Phase One: The European Common Market and National Labour Systems

Until the 1970s, the scope for European interventions in employment relations was very confined. The Treaty of the European Economic Community (TEEC) of 1957 focused on the free movement of goods, capital, services, and people, and the space it devoted to labour issues was limited. Art. 118 TEEC tasked the European Commission ‘to promote close collaboration between member states in the social field, particularly in matters relating to employment, labour legislation and working conditions, occupational and continuation training, social security, protection against occupational accidents and diseases, industrial hygiene, the law as to trade unions, and collective bargaining between employers and workers’.

The flimsiness of these social EEC Treaty provisions, however, did not indicate a subordination of social issues to a market logic. The EEC abolished tariffs within the common market, but its member states also built strong industrial relations systems and social welfare states that ensured the social reproduction of labour. As social progress relied also on economic growth, produced inter alia by the making of the European common market, the EEC did not impinge on, but rather supported, the development of the social welfare state at national level (Milward, Reference Milward1999). This virtuous cycle between European economic integration and social progress at national level supported the class compromise between organised capital and labour that shaped Western Europe after World War II (Giubboni, Reference Giubboni2006; Ashiagbor, Reference Ashiagbor2013; see Chapter 2). The EEC Treaty nevertheless also empowered the Commission to propose legislation on labour issues linked to the making of the common market, namely, to guarantee workers’ freedom of movement within the EEC (Arts. 48–51 TEEC). In the following two decades, this led to the adoption of EU legislation in the social security field, as well as access to cross-border healthcare (see Chapter 10). Other labour-related articles in the EEC Treaty reflected French employers’ preoccupation that the more advanced labour law provisions in their country could negatively affect their competitive position within the common market (Allais, Reference Allais1960). Its Art. 119 therefore urged member states to enforce the principle of equal pay for equal work between men and women, as already enshrined in French legislation, and Art. 120 TEEC required member states to maintain ‘equivalence’ with respect to their regimes of paid holidays.

By the early 1970s however, the mid-twentieth century class compromise between capital and labour started to run out of steam when unemployment and inflation were on the rise and when companies’ profit margins declined across advanced capitalist economies (Glynn, Reference Glynn2006). National governments’ initial response was more state intervention at national level. After Denmark, Ireland, and the United Kingdom joined it in 1973, the EEC became more important. Within the EEC, organised labour also attempted to put forward a supranational social-democratic response to the crisis. In 1973, Western European trade union confederations founded the European Trade Union Confederation (ETUC), inter alia, to advance economic and industrial democracy in transnational corporations (TNCs). This was crucial, as TNCs had started to relocate production to lower-wage countries (Petrini, Reference Petrini, Kaiser and Meyer2013). The cause of labour was also favoured by the rise in electoral support for socialist and social-democratic parties, which altered the balance of power within the Council towards labour. Accordingly, in 1972, the Council asked the Commission to propose legislation on labour protection.

In turn, organised labour obtained several decommodifying EEC laws, such as the directives that increased workers’ rights in the event of collective redundancies (Directive 75/129/EEC) or the transfer of undertakings to a new employer (Directive 77/187/EEC). These issues were made even more urgent by business restructuring processes triggered by increased economic integration within the common market (Rainone, Reference Rainone2018). The growing participation of women in the labour market, along with the rise of feminist movements, brought the issue of gender equality back on the European political agenda too. At long last, the Commission acted on Art. 119 of the EEC Treaty, drafting two directives on equal pay and equal treatment between men and women that the Council approved in 1975 (Directive 75/117/EEC) and 1976 (Directive 76/207/EEC). By the end of the 1970s however, the balance of power within the Council became less favourable to labour (Petrini, Reference Petrini, Kaiser and Meyer2013: 159). The ideological shift towards neoliberalism, combined with the staunch opposition of business associations on both sides of the Atlantic, led to a watering down of the most ambitious proposal put forward by the ETUC, namely, a directive on workers’ information, consultation, and co-determination rights within TNCs.

Phase Two: The Single Market, Monetary Union, and Social Legislation

In the mid-1980s, European integration received a new impetus under the aegis of the Commission led by the French socialist, Jacques Delors. Taking place in the context of the rise of neoliberalism, this phase of integration centred primarily on market expansion. Even so, Delors’ Commission promised to add a social dimension to the European integration process, which was crucial to get trade unions’ support for the SEA and the Maastricht Treaty (van Apeldoorn, Reference van Apeldoorn2002; Bieler, Reference Bieler2006; Jabko, Reference Jabko2006; Erne, Reference Erne2008; Golden, Reference Golden2015).

The SEA of 1986 kickstarted the process with its SMP. Whereas the EEC Treaty tried to eliminate non-tariff-related barriers to cross-border trade through the adoption of European product standards, the SMP pursued this aim through the mutual recognition of national standards. The latter effectively put national product standards – and by implication also national welfare states and industrial relations regimes – in competition with one another (Streeck, Reference Streeck1998). The SEA was followed by the signing of the Maastricht Treaty in 1992, which created the legal basis for the EMU by the end of the decade.

In the 1980s, the EEC broadened its borders further, with the accession of Greece, Portugal, and Spain. The accession treaties for these countries imposed an initial limitation on workers’ freedom of movement up to seven years, but they did not foresee any restriction on the circulation of services (Comte, Reference Comte2019). As the new Southern members had lower labour costs, this raised the issue of how to regulate the terms and conditions of workers sent by their employer to provide services in another member state (Comte, Reference Comte2019). This issue would be addressed by a directive only in the 1990s (see below).

After the fall of the Berlin Wall in 1989, the dissolution of the USSR in 1991, and the creation of the European Union in 1993, Austria, Sweden, and Finland joined in 1995, bringing the number of EU member states to fifteen. As these were countries with strong trade unions and collective bargaining institutions, their accession raised hopes for a strengthening of the EU social dimension (Dølvik, Reference Dølvik1995). Scandinavian unions, however, also showed scepticism towards the enhancement of binding supranational legislation in the social field, which they feared could impact on the autonomy of their collective bargaining systems.

Despite their early interest in joining the EU after the fall of the Berlin wall in 1989, the first eight Central and Eastern European (CEE) countries became EU member states, together with Malta and Cyprus, only in 2004, with Romania and Bulgaria joining in 2007 and Croatia in 2013. Before being accepted as members, they had to prove that they fulfilled the political and economic criteria for accession set out by the European Council at a summit held in Copenhagen in June 1993. The Copenhagen criteria included having a functioning market economy able to withstand competitive pressures within the single market and the state’s capacity to absorb the EU’s entire body of laws (acquis communautaire). As most EU legislation is related to the single market and its four freedoms, the Commission’s pre-accession strategy was ‘basically about disciplining the candidate members in terms of free market integration’ (Holman, Reference Holman, Bieler and Morton2001: 180–181). Although CEE countries also had to transpose the EU’s social acquis into their national laws, this did little to enhance workers’ rights in the new member states because of the minimalist transposition approach taken and the lack of enforcement of the EU’s social acquis on the ground (Meardi, Reference Meardi, Delteil and Kirov2016).

The intensification of interfirm and interstate competition in the single market and monetary union led to increased horizontal market pressures on national industrial relations institutions to become more competitive (Marginson and Sisson, Reference Marginson and Sisson2004). Furthermore, the Maastricht Treaty introduced strict national convergence criteria on public finances, inflation, exchange, and interest rates to join the EMU. These pressures affected wage bargaining dynamics, even though national bargaining systems formally remained autonomous (Streeck, Reference Streeck1998).

Across several member states, governments sought to conclude bi- or tripartite corporatist arrangements to moderate wage increases. Such arrangements emerged even in countries that were thought to lack the conditions for the emergence of corporatist agreements, such as Italy and Ireland (Schmitter and Grote, Reference Schmitter and Grote1997). In contrast to the classical neo-corporatist agreements that had emerged during the era of embedded liberalism, these competitive corporatist agreements (Rhodes, Reference Rhodes and Pierson2000) were not meant to reconcile economic growth and social equality. Instead, these arrangements advocated wage moderation to increase the attractiveness of the country as a location for foreign capital investment – as happened, for example, in the case of the seven social partnership agreements that Irish governments, employer organisations, and unions signed from 1987 to 2007 (Roche, Reference Roche2007; Erne, Reference Erne2008: 71). Furthermore, governments sponsored social pacts that advocated wage moderation to secure eurozone membership in line with the low-inflation benchmarks set by the Maastricht Treaty, like in Italy after 1993 (Erne, Reference Erne2008: 73; Pulignano, Carrieri, and Baccaro, Reference Pulignano, Carrieri and Baccaro2018).

