When did the austerity era of European crisis management end? On the failure of National competitiveness boards

ABSTRACT

The National Competitiveness Boards were supposed to become a central building block in European crisis management and enable European steering of wage developments. However, they failed and were institutionalized under the name ‘National Productivity Boards’ as largely non-binding advisory bodies. This article examines the policy-making process of the National Competitiveness Boards against the background of the EU’s current social and labor policy initiatives and argues from the perspective of a critical theory of European integration that the failure of the National Competitiveness Boards represented an important breaking point with the austerity policy continuity in the EU.

KEYWORDS:

• National Competitiveness Boards
• European integration
• Process tracing
• Trade unions
• European commission
• National productivity boards

1. Introduction

Since the outbreak of COVID 19, a change in European integration can be observed. In many policy areas there seems to be a break with the competition mode of integration: In industrial policy, there has been a considerable relaxation of competition law and the granting of generous state aid in the context of so-called major projects of common European interest (Schneider 2022). In fiscal policy, the so-called general escape clause of the Stability and Growth Pact (SGP) was activated, the criteria were suspended and the Recovery and Resilience Fund made it possible to issue EU bonds for the first time (Luo 2022). In social and labor policy, considerable measures have recently been taken to break with the market-creating logic and establish a new mode of market limitation. Most recently, the Minimum Wage Directive led to a fundamental redefinition in the field of wage policy: trade unions and collective bargaining are no longer seen as an obstacle to economic competitiveness, but as an instrument to prevent poverty (Schulten and Müller 2021).

In particular, the development in labor and social policy is truly puzzling, considering that during the euro crisis the EU pursued an austerity management that saw wage policy as the central lever for improving competitiveness alongside budgetary policy. In the euro crisis, a labor policy complex was created in the form of a modular system that intervenes in the national regulation of wage relations, lowers (minimum) wages and enforces general wage restraint (Syrovatka 2022b). However, Zeitlin and Vanhercke (2018) observe a new social policy orientation in European politics already in the mid-2010s. Their article triggered the so-called socialization debate, which revolved around the question of a social policy turn in the EU in general and a stronger emphasis on social policy in the European Semester (Haas et al. 2020; D’erman et al. 2022).

Some scholars emphasize the role of Jean-Claude Juncker, who became Commission President in 2014 and pursued a stronger social policy agenda (Zeitlin and Vanhercke 2018; Bekker 2018). They argue that Juncker facilitated the participation of social policy actors in the Commission’s policies as a whole, while integrating the prioritization of social issues into the structure of the European Semester (Zeilinger 2021). With regard to the COVID-19 pandemic, Miró (2021) therefore refers to the suspension of the semester rules and Vanhercke and Verdun (2022, 217) note that ‘officials at the EU level (especially in the various Directorates General of the European Commission) were even more receptive to social issues and the views of social actors than before’ (cf. O’dwyer 2022, 162 from a gender perspective). In contrast, other scholars point to the continuity of the market liberal orientation in European policy, especially the country-specific recommendations (CSRs) (Jordan, Maccarrone, and Erne 2021; Copeland and Daly 2018; Dawson 2018). With regard to the most recent social policy initiatives, it was criticized that these were mainly symbolic in character and did not correct the basic orientation of EU labor policy (Syrovatka 2022a). Yet even critical commentators had to admit that a ‘new dynamic in the field of EU social policy’ (Syrovatka 2022c, 136) had emerged or even a ‘paradigm shift’ (Schulten and Müller 2021) had taken place.

But when exactly was the austerity policy of the European Union first challenged and progressive resistance successful? When was an expansion of the market-making ‘New European Labour Policy’ prevented? These questions have so far remained underexposed in the current debate, when the turnaround is justified with the assumption of office by Jean-Claude Juncker or with the learning of specific directorates-general of the Commission (Zeitlin and Vanhercke 2018; Bekker 2018). These explanations are unsatisfactory in that they underestimate the conflictual nature of political change and overlook the drivers and power relations behind the institutions. This results in processes of change being over- or underestimated. A critical theory of European integration instead identifies historical ruptures and focuses on the power relations lying behind the processes of change. The interest in knowledge lies in conflicts between social forces that have led to a policy change. This makes it possible to assess how sustainable and lasting a policy change is. From the perspective of a critical theory of European integration, it is therefore argued that one such historical ruptures with austerity policies was the failed enforcement of the so-called National Competitiveness Boards (NCB) in 2015. This project was a central building block to increase the enforceability of the European Semester and to establish a penetration into national wage policies. The NCBs were to be established at the national level and formulate guidelines for national wage negotiations based on indicators such as productivity. They were linked to the goal of limiting national wage development by providing a framework in order to better control and coordinate competitiveness development (Council 2015a). However, due to the strong resistance of the trade unions, they could only be adopted in a very weakened form.

In line with the motto ‘There is no glory in prevention’, NCB have not received much attention in academic literature. With the exception of a few policy papers (Valkama and Zoppè 2018; Schwieter et al. 2018; Koll 2016) there is only the study by Wigger (2019) which discusses in the context of the EU industrial strategy. Moreover, there is no research on their enforcement. The following article aims to fill this gap and presents a process-analytical reconstruction of NCB failure. This means that the focus is less on the political-economic relevance of the NCBs and more on the related policy process. To this end, after the presentation of the theoretical and methodological approach (2), the political debates around the Competitiveness Committees are traced and the associated actors and strategies are elaborated (3), followed by a reflection on the resulting findings (4). Finally, a conclusion is drawn (5).

