The sovereign debt crisis and the evolution of labour law in Europe

The sovereign debt crisis, which began in Greece in 2010and then spread to several other Eurozone economies, is having profound consequences for the labour law systems of the debt-affected Member States and for the role of social policy in EU law and governance. As a result of the austerity measures stipulated in the loan agreements made between the ‘Troika’ of the IMF, ECB and Commission and the Member States receiving financial assistance, essential features of national systems of labour law and social security have been, or are in the course of being, radically revised. These ‘structural’ reforms are leading to a worsening of living and working conditions and a deepening of economic recession. Under these circumstances, current efforts to amend the framework of EU law and governance in such a way as to embed fiscal discipline in the Eurozone, epitomised by the ‘Six Pack’ of economic regulations and the Treaty on Stability, Coordination and Governance, risk inducing a continent-wide ‘race to the bottom’ in labour standards. In this chapter we seek to put the sovereign debt crisis in the context of the long-run evolution of labour law systems in Europe as well as more recent institutional developments at EU level. We argue that notwithstanding the absence of an EU-level labour code that would have put a floor under national labour law systems, the experience of European labour law from the early 1970s onwards has been one of stability (with the UK being the most prone to change) and the maintenance of a significantly higher level of protection than in the US. Even with the gradual implementation of the programme of the economic and monetary union from the Treaty of Maastricht onwards and the deepening of internal market reforms, labour law at Member State level did not undergo a fundamental change (section 2). We argue that part of the reason for this was a fundamental compatibility of labour law protection with the competitiveness agenda which came to influence national and European policy-making at this time. However, labour law regulation was unable to reverse the trend towards weaker collective bargaining systems and falling union density and these developments, as they weakened the force of labour law protections on the ground, were responsible, at least in part, for the increase in inequality experienced in the large EU economies, as well as in the US, during this period.