Public services, austerity, alternatives

Jan Willem GoudriaanEuropean Federation of Public Service Unions

 

Brussels, 5 May 2012

8 Million Members in 275 Trade Unions in 47 countries in Europw, 60% women, member ETUC

local and regional government (municipalities);

central government and EU administration

health and social services

utilities (electricity, gas, water, waste)

About EPSU

Bucharest 14 January 2012

Protests turn violent over proposed legislation that seeks to privatise health care (Private sector access to government funding while public services denied funding,

proposals withdrawn by government, protests continue, more anger 19th)

• BILD: The French President said that Europe should learn from the German model…

• Draghi: …he’s right. Long before him I said that Germany is a model. The old European welfare state model is in fact dead, because it had to make debts far too often. The Germans have re-invented it – with no excessive debts.

• BILD: Do you have a message for the people of Germany?• Draghi: Keep it up!

• ILO (2012) Germany is contributing to problems of the Eurozone. Wage deflation, growing inequalities, low wage economy. Other economies have to refer to wage - downward spiral.

The impact of the crisis on the public sectorSevere constraints on public budgets has resulted in:

Reductions in public sector employmentCuts in pay and pensionsCuts in social protection, coupled with increases in direct and indirect taxation, and increases in pension age

Ongoing cuts are affecting employees working for the general interest, in health, social security, education, culture and arts, environment, justice and prison services through to providing energy and waste services.

Privatisation, PPPs, commercialisation of PS lead to corporate welfare

Quality of services and the general interest effected and long term negative consequences

Threats to the autonomy of collective bargaining and democratic accountability arising from EU/IMF conditions

Denmark Nominal freeze of several social benefits (unemployment, student financial aid, welfare) and foreign aid; reduction in duration of unemployment benefits; cuts in salaries of ministers by 5 per cent (around 2 billion Kroner); introduction of ceiling on family benefits; higher excise duties on unhealthy foods and tobacco

2010–13

Estonia Increase of VAT (2 percentage points) and excise taxes; reduction in social benefits (health, pensions); operating spending cuts; (temporary) increase in second pillar pension contributions; land sales; discretionary spending cuts

2011–14

France Cuts in public pensions, healthcare and public administration; raising of retirement age (from 60 years to 62 years by 2017); increase in taxes on capital; increase in top income tax rate by 1 percentage point

2010–13

Germany Yearly consolidation of €25 billion from additional taxes (banks, air traffic, nuclear power; total around €8 billion); cuts in spending on social security and labour market policies (around €8 billion); cuts in military and administrative expenses (around €5 billion)

2010–14

Greece Elimination of tax exemptions; increase in property taxes; higher excise tax on cigarettes and alcohol; higher tax on mobile telephones and petrol; special levy on profitable firms and on high-value real estate; 10 per cent reduction in general government expenditure on salary allowances; public sector recruitment freeze in 2010 and partial replacement of retiring civil servants; reduction in operating costs and subsidies for pension funds; significant reduction in the number of public sector special committees; amalgamation and drastic reduction in the number of the public bodies/entities linked to local authorities

2010–14

Hungary Introduction of 16 per cent flat rate of income tax over two years; cuts to the public sector (reduction of wages, elimination of certain benefits); six-year tax for financial institutions; reduction of bureaucracy for investors; ban on foreign exchange mortgages

2011–13

Ireland Tax increases and spending cuts (public sector wages, social welfare benefits 2009–10Italy Public sector hiring freeze and public sector wage cuts (for civil servants with gross salary above €75,000); cuts in healthcare

spending; strengthening of efforts against tax evasion; reduction in transfers from central to regional and local governments2010–12

Latvia Increase of VAT (3 percentage points); introduction of capital income tax; increase of personal income flat tax rate (3 percentage points); broadened base for property tax; public sector wage cuts; pensions cuts; structural reforms in public administration; education and healthcare (revenue vs. spending consolidation in the ratio 20:80)

2009–10

Lithuania Cuts in salaries of politicians; reduction in military appropriations; scrap indexation of minimum wages; revision of maternity leave allowances; rationalization of public expenses; increase of personal income tax flat rate to 20 per cent; increase of excise taxes (fuel, tobacco, gambling); introduction of a corporate tax on agricultural entities

2009 onwards

Netherlands Consolidation effort of €18 billion until 2015 (around 3 per cent of GDP), with cuts concentrated in social security reforms (tighter eligibility criteria for childcare allowance, disability and unemployment benefits), development cooperation and military spending

2011–15

Portugal Reduction in public sector pay and hiring (15 per cent reduction of central government services and managerial positions compared with 2010); increase of VAT and taxes on high-income earners; freezing of pensions, except for the lowest pensions; special contribution on pensions above €1,500; reform of the unemployment benefit system.