2. Critical European integration theory

The European integration process is primarily an economic one (Scharpf 1998). While until the 1970s it primarily served to safeguard nation-state growth strategies, since the 1980s at the latest it has aimed to meet the spatially and temporally expanded regulatory requirements of an increasingly internationalizing capital accumulation, through the partial or even complete supranationalisation of forms of regulation. In this sense, European integration represents a response to the narrowness of national markets and their hitherto nation-state-based regulation in order to ensure stable and secure capital accumulation. However, as Jessop (1997) points out, this did not lead to a disempowerment of the member states, but to an internationalization of those state apparatuses that are closely linked to the world market and the economic sphere. This resulted in a revision and reorganization of the nation-state regulatory systems by the EU supranational order. While forms of social and labor regulation remained at the nation-state level, the core projects of European integration – the Single Market and Economic and Monetary Union (EMU) - almost completely Europeanized the monetary and competitive relations. With the shift of regulatory competences to the European level and the creation of new or the expansion of existing institutions, a ‘regulatory network spanning several spatial levels’ emerged (Wissel 2015, 39). However, this network has a highly asymmetrical effect, since the integration principle of ‘mutual recognition of national rules’, which has been implemented since the 1980s, has put national forms of regulation under considerable pressure (Scharpf 1998). In particular the Single Market project and EMU promoted intra-European location competition by lifting capital restrictions and making currency devaluations impossible, thus creating competition between the member states for the best conditions for the utilization of capital. In this sense, this ‘competitive mode of integration’ (Ziltener 1999) had a considerable effect on the still nation-state forms of regulation of the wage relationship, which now became an important lever for improving price competitiveness and thus the conditions of utilization within an EU state (Ziltener 1999).

As van Apeldoorn (2002) has pointed out, the emergence of the competitive mode of integration is largely due to the interests and influence of European industrial and financial capital. Both the Single Market project and EMU were inspired and promoted by the European Roundtable of Industrialists. Due to the nationally fragmented European civil society, as well as the limited human and financial resources, European state apparatuses such as the European Commission are much more interested in and dependent on the expertise of interest groups and capital forces than national state apparatuses. As a result, European state apparatuses have developed specific ‘strategic selectivities’ that have given organized capital in particular easier access to the policy-making process. With the term ‘strategic selectivity’ Jessop (1997) describes the specific structure of opinion-forming processes in European institutions, which, as a historical sedimentation of social struggles, can limit, block but also promote and support the strategic action of social forces. In this sense, a critical theory of European integration understands the policy-making process at the European level not as a deliberative, but as a highly power-structured process in which the political projects of transnational industrial and financial capital are structurally given greater consideration than the interests of progressive forces such as trade unions or NGOs (Bieling and Brand 2015). This has resulted in European integration having a fundamentally market-creating character, while market-limiting initiatives have largely failed or have had only a symbolic effect (Scharpf 1998).

This does not mean, however, that progressive projects are doomed to failure per se, but are more difficult to implement due to strategic disadvantage. In the past, there have always been progressive political projects that could be skillfully placed in the policy-making process through strategic action. What matters here is first the form of articulation and second the primary level of articulation. For the first issue, Bieling and Steinhilber (2000) distinguish three strategic discourse dimensions in which political projects have to assert themselves: 1.) the coordinating discourse, which is conducted in formal or informal forums and serves to coordinate political actors and communities of experts; 2.) the communicative discourse, which is characterized by the communicative practices of organic intellectuals who try to organize social approval for concrete political initiatives; 3.) the everyday life discourse, in which the initiatives connect with people’s everyday ideas.

At the same time, the primary level of articulation is of interest for the implementation of political projects, as the EU policy-making process is characterized by multi-level interaction between national and EU levels. Although the Commission has a monopoly on initiatives and the European Parliament has also gained competences, the EU member states continue to be powerful actors. In the Council, they articulate a ‘national interest’, which in turn is the result of power relations on the terrain of the respective nation state. The member states have a certain hierarchy in relation to each other, which is formally reflected in the EU’s voting system, but which mainly results informally from their respective positions in the intra-European division of labor and uneven development (Bieling 2015). As the example of Greece in 2015 illustrates, this hierarchy between member states limits the strategic room for maneuver and thus also the progressive potential of national governments.

However, it also enables progressive forces to understand the EU policy-making process as a pre-structured second-order condensation process and to strategically include the nation-state level for the articulation of political projects at the European level (Brand, Görg, and Wissen 2011). For while the European state apparatuses are characterized by powerful strategic selectivities in favor of transnational capital, there are often informal and formal channels of influence for progressive forces at the nation-state level – for example, for trade unions in corporate bodies. However, this requires a much more strategic approach and a more effective coordination of national units through the European umbrella organizations, which often makes it seem easier to limit oneself exclusively to exerting influence at the European level. This, however, does not do justice to the strong weight of the nation states in the EU policy-making process, which, as a multi-scalar and pre-structured condensation process of power relations on different terrains and geographical spaces, enables the national interest groups of certain member states to exert particular influence (e.g. Germany, France).

This was particularly evident in the euro crisis, in which the interests of Germany, the largest EU member state, combined with the interests of European industrial capital to impose an EU crisis management that essentially followed the austerity policy interests of the German export industry (Schneider and Sandbeck 2018; Scharpf 2021). In this sense, the reforms focused not only on budgetary policy but in particular on wage development and thus on labor policy in the member states. For the euro crisis had made it clear that the horizontal adjustment pressure of the competitive mode of integration had not led to an alignment of wage relations and their regulations. Based on the prevailing crisis narrative that the euro crisis was triggered by the uneven development of wages and the resulting different competitiveness of the European economies, measures were therefore taken and mechanisms created to coordinate and unify national labor market policies more closely and to better control wage developments in the EU (Müller and Schulten 2013). They led to a partial Europeanization of labor policies with the aim of strengthening the price competitiveness of the European economic area and enabling greater convergence of economic development. In this sense, this ‘New European Labor Policy’ (Syrovatka 2022a) complements the horizontal adjustment pressure of the competitive mode of integration by improving the conditions of exploitation for European capital through vertical intervention mechanisms (Jordan, Maccarrone, and Erne 2021). The NCBs examined below were embedded in this system and formed an important building block to increase its enforceability and to be able to intervene directly in collective bargaining, thereby ensuring the steering of wage developments.