The growing transnational market integration triggered by economic Europeanisation and globalisation processes led to increased commodifying pressures on national employment relations systems. To alleviate them, Jacques Delors thought to complement the SMP and EMU, as well as the EU’s future eastward enlargement, with European social flanking measures. After all, trade unions and left-wing parties still exerted some influence in EU politics that EU policymakers had to accommodate. Thus, the promise of a social dimension was instrumental in getting social democrats and trade unions on board for the relaunch of EU integration in the 1990s (van Apeldoorn, Reference van Apeldoorn2002; Bieler, Reference Bieler2006; Jabko, Reference Jabko2006; Erne, Reference Erne2008; Golden, Reference Golden2015).

The SEA had introduced qualified majority voting (QMV) in the Council on health and safety matters. The Maastricht Treaty extended QMV to other issues, namely, working conditions and workers’ information and consultation rights. The social provisions of the Maastricht Treaty were based on a social policy agreement, which EU governments attached as a separate protocol to allow the conservative UK government to opt out of it. As the social policy agreement had been drafted by the ETUC and Europe’s major employers’ associations, it is not surprising that it also institutionalised the European social dialogue between management and labour at intersectoral or sectoral level.Footnote ¹ This means that, before making any legislative proposal in the social policy field, the Commission must not only consult the European confederations of trade unions and employer associations but also give them up to nine months to negotiate their own agreements on the matter if they wish to do so (Art. 154 TFEU). If so, the European social partners could task their members at national level to implement the agreement autonomously or ask the Commission and Council to implement the agreement by an EU directive.

The social provisions of the SEA and the Maastricht Treaty led to the adoption of several EU directives that pointed in a decommodifying policy direction. The Council’s ability to adopt EU health and safety laws by QMV meant that the Commission and the Council were able to overcome the conservative UK government’s veto to adopt the Working Time Directive (93/104/EC) in 1993. The directive introduced a maximum ceiling of forty-eight working hours per week, a minimum of an eleven-hour-long rest break between two work shifts, at least four weeks of paid leave, and other provisions for night work for health and safety reasons. On the same basis, the Council adopted a directive granting basic labour rights to pregnant workers (Directive 92/85/EEC), including a protection against dismissal and at least fourteen weeks of maternity leave.

After Maastricht, the European social dialogue led to EU directives on parental leave (Directive 96/34/EC), part-time work (Directive 97/81/EC), and fixed-term work (Directive 1999/70/EC). These directives included a non-discrimination clause that gave workers holding such contracts equal labour rights while in employment. Conversely, they legitimised the use of flexible contracts as an alternative to permanent, full-time employment (Sciarra, Reference Sciarra2003). EU policymakers also adopted labour laws according to the EU’s ordinary legislative procedures, for example, when employers vetoed an equivalent social dialogue agreement. This happened, for example, in the case of the directives establishing European Works Councils (Directive 94/45/EC), on employee involvement within a company established under EU law known by its latin name of ‘Societas Europaea’ or SE (Directive 2001/86/EC), and on information and consultation of employees in companies at national level (Directive 2002/14/EC).

In 1996, the EU adopted the Posting of Workers Directive (96/71/EC), which is based on both the Treaty’s social provisions and those on the free movement of services. The directive did not go as far as to provide equal rights to workers temporarily sent (‘posted’) by their employer from one member state to another to provide services there, but it granted at least a set of core labour rights guaranteed by the laws of the host country, such as a minimum wage, work and rest periods, paid annual leave, and health and safety rules.

Most importantly, however, the Maastricht Treaty did not touch key areas of national industrial relations, such as pay and collective bargaining mechanisms, despite the increasing horizontal market pressures to which the making of the EMU exposed them. The social policy agreement attached to the EC Treaty in Maastricht explicitly excluded the issues of pay, the right of association, and the right to strike from its remit. When the British government led by Tony Blair agreed to incorporate the social policy agreement into the body of the EC Treaty at the 2007 Amsterdam summit, it also made sure that these exclusions were maintained.

Phase Three: Towards a Multilateral Surveillance of Employment Relations

After the launch of the Euro in 1999, commodifying horizontal market pressures on wages and working conditions increased further. Without the possibility of using the devaluation of national currencies, labour costs became an adjustment variable for firms and countries with lower levels of productivity to remain competitive within the EMU (Martin and Ross, Reference Martin and Ross1999). The tight monetary policy regime of the European Central Bank (ECB), designed to keep inflation levels below 2 per cent, also meant that wage growth had to be contained. Furthermore, German labour policymakers were able to adopt more assertive beggar-thy-neighbour wage moderation policies, as the introduction of the Euro excluded the risk of any counterbalancing revaluation of the Deutschmark against Southern European currencies (Erne, Reference Erne2008).

At the turn of the new millennium, not only conservative but also New Labour policymakers (Taylor, Reference Taylor1999) and their advisors (Pautz, Reference Pautz2008) used the horizontal market integration pressures linked to economic globalisation and Europeanisation to justify their calls for radical labour market reforms. Subsequently, German social partners agreed to moderate wages to an even greater extent (Erne, Reference Erne2008: 99–103; Lehndorff, Reference Lehndorff2015), and the Neue Mitte government of Gerhard Schröder pushed through its Hartz labour market reforms unilaterally despite fierce social movement and union opposition (Bruff, Reference Bruff2010: 416). Threats of further unilateral action by the Schröder government, combined with those of firms to relocate their production to cheaper locations also swayed unions to accept opening clauses in collective bargaining agreements, as in the 2004 Pforzheim agreement in the metal and electrical engineering industry (Bispinck and Schulten, Reference Bispinck and Schulten2010). Increased horizontal market integration pressures, however, did not have the same impact everywhere; this is not surprising given the EU’s integrated but also unequal political economy (Bieler, Jordan, and Morton, Reference Bieler, Jordan and Morton2019). In countries with very low wages, labour policymakers and social partners were not too concerned about wage moderation and continued to endorse decommodifying labour laws and practices. Despite the introduction of the Euro, Portuguese and Greek real wages broadly followed national productivity developments during the late 1990s (Erne, Reference Erne2008: 64). In the EU’s southeastern periphery, Romania’s social democratic government even introduced a new Labour Code in 2003, which provided strong collective bargaining rights ‘as a quid pro quo for the social peace needed to polish Romania’s EU accession dossier’ (Ban, Reference Ban2016: 96). This code remained in place, despite the victory of a centre-right coalition in 2004 and despite Romania following a neoliberal trajectory in most fields in the run-up to 2007 EU accession (Stan and Erne, Reference Stan and Erne2014; Ban, Reference Ban2016).

Horizontal European market integration pressures were not strong enough to trigger major labour market reforms in countries with average labour costs either. Whereas social partners agreed to moderate wages to support Italy’s accession to the Euro in 1999, its largest trade union confederation, the Confederazione Generale Italiana del Lavoro (CGIL), in 2002 staged a successful general strike against the labour market reforms proposed by the centre-right Berlusconi government that were meant to weaken the protections against unjustified dismissals granted by Art. 18 of the Italian Workers’ Statute (Ferrera and Gualmini, Reference Ferrera and Gualmini2004: 158).

Even so, the EMU and the EU’s 2004 and 2007 eastward enlargements increased horizontal market integration pressures on employment relations, also because the impetus for introducing vertical decommodifying EU flanking measures faded away. This happened even though, by the end of the 1990s, centre-left governments held the majority in the Council. Indeed, with supply-side economics becoming popular among Third-Way social democratic parties such as Tony Blair’s New Labour in the UK and Schröder’s Neue Mitte in Germany, there was little support for decommodifying EU labour laws (Menz, Reference Menz, Menz and Crespy2015). Legislative activity focused on the revision of existing directives rather than on new initiatives. In the absence of a threat of legislative action by the Commission, employers’ associations virtually stopped signing EU social dialogue agreements (Léonard et al., Reference Léonard, Erne, Marginson and Smismans2007). Instead, ‘softer’ mechanisms to coordinate EU member states’ economic and employment policies gained prominence.

