrats for that matter. It is a field where fundamental rights are at play, and interfering could roll back the successes of decades of social struggle.

The commission is well aware of the stakes, and it is playing a politically motivated game. The numbers around member states’ deficits, growth levels or bond prices aren’t even the issue: the issue here is whether the commission can roll back social rights.

Barred from directly attacking wages by treaty, the commission is using every possible back door to do it anyway. The trade union movement in Europe should acknowledge this, and use all means at their disposal to put its foot down. This year. Before the Belgian showcase is rolled out across Europe.

The writer is a researcher with Corporate Europe Observatory, a campaign group looking into the financial lobby in Brussels and the democracy aspects of the eurocrisis.