Its failure thus constitutes a puzzle that requires an explanation against the background of the generally market-creating structure of the European integration process and the austerity orientation of EU crisis management. In terms of the theoretical premises presented here, the thesis can be formulated that the failure of the NCBs was essentially caused by the strategic action of progressive forces who knew how to skillfully use both the various discourse dimensions and levels. At the same time, the weakening of the NCBs indicates that the balance of power in the nation states had shifted so that it was possible for progressive actors to articulate a political project. The perspective of a critical European integration theory presented here makes it possible to focus more on the actors and contested European processes. European politics is thus not the lowest common denominator between European member states, but the result of strategic and multi-scalar action by organized actors.

3. Methodological approach

For the operationalization of the theoretical considerations, the research heuristic of a historical materialist policy analysis (HMPA) is used (Brand et al. 2022). This focuses on the analysis of multi-level negotiation processes and policy field-specific power relations. Following the theoretical perspective outlined above, EU policy processes are understood as multi-level hegemonic struggles that are condensed into concrete political decisions. HMPA comprises 1) a contextual analysis, with which the contextual factors of influence are identified and the resulting actor-specific logics of action are examined; 2) an actor analysis, with which the central actors of the policy process and their concrete strategies are identified and clustered. In this context, a distinction can be made between a regulatory and a liberal network (Syrovatka 2022a). The liberal network pursued a primarily market-making strategy and was shaped in particular by the interests of European industrial companies, which are organized in a large number of associations. The regulatory network pursued a primarily market-limiting strategy aimed at preventing an expansion of austerity policy. This network is primarily shaped by the interests of national trade unions and social democratic parties. 3) The concrete reconstruction of the policy-making process takes place in the process analysis, whereby the respective strategies and power relations are revealed.

The empirical basis of the article is the data obtained through a triangulation of document and media analysis as well as semi-structured interviews (Flick 2010). Between 2018 and 2020, a total of 32 semi-structured interviews were conducted with representatives of the Commission, national governments and national and European trade union and employer associations (cf. table 1), 42 articles from the Financial Times, Handelsblatt, Frankfurter Allgemeine Zeitung and Le Monde were analyzed and a large number of documents such as publicly available position and strategy papers, minutes and memos, but also nonpublic papers e.g. InterService Consultations (ISC) of the Commission as well as internal papers of national governments. The data was systematized, coded and correlated using MaxQDA software. Access to nonpublic papers was obtained through freedom of information requests and are not cited for legal reasons. The experts interviewed were selected on the basis of the findings from the documents and their position in the policy-making process and were contacted by e-mail. Passages from German interviewees in the text were translated by the author.

Table 1. Interview overview.

Number	Date	Organisation (abbreviation)	Location	Duration
1	04.07.2018	German Federal Government (I/DBR_1)	Berlin	00:49:12
2	23.10.2018	German Federal Government (I/DBR_2)	Berlin	00:55:06
3	14.03.2019	DG EMPL (I/EMPL_1)	Brussels	00:57:53
4	18.03.2019	DG ECFIN (I/ECFIN_4)	Brussels	00:51:27
5	19.03.2019	DG ECFIN (I/ECFIN_3)	Brussels	00:53:51
6	19.03.2019	DG ECFIN (I/EMPL_5)	Brussels	01:22:07
7	19.03.2019	Staff member of a Member of the European Parliament (I/MdEP_4)	Brussels	00:33:13
8	20.03.2019	BusinessEurope (I/BusinessEurope)	Brussels	01:12:46
9	20.03.2019	Member of the European Parliament (I/MEP_1)	Brussels	00:43:49
10	20.03.2019	DG EMPL (I/EMPL_6)	Brussels	01:27:04
11	21.03.2019	DG ECFIN (I/ECFIN_1)	Brussels	00:57:52
12	22.03.2019	DG EMPL (I/EMPL_2)	Brussels	00:53:55
13	26.03.2019	DG ECFIN (I/ECFIN_2)	Brussels	00:45:53
14	26.03.2019	DG EMPL (I/EMPL_4)	Brussels	00:35:19
15	27.03.2019	IndustryAll	Brussels	01:05:41
16	28.03.2019	DG EMPL (I/EMPL_3)	Brussels	01:14:23
17	10.09.2019	German Federal Government (I/DBR_3)	Berlin	01:21:14
18	19.11.2019	EGB (I/EGB_1)	Brussels	00:47:12
19	20.11.2019	DG ECFIN (I/ECFIN_5)	Brussels	00:45:25
20	20.11.2019	ETUI (I/ETUI)	Brussels	01:20:47
21	21.11.2019	European Round Table of Industrialists (I/ERT)	Brussels	00:53:45
22	21.11.2019	DG EMPL (I/EMPL_7)	Brussels	01:45:02
23	11.12.2019	EGB (I/EGB_2)	Phone	00:29:11
24	14.01.2020	German Federal Government (I/DBR_4)	Berlin	01:14:02
25	22.04.2020	Member of the European Parliament (I/MdEP_3)	Phone	01:58:35
26	23.04.2020	Member of the European Parliament (I/MdEP_2)	Phone	00:46:03
27	28.05.2020	DG REGIO (I/REGIO)	Phone	00:48:51
28	22.06.2020	German trade unions (I/GaD_1)	Phone	00:21:12
29	24.06.2020	German trade unions (I/GaD_2)	Phone	00:44:07
30	17.07.2020	MEDEF (I/MEDEF)	Phone	01:01:07
31	22.07.2020	German Federal Government (I/DBR_5)	Phone	00:52:56
32	10.01.2022	Austrian Trade Union Congress (ÖGB)	Phone	00:47:23