To better coordinate the policies of EU member states in the run-up to EMU, the Maastricht Treaty tasked the Commission and the Council of finance ministers to issue broad economic policy guidelines (BEPGs). Responding to increased horizontal market integration pressures, high unemployment figures, and protest movements by the unemployed (Balme and Chabanet, Reference Balme and Chabanet2008), EU governments agreed at the 1997 Amsterdam summit to integrate employment policy aims into the EC Treaty (now Title IX TFEU). This led to the European employment strategy, which was meant to promote ‘a skilled, trained, and adaptable workforce and labour markets responsive to economic change’ (Art. 145 TFEU) and secure a ‘high level of employment’ (Art. 147 TFEU). At the Lisbon summit in 2001, EU executives furthermore agreed to henceforth coordinate member state policies in other areas also, such as pensions, healthcare, and social inclusion (Armstrong, Reference Armstrong2010; see also Chapter 10).

Following Milena Büchs (2007), we discuss these coordination tools, including the BEPGs, under the same heading: the Open Method of Coordination (OMC). This makes sense, as, since 2005, EU executives have integrated their BEPGs and EU employment strategy recommendations in one document. Although these recommendations to the member states were not legally binding, they still had practical effects (see Chapter 2). Ironically, precisely the soft-law character of OMC prescriptions enabled the Commission and the Council to gradually build up governance capabilities in areas in which they did not possess formal legislative competences, including pay and healthcare (Marginson and Sisson, Reference Marginson and Sisson2004; Büchs, 2007; Chapter 10).

The policy orientation of OMC prescriptions echoed the shift from demand- to supply-side economic policies that increasingly shaped European labour policymaking (Büchs, Reference Büchs2007). OMC prescriptions stressed the need to increase workers’ employability and propagated a new ‘flexicurity’ approach, which was meant to reconcile employers’ need for a flexible workforce with workers’ need to secure durable employment, even if that meant keeping wage growth below productivity developments at firm level. Nevertheless, the coercive power of OMC prescriptions was weak, as they lacked any enforcement mechanism other than peer pressure from European institutions and other countries’ governments (Marginson and Sisson, Reference Marginson and Sisson2004). Yet national executives still used OMC prescriptions to discursively legitimise commodifying labour reforms, as in the case of Schröder’s Hartz reform (Büchs, Reference Büchs2007).

A much more decisive push for further labour commodification came from the Commission’s 2004 proposal for a Services Directive (COM (2004) 2 final/3). The proposed EU law envisaged liberalising the provision of all services, public and private, across borders (see also Chapter 7). The threat for labour came from the country-of-origin principle contained in the draft law, which would have made service providers subject to the provisions of their home country, rather than those of their host country. This would have given service providers from states with lower labour and product market standards a major competitive advantage, also considering the EU’s concurrent inclusion of CEE countries, which had lower wages and weaker trade unions and employment protection institutions. European trade unions therefore feared that the directive would unleash a race to the bottom in working conditions and employment relations and waged a transnational campaign with social movements (Bieler, Reference Bieler2007; Parks, Reference Parks2015; Chapter 7) that convinced the European Parliament and Council to remove the country-of-origin principle from the final text of the Services Directive (2006/123/EC).

The EU’s first attempts to commodify labour through direct interventions in the area of employment relations failed, either because they were too weak (in the case of OMC) or because they triggered strong countermovements (in the case of the Services Directive). In the mid-2000s, some of its leading scholars thus concluded that EU industrial relations were ‘evidently not a vertically integrated system, with the European supranational level exerting authoritative direction over national systems, that would facilitate top-down policymaking and implementation’ (Leisink and Hyman, Reference Leisink and Hyman2005: 280). In 2007 however, these arguments were called into question by the CJEU’s four Laval Quartet rulings (Dølvik and Visser, Reference Dølvik and Visser2009).Footnote ²

With its rulings in the Laval and Vikings cases, the CJEU limited unions’ capacity to take national and transnational strike action. In Laval, a Swedish union took secondary strike action to compel Laval, a Latvian construction company that had won a contract to renovate a school, to sign a Swedish collective agreement. In Vikings, a Finnish seafarers’ union and the International Transport Workers’ Federation called for strike action against the decision of the Finnish ferries company Vikings to reflag its ferries to Estonia to lower wages and labour standards. In both cases, the companies launched legal challenges in national courts against the unions’ actions, which were brought to the CJEU in turn. In Laval, the Swedish employers’ organisation Svenskt Näringsliv funded the court case, which it then used as a strategic opportunity to curb Swedish trade union rights (Woolfson and Sommers, Reference Woolfson and Sommers2006: 61). In Vikings, the Finnish company brought the case to a UK court, using the Federation’s location in London to bypass the more labour-friendly Finnish courts. In both cases, the CJEU found that the use of the right to strike guaranteed by national labour laws and the EU’s Charter of Fundamental Rights had unduly restricted the economic freedoms of firms guaranteed by EU treaties, namely, the freedom of establishment (Vikings) and of providing services across borders (Laval). The Court also interpreted the Posting of Workers Directive restrictively, as setting a ceiling of rights granted to posted workers, rather than a floor (Höpner and Schäfer, Reference Höpner and Schäfer2010: 354).

In Rüffert, the Court found that the social clause in the procurement law of Lower Saxony in Germany would violate companies’ freedom to provide services across the EU. The clause stipulated that public contracts should be awarded only to companies that abided by the wage rates set by collective agreement. Finally, the Commission pushed ‘the new market-oriented doctrine further’ (Garben, Reference Garben2017: 35), bringing Luxembourg to the CJEU as its transposition of the Posting of Workers Directive had gone too far. The Commission argued that Luxembourg was incorrectly applying the ‘public policy provisions’ provided by Art. 3(10) of the directive to give posted workers greater protections than the set of rights stated by the directive itself. In Commission v. Luxembourg, the CJEU upheld most of the Commission’s arguments, providing a restrictive interpretation of the public policy exception.

The shift in the CJEU’s jurisprudence in its Laval Quartet rulings sanctioned much more vertical, commodifying EU interventions in employment relations. Only a few months afterwards, in response to the 2008 financial crisis, the EU created its NEG regime, which complemented and overlayed the OMC’s soft multilateral policy coordination tools with new governance instruments that enabled further vertical EU policy intervention in the field.

NEG Prescriptions on Wage Levels

As Table 6.2 illustrates, most prescriptions under this category called for a curtailment of wages in both the public and the private sector. The two countries targeted by the prescriptions are Ireland and Romania, which were both subject to the conditionalities specified in MoUs of a bailout programme. By contrast, since 2012, Germany consistently received prescriptions to increase wage levels.

Before entering into the bailout programme, the Irish government had already implemented wage cuts as part of what the IMF itself defined as one of the most severe adjustment programmes in modern times (Whelan, Reference Whelan2014). The Commission praised the substantial wage cuts in the public sector in 2009, which ‘helped to initiate the necessary change in labour costs’ (European Commission, 2010a: 67). Hence, the first MoU signed in November 2010 did not require additional public sector wages cuts for existing employees on top of the cuts that the Irish government had already implemented unilaterally in 2009. It did, however, urge an additional 10 per cent wage cut for new entrants to the public service (MoU, Ireland, 28 November 2010); this is remarkable given the Commission’s recurrent criticism of labour market segmentation (see NEG Prescriptions on Hiring and Firing Mechanisms below). The austerity measures adopted by the government depressed the Irish economy so much that it became impossible to reach the deficit/GDP targets agreed in the MoU. In 2013, the government therefore persuaded the Irish public sector unions to agree to further wage cuts in a new national public sector agreement. This was done under the duress of the Financial Emergency Measures in the Public Interest (FEMPI) Acts, which allowed the government to cut public sector wages unilaterally, in the event of union opposition (Szabó, Reference Szabó2018; Maccarrone, Erne, and Regan, Reference Maccarrone, Erne, Regan, Müller, Vandaele and Waddington2019).