2010–13

Romania 25 per cent reduction in public sector wages; 15 per cent reduction in pensions and unemployment benefitsSlovenia Announcement to reduce budget deficit by investment cuts (rather than public sector cuts)Spain Cut in public sector jobs (13,000 jobs) and pay (salary cuts of 5 per cent for civil servants and of up to 15 per cent for ministers

and mayors); introduction of new income tax; scrapping of newborn benefits; reduction in public investments by €6 billion; cuts in public pensions; sale of public sector assets: one-third of public enterprises shall be closed or sold off

2010–13

Turkey Introduction of the “fiscal rule bill”, including cuts in social security, local and provincial administration and unemployment benefits and levies for firms with floating capital

2010 onwards

United Kingdom

Emergency measures: abolition of the Child Trust Fund and cutting of employment programmes (Young Person’s Guarantee fund), civil service recruitment freeze. One-quarter of higher revenues shall be achieved by tax increases: increase in VAT (2.5 percentage points)

2010

Table 1. Overview of fiscal austerity measures (source ILO)

The European Central Bank’s secret Italian letter

“The Italian Government has decided to pursue a balanced budget in 2014 and, to this purpose,

has recently introduced a fiscal package. These are important steps, but not sufficient”

“a) A comprehensive, far-reaching and credible reform strategy, including the full liberalisation of local public services and of professional services is needed. This should apply particularly to the provision of local services through large scale privatizations.”

(For context – Italian people voted NO to privatisation of local municipal services in a Referendum in June 2011)

EU developmentsEconomic Policy and Institutional Changes

EU financial supervisory authories

European Semester (annual growth survey and recommendations)

EuroPact plus

Legislative measures (6-pack) and new 2 pack

Programme Countries (Greece, Ireland, Portugal)

EFSF to become ESM

Role for the IMF (Latvia, Roumania, Hungary, Ukraine, etc. ),

SPIV (getting Chinese money)

Increased role for the ECB (not just monetary – secret letters)

Task Force on Greece.

Spain & Italy forced to take measures. Italy to be monitored

Increased economic coordination with Euro-summit institutionalised

Permanent Euro WG President, “reinforced surveillance beyond 6 pack”

Commissoner with enforcement powers

New Treaty proposed

ETUC on TreatyETUC rejects approach to impose ever stricter austerity. Fiscal discipline alone, in the absence of recovery and investment measures, is dragging countries into crisis. Employment and social justice are top priority today for millions of Europeans.

Treaty does not address challenges created by the crisis. New treaty may further strengthen the obligation of member states to adopt fiscal policies that will accentuate rigid economic rules. A fiscal compact must go hand in hand with a social contract for Europe. It must give priority to investments that promote a sustainable economy, quality jobs and social justice, while combating inequalities.

“Europe must not become synonymous with sanctions and rigid fiscal policies. It must be identified with prosperity and must offer prospects for the future." Debate and consultation are required. Process is not democratic

The ETUC calls for the adoption of a social protocol to the treaties that guarantees respect for fundamental social rights and social protection. A clause protecting the wage formation must also be adopted

Reasons for optimism

Our Alternatives

Address inequalities, macro-economic imbalances, greed and strengthen the public services

Respect autonomy of the social partners and increase coverage by collective agreements

Financial Transaction Tax at EU level; Wealthy; Tax Justice; Financial Regulations

System of Eurobonds, European Public BankSolidarity mechanisms to assist countries hit; to

manage part of public debtEU investment programme (1% of GDP) in

infrastructure, low carbon economy, public servicesAddress precarious work and low pay

.

A European Struggle – new EU ?Local and national resistance as part of European approach for change

Coordination at EU level – EU mobilisation Support for actions

Continued discussion in union movement on stronger coordination of collective bargaining to confront precarious work, low pay, (youth) unemployment

And to resist attack on right to strike (Monti II)

Coalition building

In ShortMore and better jobs: Investment in an expanded

European recovery planStronger welfare systems to provide more security and

avoid social exclusionStronger workers’ rights and an end to the dominance of

the short-termist market principles. Priority to social rights and collective action

Better pay: stronger collective bargaining. European solidarity as a protection against the excesses

of financial capitalism

www.epsu.org