4. Process tracing: The failed competitiveness Boards

The NCB initiative was embedded in a comprehensive reform of European economic policy. Since the outbreak of the euro crisis, various mechanisms and processes have been institutionalized in the form of a building block system, which, when linked together, resulted in a new labor policy regime (Syrovatka 2022a). At the center is the European Semester, which monitors national wage development and labor policies in an annual policy cycle, while at the same time having binding steering powers through the SGP and the Macroeconomic Imbalances Procedure (MIP). The central coordination instrument are the country-specific recommendations, which contain a large number of partially binding specifications and were formulated in the euro crisis according to the imperative of strengthening competitiveness. In the core, the aim was to elevate wage development and thus labor policy in the member states to the central control variable for price competitiveness. The resulting labor policy complex comprises formal and informal, rule-based and institutionalized structures, mechanisms and processes that are interlinked, partially automated and primarily follow a market-creating logic.

However, the effectiveness of the European Semester remained controversial. In particular, the effectiveness of country-specific recommendations (CSRs) was repeatedly criticized and more binding and consistent enforcement was called for. In particular, CSRs to increase competitiveness should be given greater clout. To this end, the German Chancellor, for example, proposed the conclusion of competition pacts between individual member states and the Commission or a strengthening of the MIP and the establishment of direct rights of intervention in national regulation. For despite the considerable efforts to create a system of labor policy monitoring and coordination, the EU has so far shied away from the permanent institutionalization of intervention processes in national collective bargaining structures – as practised by the Troika within the framework of the ESM. This is due to the legal hurdle of Article 153 TFEU on the one hand, while on the other hand a product of the different collective bargaining structures in the EU member states.

However, the NCB initiative should take this step and try to implement a ‘troika for all’ in collective bargaining policy. Following the proposals of the OECD in the 2000s and the competition councils in some euro states such as Ireland or Belgium, expert bodies should now be installed at national level to define the framework for collective bargaining policy and thus make it possible to steer and coordinate the development of wage costs in the EU.

4.1 Agenda-setting and the impulses of intellectual networks

It was the organized European industrial capital in the form of the ERT (2010) that had already pointed to the need to limit (nominal) wage growth shortly after the outbreak of the euro crisis. They pursued the competitive strategy of being able to cushion the consequences of the crisis through a stronger export orientation, especially to the emerging markets (Syrovatka 2022a, 463–80). After the economic governance reforms in 2011, the ERT and BusinessEurope had pushed for more binding measures to better control labor markets. At a meeting 2013 between the Commission, the German Chancellor, the French President and ERT members in Berlin, high-ranking managers of European industrial firms insisted on stronger regulation of wage developments and closer monitoring of price competitiveness by the Commission. In the discussion, the ERT (2013) proposed streamlining the European Semester and making it more binding through national monitoring of the CSRs (ERT and Snabe 2013). This established a coordinating discourse from which the initiative of the NCB was to emerge (Wigger 2019, 5).

The agenda was therefore strongly influenced by the interests of European industrial capital, which wanted to secure its renewed competitiveness strategy and anchor it in European politics (ERT 2014). Following the reform of economic governance, complementary structures were now to be created at the national level to enable a more effective translation of European specifications and to influence national wage-setting processes. The demand was strategically embedded in an industrial policy framework and discursively linked to the global challenges (BDI and MEDEF 2014; BDI and BDA 2015). To be competitive, the EU needed to create a more business-friendly regulatory environment in which ‘industrial competitiveness permeates all policies and all levels of government’ (ERT 2014), 4). To this end, the ERT and BusinessEurope stepped up their engagement with the Commission in March 2015 (COM 2020e). At the same time, European industrial capital looked for opportunities to exert influence in the pre-institutional space and found them in the cooperation with the BRUEGEL Institute. In its function as a network of ‘organic intellectuals¹’ (Gramsci 2012, 515–17), BRUEGEL translated the concept of global industrial competitiveness into a concrete labor policy instrument.

The impetus was given in February 2015 by a policy paper of BRUEGEL, written by Sapir and Wolff (2015a) and was published in parallel to the Commission’s internal drafting of the 5-Presidents’ Report. The policy paper assessed the previous euro crisis policy as insufficient, as an adequate adjustment mechanism was missing due to the lack of flexible exchange rates and labor mobility in the Eurozone. Based on the observation that wage developments in the Eurozone are diverging, the authors proposed a system of ‘National Competitiveness Councils’ that would monitor and coordinate labor and wage developments at the member state level and intervene to correct them in case of doubt (p. 2–3). Independent expert committees should be set up at the national level to develop wage norms for the next collective bargaining on the basis of economic indicators. These wage norms were to form the framework within which the collective bargaining partners were to operate with their wage agreements so as not to impair competitiveness. The proposal also envisaged the creation of a ‘Eurosystem of National Competitiveness Councils’, which would coordinate national measures and ensure that ‘no country in the euro area sets a wage standard that creates significant competitiveness problems for itself and/or others’ (p. 5). In this case, the authors envisaged the possibility of demanding corrective measures via the MIP or other instruments of the European Semester and sanctioning the respective member states. The aim was to steer wage developments in the EU in order to coordinate the development of competitiveness in the member states in a more binding way (p. 5). Because the unions’ wage-setting power and the unpredictability of collective bargaining tended to be disruptive factors, it should be possible to control them as much as possible (COM 2012). The proposal to establish NCBs thus fitted seamlessly into the building block system of the New European Labor Policy, which followed the imperative of competitiveness. Even more, it was to be a central instrument for controlling wage developments and thus considerably strengthen the enforceability of the CSRs.