The MoU also asked the Irish government to reduce the minimum wage by €1 per hour, which amounted to a 12 per cent reduction (MoU, Ireland, 28 November 2010). The Irish government implemented the cut without further delay within a month, causing widespread uproar among unions and social justice NGOs. In spring 2011, Ireland’s new Fine Gael–Labour government reversed the minimum wage cut in agreement with the Commission and the IMF. To offset the effect of the reinstatement of the minimum wage on nominal ULC, the government reduced employers’ social contributions accordingly (MoU, Ireland, 1st update, 28 April 2011). Between 2010 and 2012, Irish wage (and social contribution) cuts contributed to a 12.8 per cent drop in nominal ULC (Erne, Reference Erne2015: 353). This is astounding, as the MIP scoreboard would have allowed a 9 per cent ULC increase over this period. Ultimately however, the NEG regime does not hinge on numerical benchmarks per se but on political ad hoc interventions that use them instrumentally (see Chapter 2; Cova, Reference Cova2022; Syrovatka, Reference Syrovatka2022b).

In the case of Romania, subsequent MoU addendums urged the government to first freeze public sector salaries (MoU, Romania, 1st addendum, 22 February 2010), then to cut them altogether through a reduction in wages and bonuses (MoU, Romania, 2nd addendum, 2 August 2010). By contrast to Ireland, NEG prescriptions continued to target Romanian wage policy even after the country left the bailout programme. In 2014, the Romanian government was invited to ‘establish, in consultation with social partners, clear guidelines for transparent minimum wage setting’ (Council Recommendation Romania 2014/C 247/21). As the prescription refers to social dialogue with unions and employers, it might appear as socially oriented (Zeitlin and Vanhercke, Reference Zeitlin and Vanhercke2018). However, the meaning of the prescription becomes clearer if we analyse it within its semantic context. Indeed, the Commission’s 2014 Country Report emphasises that ‘establishing clear guidelines, in effective consultation with social partners, should contribute to the evolution of the minimum wage in line with the underlying cyclical conditions’ (emphasis added) (Commission, Country Report Romania SWD (2014) 424: 15). Thus, rather than being concerned with the involvement of social partners in policymaking per se, the prescription aimed to prevent the unilateral minimum wage increases planned by the new social democratic government, as demanded by Romanian employer organisations.

As Italy does not have a statutory minimum wage, unlike Ireland and Romania, it did not receive explicit NEG prescriptions on wage levels for the private sector (Afonso, Reference Afonso2019). The Italian government did not receive any prescription to restrain wages in the public sector either. It did, however, receive prescriptions to curtail public spending (see Chapter 7), thereby putting public sector workers’ wages under pressure (Bach and Bordogna, Reference Bach and Bordogna2013).Footnote ³

In contrast to the other three countries, from 2012, the German government received prescriptions to promote higher wage growth almost every year. In 2012, the prescription was formulated in a rather flimsy way, asking the German government to ‘create the conditions for wages to grow in line with productivity’ (Council Recommendation Germany 2012/C 219/10), as German wage levels were even below that. After 2013 however, the prescriptions became more clearly decommodifying, requesting Germany to ‘sustain conditions that enable wage growth to support domestic demand’ (Council Recommendation Germany 2013/C 217/09). Similar decommodifying prescriptions were issued between 2017 and 2019.

Although these prescriptions supported German unions’ demands for higher wages (Lübker, Reference Lübker2019: 19), they were only partially related to a concern for enhancing social inclusion. Instead, from 2013, they were increasingly linked to Germany’s core position in the European political economy and the need to rebalance the European economy. Analysing the German prescriptions on wage levels in their semantic, communicative, and policy context, we can see that they relate to the MIP’s focus that also targets countries with current account surpluses, such as Germany. Accordingly, the Commission and the Council agreed that wage growth in surplus countries might have positive spill-over effects on the whole EU economy by generating demand for goods produced by other EU countries. Higher German wages would therefore contribute to a rebalancing of the eurozone and the entire EU economy (Council Recommendation Germany 2017/C 261/05; Buti and Turrini, Reference Buti and Turrini2017). EU executives continued to issue similar prescriptions until 2019, demanding higher German wages, indicating that the actions undertaken by German policymakers were seen to be insufficient. Given the prescriptions’ weak coercive power, however, German labour policymakers were not too concerned about that.

Our comparison of all NEG prescriptions on wage levels exposed their differing policy orientations across countries. This divergence is related to countries’ different position in the integrated but also uneven EU economy. On the one hand, EU executives urged Ireland and Romania to cut the public sector wage bill and national minimum wages. As both countries were subject to MoU conditionality, the coercive power of these prescriptions was very significant. EU executives justified their prescriptions with the countries’ need to curtail public spending and wages to regain national competitiveness and to consolidate public finances. On the other hand, EU executives urged Germany to promote wage growth, to expand its internal demand, and to reduce its current account surplus with the aim of correcting the corresponding macroeconomic imbalances within the EU economy. As the coercive power of these prescriptions was weak, the German government was effectively able to ignore them. The diverging orientation of NEG prescriptions on wages across countries at the core and at the periphery of the uneven EU economy made it very difficult for European trade unions to challenge these NEG prescriptions jointly in countervailing transnational collective action.

NEG Prescriptions on Bargaining Mechanisms

Bargaining mechanisms refer to the procedures for the negotiation of terms and conditions of employment between employers and workers, often collectively represented by trade unions. All countries, except Germany, received at least one prescription under this category. All the prescriptions, bar one, had a commodifying orientation, aimed at marketising bargaining mechanisms by fostering a less solidaristic logic of bargaining.

In 2011, the prescriptions of the EU–IMF bailout programme urged Romania to ‘implement reforms to the wage-setting system allowing wages to better reflect productivity developments in the medium term’ (MoU, Romania, 28 June 2011). The centre-right government implemented its demands unilaterally by a new Social Dialogue Act in 2011, which it adopted as a decree-law, to prevent any labour-friendly amendments in parliament. The law led to a profound decentralisation of Romania’s collective bargaining system. Whereas Romania’s 2003 labour code supported multi-employer collective bargaining at national level, the 2011 Social Dialogue Act abolished the provisions supporting cross-sectoral bargaining and limited extension mechanisms for sectoral agreements (Marginson and Welz, Reference Marginson and Welz2015; Trif, Reference Trif2016). The result was a dramatic drop in the coverage of bargaining, from 98 per cent in 2010 to 35 per cent in 2011 (Trif and Paolucci, Reference Trif, Paolucci, Müller, Vandaele and Waddington2018). In 2018, EU executives finally acknowledged that drop, albeit without mentioning their active role in fostering the fall. In their 2018 round of CSRs, they urged the Romanian government to ‘improve the functioning of social dialogue’ (Council Recommendation Romania 2018/C 320/22). The coercive power of this decommodifying request was weak however, by contrast to the commodifying prescriptions on bargaining mechanisms issued when Romania was subject to the MoU conditionalities of the bailout programme.

In 2009, Ireland’s long-standing system of tripartite national wage bargaining known as social partnership had collapsed following the government’s decision to unilaterally cut wages in the public service before it signed up to the EU–IMF bailout programme (Maccarrone, Erne, and Regan, Reference Maccarrone, Erne, Regan, Müller, Vandaele and Waddington2019). Even so, the first MoU urged the government to review the only existing sectoral wage-setting mechanisms still in place, namely, the Employment Regulation Orders (ERO) and the Registered Employment Agreements (REA) (MoU, Ireland, 28 November 2010). Simultaneously, several employers challenged the ERO- and REA-systems in court. In turn, the Irish High and Supreme Courts declared the ERO- and REA-related provisions that had been in place since 1946 [sic] unconstitutional (Maccarrone, Erne, and Regan, Reference Maccarrone, Erne, Regan, Müller, Vandaele and Waddington2019: 319) and declared all existing EROs and REAs invalid. Subsequently, the government nevertheless reintroduced similar provisions in labour law, but these provisions allowed companies in financial difficulties to opt out from the terms determined at sectoral level (Maccarrone, Erne, and Regan, Reference Maccarrone, Erne, Regan, Müller, Vandaele and Waddington2019). This echoed the concerns of the Commission, which demanded that the reform must ‘ensure that wages are adequately linked to productivity levels’ (EAP, Ireland, Autumn 2012 Review, 25 January 2013: 37–38).