Due to the reputation of BRUEGEL and the support from European industrial capital, the proposals received strong attention in the EU coordinating discourse and were also included in the drafting process of the 5-Presidents’ Report (COM 2015b). But France and other southern member states expressed strong reservations about the one-sided focus on price competitiveness and a neoclassical view of wage development as a cost factor (RF 2015). Due to the stronger domestic market orientation of these countries, they always understood wages as a demand factor, which was not least linked to the hope of strengthening national purchasing power. The NCBs would therefore have significantly increased the adjustment pressure on those demand-led growth models and intensified the existing crisis and transformation tendencies. For this reason, the more domestic market-oriented member states such as France in particular were opposed to the one-sided competitiveness orientation of the NCBs.

In order to dispel the reservations, intellectuals of BRUEGEL increasingly pushed into the French coordinating and communicative discourse. In May 2015 the French president’s advisor and former BRUEGEL director Pisani-Ferry (2015) advocated the establishment of NCB. In addition, Sapir and Wolff (2015b) placed an article prominently in the French daily Le Monde in which they summarized their proposals. The interventions in the French debate – which at that time was marked by social disputes as a result of far-reaching reform programmes (cf. Syrovatka 2021) - fell on fertile ground. The government supported the NCB in the negotiations from May 2015 onwards, which led to the BRUEGEL Institute’s proposals being largely in line with the concept in the 5-Presidents’ Report.

4.2 The process in the commission

After the 5-Presidents’ Report, the Commission started working on a draft Council Recommendation. Once again, Directorate-General for Economic and Financial Affairs (DG ECFIN) was in charge, coordinating with the Secretariat General (DG SG) internal drafting process. This is remarkable because the NCB were supposed to address national wage policy and thus should have fallen under the competence of the Directorate General for Employment (DG EMPL). The powerful position of DG ECFIN and the coordinating function of DG SG in the Commission as well as the personnel capacities and knowledge resources concentrated in both DG made it possible that DG EMPL was largely bypassed (I/EMPL_2; I/EMPL_5).

Nevertheless, DG ECFIN tried to consider the interests of the regulatory network already at this early stage and inserted – after a first consultation in the ISC process – a formulation in the draft that explicitly referred to Article 152 TFEU, which regulates respect for collective bargaining autonomy (COM 2015b, 3). DG ECFIN’s ability to compromise was due to the pressure caused by the criticism of the 5-Presidents’ Report. In particular, the German Trade Union Confederation DGB and Employers association BDA had been outraged by it at national and European level and had emphasized the special nature of German collective bargaining autonomy. After the publication of the 5-Presidents’ Report, on the initiative of the DGB, both had sent a letter to Commission President Juncker urging that collective bargaining autonomy be preserved (DBR 2016, 5; BDA and DGB 2015). Due to the position of the German government and the political importance of both federations, the joint statement carried particular weight in the Commission (I/ECFIN_2). Therefore, the intervention strengthened the position of DG EMPL in the internal disputes and made it possible for DG ECFIN to allow a special reference to Article 152 TFEU – also to avoid a premature rejection by the member states.

In terms of content, however, the draft remained close to the proposal of the 5-Presidents’ Report. While the recommendations of the NCB should no longer ‘guide collective bargaining’ (Juncker et al. 2015, 9) they should continue to provide ‘relevant information for wage-setting processes’ (COM 2015a, 4). At the same time, the Commission’s draft expanded the NCB activities. In addition, they should monitor and assess policy reforms, develop policy recommendations to increase competitiveness, and provide advice on the implementation of CSRs (COM 2015a, 4–5). The NCB should play an essential role as drivers and reminders of labor reforms in the member states COM 2015a, 2–4). The draft therefore corresponded substantially with the demands of world market-oriented European industrial capital to make the promotion of competitiveness an imperative that permeates all policy areas (ERT 2014, 4; BusinessEurope 2015b).

After the publication of the draft, the Commission, in anticipation of increasing criticism from the regulatory network, tried to link the necessity of the NCB in the communicative discourse with the supposed shortcomings of the European Semester. Together with BRUEGEL, it emphasized, through events and studies, the need for more binding labor guidelines. At the end of November 2015, BRUEGEL published another policy paper on the limited effectiveness of CSR, in which the authors explicitly promoted the implementation of NCB (Darvas and Leandro 2015). The publication was accompanied by a prominent event, which was to be followed by further meetings with the Permanent Representatives of the member states in order to counter the criticism from the member states (DG COMP and BRUEGEL 2015; I/DBR_5).

4.3 Interests of the networks

The Commission’s draft met with divided reactions. In particular, the regulatory network reacted negatively and, partly, indignantly. The indignation resulted from the fact that they had already criticized the ‘institutions for strengthening competitiveness’ proposed in the 5-Presidents’ Report (ETUC 2015d; DGB 2015a, 4–6; S&D 2015). The ETUC (2015c), saw the proposal as an illegitimate attempt to intervene in collective bargaining.

The fact that the Commission published the draft despite the sharp criticism in advance was seen as an affront by the regulatory network, because the Commission had neither organized the conversation nor a consultation. The retention of nominal wage development as competitiveness indicator was just as big a problem as the right of recommendation, with which the NCB could have influenced collective bargaining (ETUC 2015a). While the ETUC (2015b) initially proposed ‘Social Progress Boards’ as an alternative to NCBs, its position changed to a clear rejection. Responsible for this was the influential German and Austrian trade unions, which rejected any intervention in collective bargaining autonomy (DGB 2015b; ÖGB 2015).

When it comes to interventions in collective bargaining autonomy, especially from the European level, the trade unions are on the same page. The DGB unions are always behind the idea that such things do not happen (I/GaD_2).

In both Germany and Austria, social democratic parties were in government, which provided a privileged channel for trade unions (I/GaD_2; I/ÖGB). Aware of the powerful role of the German government in the EU, DGB President Rainer Hoffmann wrote two letters to Chancellor Angela Merkel and Minister of Economics Sigmar Gabriel asking them to prevent the NCB in the Council (DBR] 2016, 5; DGB 2015c). Furthermore, there were several meetings between the DGB and Sigmar Gabriel in the run-up to the ECOFIN Council in December 2015, during which Gabriel also gave written assurances that he would work for the ‘rejection in principle of the Council recommendation’ (Gabriel 2015). Despite the strategic selectivities of the Ministry of Economics, which traditionally gave less weight to the strategies of the trade unions, the DGB was able to assert itself with its demands and had them given priority in the condensation process at national level (I/DBR_3).

Market liberal stakeholders welcomed the Commission’s proposals. European Industrial Capital was largely positive about the draft and welcomed the planned monitoring of CSRs and the attempt to make them more binding (BusinessEurope 2015a, 4; I/BusinessEurope). At the same time, BusinessEurope (2015a, 9) stressed that national collective bargaining autonomy must be preserved. The reason for the ambivalent attitude of BusinessEurope was the German businesses. While it had an interest in a competition-oriented corrections in collective bargaining, it wanted to prevent a European right to intervene. On the one hand, the positioning showed an interest in reliable collective bargaining structures, which not only enabled pacification in the workplace, but also historically established the German, export-oriented growth model (Thelen 2000). Since the 1950s, the compromise function of collective bargaining has made it possible to integrate the trade unions into the German export strategy and thus prevent excessive wage increases. Most recently, the competitive corporatist integration of trade unions proved its worth during the height of the euro crisis and was decisive for Germany’s rapid economic recovery (Schulten 2019). On the other hand, against the background of years of negative real wage development, organized German business feared wage policy interventions via the CSRs and thus a weakening of German export strength by reducing price competitiveness (I/DBR_5). Especially after the ‘State of the Union’ speech of Juncker in September 2015, this fear was considered realistic (I/DBR_5).

However, the BDI (2015, 7–8), as the representative of export-oriented and price-sensitive German industrial capital, welcomed the NCBs after the Commission’s draft was weakened and became its most important supporter. He favored the NCB as an institution to promote structural reforms and hoped that it would be an external and recognized authority that would support his own position of a moderate wage policy to increase competitiveness. Especially after the introduction of the German minimum wage and against the background of rising unit labor costs, German industrial capital was keen to cap labor costs and regain price competitiveness by linking nominal wage development to productivity development (BDA 2016, 4). To lend weight to their demands, BDA/BDI sought talks with Commissioners Dombrovskis, Moscovici and Oettinger between September and November 2015 and campaigned for a strong mandate for the NCB (COM 2020d, 2020a).

The French capital association, MEDEF, also supported the NCBs, seeing the CSRs as a basis for legitimizing its own position in the national struggles over structural labor reforms (I/MEDEF; Syrovatka 2016). In this sense, MEDEF had also wished for much stronger intervention rights for the national NCBs (MEDEF 2019). In addition, the association of large French companies, afep, was also clearly in favor of the Commission’s draft (afep 2015). In June, July and November 2015, the two business associations had increasingly sought proximity to Commissioners Moscovici, Dombrowski and Thyssen (COM 2020c, 2020b).

4.4 Political decision-making process

At the time of its publication, it was already clear that the Commission’s draft was not capable of consensus among the member states (cf. Figure 1). On 13 October 2015, the High Level Group on Competitiveness and Growth, a preparatory body of the Council, had met for an extraordinary debate on the ‘creation of new institutions to strengthen competitiveness’ (Council 2015b, 3). The DG ECFIN presented its proposals and was met with widespread skepticism. Even at this early stage, ‘almost all delegations’ (Council 2015b, 3) had expressed negative views, criticizing both the focus on wage-setting mechanisms and the creation of new bureaucratic institutions.

Figure 1. Intergovernmental interest in the Council on the subject of competition councils.

The resistance came mainly from Southern and Northern member states, which meant that the classic polarization of the euro crisis did not come into play. The Southern member states were bothered by the recommendation function of the NCB and feared a renewed and permanent transfer of sovereignty in labor policy. The Northern member states, which are characterized by strong corporatist institutions, fearing interference in collective bargaining. Only France, Lithuania, the Netherlands and Ireland were in favor, although this was associated with very different interpretations and ideas (I/DBR_5). France was strongly in favor, seeing the added value of NCB in the creation of European coordination structures and as an instrument for dealing with imbalances as well as support for the national implementation of structural reforms in labor policy.

We rejected it, clearly rejected it, also because of the clear position of our minister. […] The French tended to see it positively, but there was no unanimous opinion. The absolute majority opinion was that the collective bargaining autonomy should be preserved. And apart from that, the ideas of what these councils could and should actually do were relatively different. Some wanted strong economic policy recommendations, others less so. For some, wage recommendations were largely taboo, while others saw it as the added value (I/DBR_5).