The NEG prescriptions for Italy also included demands to introduce clauses allowing opt-outs from sectoral bargaining. Since 2011, the Italian government had repeatedly been told to ensure ‘that wage growth better reflects productivity developments as well as local and firm conditions, including clauses that could allow firm level bargaining to proceed in this direction’ (Council Recommendation Italy 2011/C 215/02). In the summer of 2011, under pressure from both the Commission and the ECB, the Italian centre-right government pushed through an emergency decree-law that would have foreseen a disorganised decentralisation of collective bargaining from sectoral to firm level. This motivated even Italy’s largest employer confederation, Confindustria, to oppose the reform, as it would have undermined its raison d’être as an organisation conducting collective bargaining on the employers’ side (Meardi, Reference Meardi, Hauptmeier and Vidal2014; Bulfone and Afonso, Reference Bulfone and Afonso2020). In response, unions and employers signed an autonomous agreement that reaffirmed the importance of sectoral bargaining at national level. This rendered the government’s decree-law ineffective (Meardi, Reference Meardi, Hauptmeier and Vidal2014; Bulfone and Afonso, Reference Bulfone and Afonso2020). Collective bargaining decentralisation nonetheless remained high on NEG’s agenda, as NEG prescriptions continued to request a greater use of firm-level bargaining until 2017.

Germany is the only country in our sample that did not receive any NEG recommendations on collective bargaining. On the one hand, the lack of any NEG prescription on collective bargaining decentralisation is not surprising, given the opt-out clauses introduced by the pathbreaking 2004 Pforzheim agreement in the metalworking and electrical industry and a similar agreement in the chemical sector, which unions and employers concluded in response to ever-increasing horizontal market integration pressures. After all, the Commission had already cited these agreements as virtuous examples in 2010 (European Commission, 2010b: 39, 132). On the other hand, Germany did not receive decommodifying NEG prescriptions in this field, despite the fact that the recitals accompanying the NEG prescriptions in favour of higher wages (see above) also acknowledged the fall in collective bargaining coverage.

Hence, the NEG prescriptions on bargaining mechanisms went in a commodifying direction, except for the weak 2018 prescription for Romania that called for improved social dialogue. The coercive power of the commodifying prescriptions was very significant (Ireland and Romania) or significant (Italy). The prescriptions for Ireland, Italy, and Romania demanded a further decentralisation of collective bargaining from cross-sectoral and sectoral level to firm level, to better align workers’ wages and conditions to their employers’ productivity levels to foster national competitiveness.

NEG Prescriptions on Hiring and Firing Mechanisms

Hiring and firing mechanisms are a key dimension of employment relations, as they define the boundaries of employment. Commodifying prescriptions under this category aimed to increase labour market ‘flexibility’, thus exposing workers to the vagaries of the market. Policymakers can increase labour market flexibility in two ways: either by increasing the use of more flexible (i.e., more precarious) forms of employment contracts or by making permanent contracts more flexible (i.e., less stable) by easing workers’ protection against dismissals. Whereas Italy and Romania received only commodifying prescriptions in this field, Germany received some decommodifying prescriptions aimed at reducing the use of precarious contracts.

The NEG prescriptions issued to Romania emphasised the need to use more flexible employment contracts. In 2011, its government was urged to ‘widen the set of cases for use of fixed-term contracts’ (P-MoU, Romania, 29 June 2011). The centre-right Romanian government implemented this prescription in turn, with a radical reform of the Labour Code that greatly expanded the use of atypical employment contracts and reduced the scope for collective bargaining (Trif, Reference Trif2016). The government pushed these changes through unilaterally by means of a decree-law, which enabled it to sideline social dialogue with trade unions and to preclude labour-friendly amendments by the Romanian parliament. When the subsequent social democratic Romanian government was considering reversing some of these changes however, the EU executives and the IMF urged them to ensure ‘that any further amendment to labour legislation will be undertaken in consultation with all stakeholders through ordinary legislative procedures’ (emphasis added) (P-MoU, Romania, 6 November 2013) to prevent the adoption of measures that would go against employers’ interests.

In the Italian case, EU executives cited the segmentation of its labour market, created by several waves of liberalisation of precarious contracts since the end of the 1990s, as a compelling reason to reduce the protection of workers with permanent contracts against unjustified dismissals provided by the country’s Workers’ Statute (Council Recommendation Italy 2011/C 215/02). As mentioned above, in 2002, an earlier attempt by the Berlusconi government to dismantle such protections had failed as a result of strong labour opposition. In response to the corresponding 2011 NEG prescription, the former EU Commissioner Mario Monti’s technocratic government managed to weaken the protection against unjustified dismissal granted by Art. 18 of the Italian Workers’ Statute. As the Monti government depended on support from centre-left Partito Democratico (PD), which had links to the union movement, the scope of the deregulation nevertheless remained limited.

Only two years later however, EU executives threatened the opening of an excessive deficit procedure against Italy. In response, the new centre-left government led by the PD’s Matteo Renzi pushed through a new Jobs Act (and a public sector reform, see Chapter 7) to get more flexibility from EU executives under the SGP in exchange. This was possible, as the Juncker Commission agreed to interpret the SGP more flexibly if the respective member state implemented a major structural reform instead (see Chapter 2). The ensuing Jobs Act introduced a new type of open-ended employment contract with fewer protections against dismissals (Rutherford and Frangi, Reference Rutherford and Frangi2018). As in the Romanian case mentioned above, the reform was approved through an executive decree-law that prevented any labour-friendly amendments in parliament. Following its approval, the Commission argued that ‘swift implementation of the “Jobs act” should improve entry and exit flexibility, enhance labour reallocation and promote stable open-ended employment, most notably for the young’ (Commission, Country Report Italy SWD (2015) 31: 32).

As Ireland was already one of the EU states with the lowest employment protection, there was little scope for further EU intervention in that area, during the bailout programme or afterwards (Prosser, Reference Prosser2016). As we shall see, EU executives and the IMF nevertheless urged the Irish government to change the few sectoral wage-setting mechanisms that existed there to achieve even greater ‘labour market flexibility’ (EAP, Ireland, Autumn 2011 Review, 28 November 2011).

In contrast, from 2013, Germany received several NEG prescriptions that urged its government to ‘facilitate the transition from non-standard employment such as mini jobs into more sustainable forms of employment’ (Council Recommendation Germany 2013/C 217/09). These prescriptions point in a decommodifying direction, as they reflect a concern for the increase of in-work poverty following the growth of precarious contracts such as mini-jobs (Commission, Country Report Germany SWD (2013) 355). Mini-jobs were based on a particular type of part-time employment contract with a tax-free wage up to €450 per month but without any entitlements to unemployment and health insurance or pension payments. The widespread use of these mini-jobs was facilitated by the Hartz labour market reforms of the Schröder Government in the 2000s, mentioned above. Although the NEG prescriptions on mini-jobs addressed some of the negative effects associated with their widespread use, the Commission still welcomed the Hartz reforms that propagated them in the first place (Commission, Country Report Germany SWD (2013) 355: 19).

The NEG prescriptions on hiring and firing mechanisms point in two diverging directions, as also happened in the case of those on wage levels. The prescriptions for Italy and Romania were commodifying, as they exposed workers to greater market pressures. EU executives justified their calls for more labour market flexibility in these countries to increase companies’ competitiveness, to increase the number of people in employment, and to reduce labour market segmentation between more and less protected workers (Rubery and Piasna, Reference Rubery and Piasna2016). The coercive power of these prescriptions was significant. Ireland did not receive any prescription in this area, as its hiring and firing mechanisms were already very lax. By contrast, NEG prescriptions urged the German government to foster the transition from precarious mini-job contracts to more stable forms of employment. As their coercive power was weak however, the German government did not feel obliged to enforce them.

NEG: Fostering Vertical Interventions on Employment Relations

The shift to the NEG regime increased the salience of EU vertical interventions in employment relations. The analysis of NEG prescriptions in their semantic context highlights the salience of a commodifying script that aims to increase companies’ and countries’ competitiveness through the curtailment of wages and the marketisation of bargaining and hiring and firing mechanisms. This script informed all commodifying prescriptions issued to Ireland, Italy, and Romania across the three categories, whether they had a merely quantitative (wage levels) or qualitative (bargaining and hiring and firing mechanisms) dimension. By contrast, there was little need for commodifying NEG prescriptions for Germany, as German policymakers had already moderated wages and decentralised collective bargaining mechanisms in the 2000s in response to increased horizontal market integration pressures, as outlined above.