In contrast, the Netherlands, based on its own experience, saw the NCB as an instrument to curb labor costs and strengthen price competitiveness. Poland and Italy were also not averse but argued for a stronger focus on productivity or a broader concept of competitiveness (RI 2015). The majority of member states rejected the draft.

The criticism put the Commission on the defensive. Although it defended its proposal by pointing to the need for closer coordination of wage developments, it also tried to save its proposal by making concessions. Thus, it proposed a broader definition of competitiveness that included both quantitative and qualitative elements (Council 2015a, 2015b). Furthermore, it affirmed that existing institutions could be entrusted with the task and, at the same time, it also conceded a wide national scope for action, which prevented a premature rejection by the member states. The main negotiations took place in June 2016 in the EFC, a high-level preparatory body of the ECOFIN Council. The fact that the proposal was not rejected was due to the German Ministry of Finance (BMF), which acted as an intermediary for weakened NCB (I/DBR_5). It had previously lobbied within the German government for approval of the Commission’s draft. As the base of German industrial capital, there was a great deal of overlap between the positions of the BMF and the BDI. While the German Labour and Economics Ministries, representing the DGB position, opposed the Commission proposal and the Chancellery was also critical of it, the BMF argued that the NCB could be a helpful instrument for monitoring structural reforms in the euro countries.

From the BMF’s point of view, it was rather an uncritical scientific advisory activity, which could certainly also serve a European networking of the competent advisory institutions, etc. […] The Chancellery had great reservations as to whether an additional advisory body was really needed, especially for Germany. (I/DBR_5)

The dominant role of the BMF within the German government, its close connection to the hegemonic factions in the German power bloc and the European state apparatuses, led in the second-order condensation process to the government’s overall support for NCB. However, in the negotiations Germany now pushed for changes and concretizations that essentially corresponded to the interests of the DGB. For example, the NCB were to place a stronger focus on productivity, while competitiveness was to be de-emphasized. Therefore, Germany pushed for a symbolic renaming into Productivity Boards (I/DBR_5). Furthermore, Germany was in favor of the explicit exclusion of recommendations on collective bargaining and wage policy and therefore proposed to include a reference to Article 28 of the Charter of Fundamental Rights in addition to the reference to Article 152 TFEU. In addition to the German amendments, the Spanish amendment was also accepted that the competences of the NCBs were limited exclusively to the analysis of economic developments, so that they were prohibited from evaluating economic policy measures. Adopted in this form by the Council, the NCBs had been transformed from central economic policy steering bodies to non-binding advisory bodies.

5. Discussion of the results

The NCBs were planned as the final building block of the ‘New European Labour Policy’ and would not only have strengthened the binding nature of the CSRs, but also transferred central regulatory competences to the European level. Direct access to national wage policies would have been permanently institutionalized. There would have been a considerable transfer of competence to the European level, as the European regulatory dimension would have been directly present in national wage negotiations. This would have made a coordinated European wage policy possible, but under the condition of an institutional restriction of the negotiating autonomy between trade unions and employers. At the same time, the Commission’s plans envisaged a normative orientation of wage bargaining mechanisms toward the primacy of price competitiveness, which would have favored those states that pursue an export-led growth model. This reveals a technocratic understanding of wages, according to which they correspond to a macroeconomic variable for increasing competitiveness, which must be politically controlled and steered (Syrovatka 2022a). This primarily focuses on the wage-setting power of the trade unions, which must be contained through the definition of wage norms (COM 2012). The NCBs are thus in a line of continuity with the previous economic governance. But why did the NCBs fail in their intended form? In any case, the initiative launched by the Commission in close cooperation with the European intellectual network around BRUEGEL was significantly altered in the political decision-making process and weakened both in its impact, its competences and its institutional position. There are four reasons for this, which the process-analytical reconstruction of the disputes has outlined.

1. The change in the political environment as a result of the social consequences of austerity policies have limited the willingness in the EU member states to make a far-reaching transfer of competences to the EU level. In the southern European member states in particular, the crisis policy had led to the rise of forces critical of the EU, which inscribed themselves in the national balance of power and tended to make it more difficult to tighten austerity policy. Thus, it should not be forgotten that the negotiation of the NCBs in the context of the Greek crisis in 2015 took place after the election of the left-opposition SYRIZA government. It was already an indicator of what became clear with the Brexit in 2016 and the election of the right-wing populist government in Italy in 2018: the European integration project is fundamentally questioned by different parts of the population. This political contextual factor made it difficult to continue with austerity policies and opened up a new space of opportunity for progressive forces (I/ETUC_1; I/ETUC_2).

2. However, this space of opportunity also had to be used. In this sense, the failure of the NCBs was primarily the result of a successful strategy of the regulatory network, who, not only appeared united in the negotiation process, but also knew how to skillfully use the multiscalarity of European decision-making. Due to the experiences in the euro crisis, the European scale was no longer primarily addressed, but the national scale was used as the primary level of influence. There, the trade unions drew on long-standing traditions of collective bargaining and historically grown channels of influence into the national state apparatuses. This opened up the possibility of circumventing the commission, which were unfavorable from the point of view of the regulatory network, by concentrating on the first-order condensation processes and considerably weakening the commission’s draft (I/GaD_2). However, this scale jumping strategy worked mainly because in Germany in particular the political environment was very favorable for a weakening of the NCB. On the one hand, because of the tradition and overall social significance of ‘collective bargaining autonomy’ and, on the other hand, because of the SPD’s participation in government. While the former provoked a traditional political reflex to the announcement of the NCBs, the social-democratic participation in government opened up certain channels of influence in the policy-making process. The trade unions were able to activate their close connection to the social democracy – which is not only due to a historical path dependency but is reproduced by a multitude of personal and institutional overlaps – and exert pressure on the government (I/GaD_2). Moreover, with Sigmar Gabriel, not only the minister was addressed, but also the vice-chancellor and SPD party leader. The vehemence and unity with which the DGB articulated its rejection made it possible to bring its interests prominently into the first-order condensation process via the SPD-led Ministry of Economics. The success at the national level had an impact on the second-order condensation process, in which the federal government largely represented the interests of the DGB in a condensed form.