Whereas most NEG prescriptions in employment relations follow a commodification script, some of them point towards decommodification. Thanks to our analysis of NEG prescriptions in their semantic context (Chapter 5), we could also map the policy rationales that informed them (Online Appendix, Tables A6.1–A10.4). From 2012, Germany’s policymakers received several prescriptions that urged them to increase wages. These decommodifying prescriptions are only partially related to a social concern though. It is instead Germany’s position in the integrated but also uneven EU economy that informs most of these prescriptions. EU executives considered Germany’s consistent current account balance surpluses as a problem that might threaten the proper functioning of the EU economy. The decommodifying NEG prescriptions issued therefore aimed to nudge German policymakers to increase German wages to contribute to a rebalancing of the EU economy. This policy rationale, however, does not clash with the commodifying script that we have detected above. Instead, it rather complements it, as both scripts follow a similar economic logic, which sees increased competitiveness as a function of wage levels and flexible employment contracts.

We also detected another decommodifying prescription on wage levels, which does not contradict the commodifying script either, namely, the 2012 NEG prescription that allowed the Irish government to reverse the cut to the national minimum wage that the MoU had previously mandated. This measure did not contradict the commodifying script, as it was accompanied by a concomitant reduction in employers’ payroll taxes to offset its impact on ULC, according to a logic that sees a reduction in ULC as necessary to increase competitiveness.

The prescriptions that demanded the German government to increase the transition from precarious contracts to more stable forms of employment are semantically linked to concern about labour market segmentation. Neither is this script in contradiction with the commodifying script. Indeed, it mirrors the (stronger) commodifying prescriptions addressed to Italy and Romania on hiring and firing mechanisms that demanded that their employment contracts be made more precarious under the same stated rationale.

The single prescription addressed to Romania to ‘improve social dialogue’, which recognises the fall in (sectoral) collective bargaining coverage as problematic, is semantically linked to a policy rationale concerned with enhancing social concertation. From 2018, the prescription addressed to Germany to increase wage growth was also semantically linked to a concern for the fall in collective bargaining coverage. Albeit related to few prescriptions, this script is relevant, as it marks the beginning of a shift in the EU executives’ view on the role of social dialogue and solidaristic wage-setting institutions, which became more prominent from 2019 onwards, as we discuss in the concluding section.

The few prescriptions related to this policy rationale are also the only ones among all NEG prescriptions issued in the decade 2009–2019 that we could link to a social concern with a more equal distribution between labour income and capital profit. This is striking, as a more equal distribution of wage and capital incomes has historically been a key concern of European trade unions’ wage policy (Erne, Reference Erne2008). Instead, commodifying prescriptions on wage levels, bargaining mechanisms, and hiring and firing mechanisms dominated the picture, even after the most acute phase of the financial crisis.

In comparison with the previous phases of EU governance of employment relations, the establishment of the NEG regime highlights a qualitative shift. Until 2008, the process of EU integration had exercised only indirect – albeit strong – horizontal commodifying pressures on national industrial relations. Although the impetus for vertical decommodifying legislation had run out of steam at the end of the 1990s, even a sceptical observer of social Europe such as Wolfgang Streeck conceded that ‘there have also been few examples, if any, of European regulation mandating deregulation of industrial relations at national level’ (Streeck, Reference Streeck1998: 435). Throughout the 2000s, vertical interventions by EU executives aimed at commodifying wages and workers’ rights were not successful either, either because of protests by labour and social movements (e.g., in the case of the draft Services Directive) or because commodifying EU interventions were embedded in non-binding policy coordination processes, such as the OMC.

Whereas the CJEU opened the way for vertical commodifying interventions on labour policy in its Laval Quartet rulings, it was the adoption of the NEG regime that allowed the EU’s executive arms, namely, the Commission and the Council, to intervene in employment relations more directly and much more broadly. In turn, national governments often implemented NEG prescriptions through unilateral acts, such as emergency decree-laws, which limited organised labour’s capacity to influence national policymakers. Although some scholars have argued that ‘there is not and never will be’ any coordination of wage policies in Europe (Höpner and Seeliger, Reference Höpner and Seeliger2018: 415, our translation), this coordination now exists; but as a result of the EU’s NEG regime rather than transnational union action. Section 6.4 thus analyses European unions’ responses to NEG interventions in employment relations and to the horizontal market pressures and vertical EU interventions that preceded them.

Phase One: Common Market and National Public Services

The Treaty of Rome, which created the EEC in 1957, referred to public services and public companies only marginally. Even so, the Treaty already contained the seed for the tensions between member states’ capacity to provide public services and the rules governing the EU common market that would emerge later.

The drafters of the Treaty had to contend with different traditions of public services, for example, the French service public, the Italian servizi pubblici, the German DaseinsvorsorgeFootnote ¹ (Schweitzer, Reference Schweitzer and Cremona2011). To avoid contentious debates, they coined a new term, services of general economic interest (SGEI), but failed to define it given the unequal boundaries between the public and private sectors across member states (Art. 90(2) TEEC, now Art. 106 TFEU). As the governments of West Germany and the Benelux countries feared that the widely nationalised French and Italian industries could gain unfair trade advantages, Art. 90(2) TEEC made all SGEIs subject to European competition law (Pollack, Reference Pollack, Sandholtz and Stone Sweet1998). Moreover, Art. 90(3) TEEC (now Art. 106(3) TFEU) empowered the Commission to apply competition provisions of the Treaty through adopting Commission Directives without member states’ approval in the Council. Even so, Art. 90(2) TEEC also stated that competition law shall not be used to prevent public services from delivering on their objectives. Hence, if there is a conflict of interpretation, competition law should be secondary to the public interest and the delivery of public services (Cremona, Reference Cremona2011). Finally, the Treaty acknowledged that public services could be provided by either publicly or privately owned undertakings: ‘This Treaty shall in no way prejudice the system existing in Member States in respect of property’ (Art. 222 TEEC, now Art. 345 TFEU).

During the first two decades of the European integration process, the inherent tension between the provision of public services and the EEC competition rules remained dormant. Neo-mercantilist views in favour of interventionist industrial policies prevailed, even within the European Commission (Buch-Hansen and Wigger, Reference Buch-Hansen and Wigger2011; Warlouzet, Reference Warlouzet2018). The Commission adopted a permissive stance towards state aid for public and private enterprises, as greater competitive pressures might create ‘intolerable social tensions’ (European Commission, 1972: 12). Accordingly, European integration and national public services developed in parallel: the EEC removed the tariff barriers between member states, and national governments constructed welfare states and supported their industries, relying also on the proceeds of free trade. Nationalisations, such as the establishment of the energy supplier ENEL in Italy in the 1960s, went unchallenged (Millward, Reference Millward2005: 187), as did the nationalisation of British Leyland and British Shipbuilders in the United Kingdom in the 1970s (Warlouzet, Reference Warlouzet2018: 101). This happened despite the opposition of Italian, German, and Dutch employers who lobbied the Commission in vain to prevent the ENEL nationalisation (Petrini, Reference Petrini, Del Biondo, Mechi and Petrini2010: 20). In 1981, the Commission did not prevent the ambitious nationalisation programme of the French socialist government either, which brought eight industrial conglomerates and almost all French banks into public ownership (Gélédan, Reference Gélédan1993: 48–49). Hence, during this phase, the notion of what was considered an SGEI expanded considerably.

Phase Two: Public Services in the Single Market and Monetary Union

The second phase in the relationship between European integration and public services is linked to the rise of neoliberalism in the 1980s, when ‘rolling back the state’ became a dominant mantra. Neoliberal voices also became louder within the European Commission.

In 1980, the Commission adopted Directive (80/723/EEC), which forced member states to inform the Commission about the amount of state aid that they provided to their public undertakings. Although the French, Italian, and UK governments challenged the Commission’s use of Art. 90(3) TEEC as a basis for its directive, the Court of Justice of the European Union (CJEU) ruled in favour of the Commission.Footnote ² In 1982, the Dutch centre-right Competition Commissioner Frans Andriessen saw state aid to enterprises as akin to ‘woodworms eating away the carcass of the ship of integration’ (cited in Buch-Hansen and Wigger, Reference Buch-Hansen and Wigger2011: 77). Andriessen’s successor, the neoliberal Irishman Peter Sutherland, adopted an even more confrontational approach to prevent member states from aiding their companies (Warlouzet, Reference Warlouzet2018: 171–174). Under his tenure, the Commission not only named and shamed member states by publishing reports on the amount of aid granted to their companies but also began using its powers to ban state aid in important individual cases (Buch-Hansen and Wigger, Reference Buch-Hansen and Wigger2011). According to the head of the Commission’s legal service at the time, ‘none of the commissioners since have tried to row back on what Peter achieved, so it was a clear victory for Peter and for neoliberal thinking’ (Claus Dieter Ehlermann cited in Walsh, Reference Walsh2019: 106).

In 1986, national governments adopted the Single European Act (SEA), which revised the EEC Treaty. The SEA enabled the implementation of the Commission’s single market programme through adopting corresponding EU laws by a qualified majority of the Council. Following the SEA, the Commission and Council opened several public network industries to competition, namely, telecommunications, road haulage, railways, electricity, gas, and postal services. In the case of the telecommunications industry, the Commission used once again the provisions of Art. 90(3) TEEC to liberalise the sector unilaterally by a Commission Directive. As in the case of the Commission’s Transparency of Financial Relations Directive (80/723/EEC), several governments (Spain, France, Belgium, and Italy) challenged the Commission’s prerogatives to do so in the European Court of Justice but again without success.Footnote ³ Despite the Commission’s victories in these court battles however, the Commission effectively lost the war given the strong political opposition encountered from governments. It therefore stopped issuing liberalising Commission directives. Instead, it used the slower, but more inclusive, legislative procedures involving the Council to pursue its liberalisation agenda in other network industries, such as energy and postal services (Schmidt, Reference Schmidt1996; Pollack, Reference Pollack, Sandholtz and Stone Sweet1998).

As a result, the process of public service liberalisation was gradual and uneven across sectors. Whereas the Commission and Council gradually opened one public network industry after another to competition, other public services, such as water and healthcare, remained almost untouched throughout this period (see Chapters 9 and 10). After all, the Commission acknowledged that workers and unions would oppose the commodification of public services because this would entail the ‘risk of job destruction’ and compromise people’s ‘access to essential services at affordable prices’ (1999, cited in Transfer, 2002: 293).

In 1992, European governments signed the Treaty of Maastricht that established the EU and amended the EEC Treaty (then called Treaty establishing the European Community, TEC) to accomplish an economic and monetary union (EMU) by the end of the decade. The Treaty introduced the convergence criteria for member states to join the Euro (Art. 109(j) TEC), and its protocol on the excessive deficit procedure (EDP) established reference values that member states must respect, that is, a public debt/GDP ratio of 60 per cent and a public deficit/GDP ratio of 3 per cent. In many cases, the adjustment required to meet these criteria was substantial: Italy’s deficit at the beginning of the 1990s was around 10 per cent of its GDP (Leibfried, Reference Leibfried, Wallace, Pollack and Young2015). In 1997, the Council also adopted the Stability and Growth Pact (SGP), which operationalised the use of the convergence criteria and the EDP in secondary EU law.

As public services consume a significant share of public spending, the new EU fiscal constraints motivated European governments to curtail their spending on them directly. In addition, governments tried to make savings through marketising public services reforms, which shifted the financial burden of public services from the state budget to the service users. These reforms often included the full or partial privatisation of former public undertakings too. The reason to do so was twofold. Firstly, the immediate revenues from sales could go towards reducing public debt. Secondly, the balance sheet of former state companies would be excluded from future public budgets (Bieler, Reference Bieler2006). Although some EU countries, for example the United Kingdom, had already begun privatising public services in the 1980s, most EU member states launched their privatisation programmes only after the ratification of the Maastricht Treaty in 1993 (Clifton, Comín, and Díaz Fuentes, Reference Clifton, Comín and Díaz Fuentes2006: 742). However, as the EU initially issued only overall debt and deficit benchmarks without linking them to concrete policy prescriptions, the ensuing public sector curtailment and marketisation processes unfolded at an uneven pace and intensity across countries and sectors.

Whereas Western European public services had been put under pressure by the EMU convergence criteria, in Central and Eastern Europe (CEE) the EU accession process fuelled the commodifying pressures on public services. According to the European Council’s Copenhagen EU accession criteria, EU candidate countries must have ‘a functioning market economy as well as the capacity to cope with competitive pressures and market forces within the Union’ (Presidency Conclusions Copenhagen European Council, 21–22 June 1993). The Commission monitored candidate countries’ progress in meeting this criterion very closely, emphasising the need for further privatisations and liberalisations, even though CEE governments had already privatised most state-owned enterprises (SOEs) in the transition from state socialism to capitalism in the 1990s (Appel and Orenstein, Reference Appel and Orenstein2018: 65–89).

To make public service delivery allegedly cheaper, governments in turn promoted public sector reforms, that is, the introduction of market-like new public management practices. The pressure to curtail the spending on public services in national budgets also incentivised member states to increasingly rely on public–private partnership (PPP) agreements to fund their projects (Kunzlik, Reference Kunzlik2013) and to use procurement rather than in-house provision of public services (Fischbach-Pyttel, Reference Fischbach-Pyttel2017). In 1996, the Commission argued that ‘buying goods and services by effective purchasing systems can make significant savings for governments …. Such considerations are all the more relevant in view of the strong pressures to cut budget deficits in line with the Maastricht convergence criteria’ (Green Paper, COM (96 583: 4, emphasis added). In practice however, these reforms have often ‘led to results almost directly opposite to neoliberalism’s claims’, as the substitution of public monopolies by rent-seeking private service providers with oligopoly market and significant political power allowed the latter to extract extra profits (Crouch, Reference Crouch2016: 156). Even so, the EMU and EU accession criteria motivated governments to adopt public sector reforms that both curtailed and marketised them, albeit in a manner that was uneven across time and space (Keune, Leschke, and Watt, Reference Keune, Leschke and Watt2008; Frangakis et al., Reference Frangakis, Hermann, Huff Schmidd and Lóránt2009; Crouch, Reference Crouch2011, Reference Crouch2016). Compared with employment relations reforms however, increased horizontal market pressures played a more limited role in triggering commodifying public sector reforms (Chapter 6). After all, (public sector) markets first need to be created by vertical policy interventions before they can set in train the horizontal market pressures that will push the commodification agenda further (Szabó, Golden, and Erne, Reference Szabó, Golden and Erne2022).

The uneven spread of marketising reforms across countries also reflected the opposition that they faced from social forces. Furthermore, neo-mercantilist ideas did not disappear completely from the action repertoire of some governments (Buch-Hansen and Wigger, Reference Buch-Hansen and Wigger2011). Throughout the 1990s and the 2000s, the governments of several member states intervened to protect large national companies from bankruptcy or hostile takeovers, challenging the EU’s new restrictive approach to state aid. The French government led this approach, with the then centre-right Minister for Economics and Finance Nicolas Sarkozy arguing that ‘it is not a right for the state to help industry. It is a duty’ (cited in Buch-Hansen and Wigger, Reference Buch-Hansen and Wigger2011: 193). When governments intervened to save companies, they often did so when they were under political pressure. In the Alstom case, even the European Commission’s DG Competition yielded to these pressures when it approved its re-nationalisation. This did not happen merely because of Sarkozy’s neo-mercantilist ideas but rather because Alstom’s unions and European Works Council succeeded in politicising the Alstom case not only in France but also across Europe through transnational collective action (Erne, Reference Erne2008; Chapter 9).

A few years earlier, in December 1995, France had already witnessed a major strike wave in its public transport sector, which observers and activists alike portrayed as the first ‘revolt against globalisation’ and the Europe of ‘Maastricht’ and as a trigger for Europe’s alter-globalisation movement (Le Monde, 7 December 1995; Ancelovici, Reference Ancelovici2002; Bourdieu, Reference Bourdieu2008). This motivated the French government to seek a better status for public services in the EC Treaty. In turn, the drafters of the Amsterdam Treaty of 1997 amended the EC Treaty, recognising the ‘place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion’ (emphasis added) (Art. 16 TEC, now Art. 14 TFEU). In doing so, they responded to the concerns of public sector companies organised in the Centre Européen des Entreprises à Participation Publique (CEEP, now SGI Europe), which feared the negative effects of further public service liberalisations (Héritier, Reference Héritier2001). Overall however, the mitigating effect of this Treaty change was quite limited, as the recognition of public services as a ‘shared value’ is merely aspirational. In fact, Art. 14 TFEU states neither what public services should be provided, nor for whom, and at what service coverage levels.