3. Furthermore, the strategy of the regulatory network was based on the European coordination of the ETUC. This was successful in bringing together and coordinating the often diffuse and divergent interests of national trade unions. At the same time, it succeeded in activating other European actors. While European social democracy was an important channel also into the national governments, the other regulatory groups in the European Parliament were important echo chambers for the demands in the communicative discourse. At the same time, European coordination enabled the articulation of different alternative proposals to the NCBs (ETUC 2015c). They shattered the European dictum of no-alternative wage policy intervention and opposed the Commission’s proposals with an alternative model.

4. Last but not least, the Commission’s approach promoted the weakening of the NCBs. On the one hand, the Commission’s draft mainly represented the interests of European industrial capital, while at the same time underestimating both the Euroskeptic mood in the member states and the historical path dependencies and social function of collective bargaining in individual countries such as Germany. While the rejection of the southern member states was justified by the domestic political situation, the critical position of the northern member states was based on the central importance of corporatism for the pacification of class compromise. Therefore, the draft led not only to a reaction of the trade unions, but also to criticism on the part of the state parliaments and individual capital fractions, which also linked collective bargaining to their own interest in institutional and economic stability (I/DBR_5). This action by the Commission shows that it had lost its sense of the balance of power at the EU level. Due to the national fragmentation of European civil society and the resulting reduced relative autonomy of state apparatuses, the longstanding dominance of DG ECFIN within the Commission led to strategic misjudgments and a selective involvement of European industrial capital in the policy process.

6. Conclusion

In the present analysis, it was possible to work out that the strongly weakened enforcement of the NCBs marked a breaking point with the austerity-political euro crisis management. For the first time since the outbreak of the euro crisis, the expansion of the market-creating character of the European economic government was prevented by the strategic action of progressive forces and an expansion of its labor and wage policy competences was rejected. It is true that NCBs have been implemented in the member states and can now be found in every euro country and in various non-euro countries. However, their tasks and competences vary greatly depending on the country, so that no concrete effects have been discernible so far (FCNP 2019; Sachverständigenrat 2019). The regulatory network has thus achieved their goal and rendered the NCBs de facto incapable of acting (I/DBR_5; I/GaD_2). Although economic governance was consolidated to a certain extent through the link with the Economic Recovery and Resilience Facility (cf. D’erman and Verdun 2022; Vanhercke and Verdun 2022), there have been no renewed attempts to expand wage policy competences since then. Therefore, the fact that the COVID-19 pandemic has so far led neither to a return of austerity policy nor to an increased expansion of economic governance makes it clear that the failure of the NCBs represents one of the first predetermined breaking points in the austerity continuity of European crisis policy since 2009.

Moreover, it became clear that the impetus for the U-turn did not come primarily from the European Commission, but was the result of a smart strategy of European and national trade unions acting within an increasingly Euroskeptic context. Contrary to what is discussed in the academic literature, it was not the replacement of the Commission President alone, nor the learning ability of the European state apparatuses, but the multi-scalar strategy of regulatory network that made it possible to position the member states against the Commission’s plans. DG ECFIN in particular had stuck to its market-liberal course with its proposals for overcoming the euro crisis and only had to abandon it after massive resistance.

This finding has consequences for the current discussion on a turnaround in EU social policy: on the one hand, it shows that the European austerity orientation had already developed cracks before the COVID-19 pandemic and the associated economic policy challenges. These cracks were essentially caused by the rise of Euro-critical forces in the member states, which in the first order condensation process prepared the ground for progressive forces to limit the further expansion of austerity policy institutions at the European level (Schulten and Müller 2021). On the other hand, the findings warn critical observers in particular against over-interpreting current developments in EU labor and social policy. Although the prevention of the NCBs is due to the clever strategic action of the trade unions, it is also due to the special issue of collective bargaining autonomy. In the Northern European member states, it represents a historic compromise to pacify the class conflict, the dissolution of which would be associated with high costs. Therefore, the current initiatives should be closely scrutinized and the associated balance of power analyzed. Particularly in the context of the current shifts at the global level and against the backdrop of social and economic disintegration tendencies, there is a likelihood that the social policy initiatives are primarily aimed at stabilizing the competitive integration path (Syrovatka 2022c). Only by examining the balance of power and the concrete strategies of the social actors is it possible to distinguish whether the initiatives bear a real socio-political character and serve the long-term implementation of a social dimension or rather in the sense of Gramsci (2012) as a passive revolution, i.e. as a domination strategy for the integration of progressive demands.

Notes of contributor

Felix Syrovatka is postdoctoral researcher and coordinator of the interdisciplinary research group ‘Justice through Collective Bargaining’ at the Institute for Labour Law at the Free University of Berlin. His research focuses on European labour and social policy, European collective bargaining systems and the Politics of Labour Law. Most recently, his book ‘Europäische Arbeitspolitik’ was published by Campus.

Acknowledgments

I would like to thank the two reviewers, Gabriel Berlovitz and Dieter Plehwe for their extremely helpful and insightful comments.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Funding

Open Access Funding provided by Freie Universität Berlin.

Notes

1. BRUEGEL is a renowned think tank, but is funded by large and highly internationalized industrial and financial firms (BRUEGEL 2022).