Phase Three: Frontal but Unsuccessful Assaults on Public Services

Throughout the 1980s and 1990s, the Commission followed a sectoral approach to push for the liberalisation of public services (Crespy, Reference Crespy2016). This changed in the early 2000s, after the successful launch of the Euro in 1999 and the CJEU’s growing reluctance to consistently endorse the Commission’s public service commodification agenda in its rulings (Héritier, Reference Héritier2001). Subsequently, the Commission began to seek cross-sectoral vertical legislative interventions that went ‘further than explicitly mentioned in the European Treaties’ (Höpner and Schäfer, Reference Höpner and Schäfer2010: 352). In 2004, Frits Bolkestein, a neoliberal Dutch Commissioner in charge of the internal market, proposed an encompassing directive that aimed to liberalise the entire services sector, both public and private (Crespy, Reference Crespy2016; see also Chapter 6).

As mentioned in Chapter 6, the most contentious item in the draft Bolkestein Directive (COM (2004) 2 final/3) was the introduction of the country-of-origin principle. This radically reinterpreted the Treaty provisions on the free movement of services (Höpner and Schäfer, Reference Höpner and Schäfer2010) by moving the responsibility for regulating service providers from the country in which they were operating to providers’ home country. By creating different sets of laws relating to access to, and exercise of, a service activity depending on the national location of the provider’s headquarters, the Commission wanted to give providers from states with lower labour and consumer protection standards a competitive advantage, arguably to make the EU more competitive.

In the name of the free movement of services, the draft directive also included public services that had hitherto been excluded from EU internal market and competition policy, such as healthcare, social services, and non-mandatory education (Crespy, Reference Crespy2016). This time however, the Commission’s bold cross-sectoral liberalisation drive managed to do what most sectoral EU vertical interventions had thus far avoided, namely, trigger a broad transnational countermovement of unions, left-wing parties, and social movements. The protest movement included major Euro-demonstrations against the draft directive held in Brussels and Strasbourg (della Porta and Caiani, Reference della Porta and Caiani2009; Crespy, Reference Crespy2012, Reference Crespy2016; Copeland, Reference Copeland2014; Parks, Reference Parks2015). Opposition to the Services Directive also played a significant role in French voters’ rejection of the EU Constitution in 2005 (Béthoux, Erne, and Golden, Reference Béthoux, Erne and Golden2018). On the legislative front, the fight happened mostly within the European Parliament, which was now granted co-legislative power under the ordinary legislative procedure. In the Parliament, two poles emerged: a liberal-conservative one in favour of liberalisation and a centre-left one favouring social regulation (Copeland, Reference Copeland2014; Crespy, Reference Crespy2016). The pro-liberalisation camp initially seemed to hold the majority within the EU institutions, but the arguments of the Stop Bolkestein coalition dominated the public debate (Copeland, Reference Copeland2014). Two years after the publication of the first draft directive, members of the European Parliament (MEPs) across the major political groups reached a compromise to secure the Parliament’s adoption of a revised directive. Most MEPs went further than the Parliament’s Internal Market Committee and removed the country-of-origin principle from the directive. The adopted directive (Directive 2006/123/EC) also explicitly excluded healthcare from its remit (see Chapter 10), along with other public services such as childcare. Even so, the provisions of a closed list of sectors that were exempted from the scope of the directive meant that other services remained amenable to liberalisation (Crespy, Reference Crespy2016: 44).

Shortly before launching the proposed Services Directive, the Commission had started to work on a major revision of EU legislation on public procurement. Given that public purchases constitute a sizable share of Europe’s economy – in 2008, they accounted for 18 per cent of the EU’s GDP (Monti, Reference Monti2010: 76) – it is unsurprising that the EU focused its interventions in this area. This included several directives that aimed to coordinate and harmonise national procurement legislation (Kunzlik, Reference Kunzlik2013). In line with the development of the EU’s single market, the main aim behind the legislation was to open competition for public contracts above a certain value to all firms in the EU. The Commission had already argued in 1985 that ‘Community-wide liberalisation of public procurement in the field of public services is vital for the future of the Community economy’ (White Paper, COM (85) 310: 23–24). Successive EU legislative interventions followed and were consolidated in two directives approved in 2004, regulating public (Directive 2004/18/EC) and utilities (Directive 2004/17/EC) contracts. These directives imposed increasing requirements on contracting authorities in terms of announcing tenders and criteria for awarding contracts (Kunzlik, Reference Kunzlik2013: 313). The 2004 procurement directives now explicitly included public services, such as healthcare, which had hitherto been relatively untouched by EU competition policy (see Chapter 10).

During the legislative process that led to the procurement directives, a broad coalition of unions and NGOs pushed for the inclusion of social and environmental criteria in the awarding guidelines (Fischbach-Pyttel, Reference Fischbach-Pyttel2017). Despite the coalition’s lobbying effort, the reference to the social and environmental aims of procurement was relegated to the directive’s (non-binding) recital (Bieler, Reference Bieler2011: 171). The weak protection for social standards in EU procurement law became then evident when the CJEU issued the Rüffert judgment in 2008,Footnote ⁴ which meant that social clauses that seek to secure adequate wage rates within national or local public procurement laws can violate companies’ freedom to provide services across the EU.

Other initiatives throughout the 2000s that aimed to protect public services from the realm of competition policy also failed, for example the attempt to establish an EU framework directive to define once and for all the role of SGEIs and exclude them from competition policy (Crespy, Reference Crespy2016). Thus, the trajectory of EU vertical interventions on public services in the 2000s remained a commodifying one, although the transnational countermovements against the Commission’s draft Services Directive also showed the limits of commodifying EU interventions that also require the democratic support of the European Parliament. These limitations are even more significant if one considers that the increased horizontal market pressures played a limited role in triggering commodifying public sector reforms compared with labour market reforms (Chapter 6).

Provision of Public Services

Resource levels: Under MoU duress, both Ireland and Romania received several NEG prescriptions to curtail resources for public services. Firstly, both countries received the prescription to cut the public sector wage bill by reducing or freezing public sector wages and/or by reducing employment numbers by partial or full recruitment bans (MoU, Ireland, 28 November 2010; MoU, Romania, 23 June 2009).

We have already analysed the impact of these measures on employment relations in Chapter 6. Here, we highlight their impact on public services. Reducing the number of public employees also reduces service quality, in terms of staff/service user ratio and so forth. This is especially the case during an economic crisis when users’ need for public services usually increases. The demand to reduce the number of workers directly employed by the state might also backfire, as it can incentivise recourse to agency work, which comes with overheads and may prove more expensive than direct employment on the government payroll, as happened in the Irish health service during the Troika years (Burke et al., Reference Burke, Thomas, Barry and Keegan2014). It is worth noting that Romania received more detailed prescriptions than Ireland on how to implement the reduction of the public sector wage bill. This mirrors the fact that, when the Troika arrived, the Irish government had already cut the public sector wage bill (see Chapter 6).

Although Italy did not receive any explicit prescription to cut the public service pay bill, it received constraining prescriptions to reduce its public expenditure between 2012 and 2014, with the stated rationale of improving ‘the efficiency and quality of public expenditure’ (Council Recommendation Italy 2012/C 219/14). In turn, these prescriptions motivated the Italian government to pause collective bargaining in the public sector (Bach and Bordogna, Reference Bach and Bordogna2013). Indeed, successive Italian governments put in place a pay freeze until 2017, coupled with a partial hiring freeze, which meant that public service providers were no longer able to replace departing or retiring staff members. The pay freeze might have lasted even longer had unions not successfully challenged it in the Italian Constitutional Court. Although the government’s attorneys argued that the pay freeze measure was taken ‘to reduce public expenditure, in fulfilment of the obligations arising from membership of the European Union’, the Court upheld the unions’ constitutional collective bargaining rights.Footnote ⁶ By contrast, in some parts of the public sector, the hiring freeze regulations that reduced the replacement rate remained in place until 2019.

Beyond prescriptions to reduce the public sector pay bill, the MoU for Ireland demanded general budget cuts that impacted on the delivery of public services and that of Romania requested a cut in expenditure for goods and services. The MoU for both countries requested specific cuts on capital expenditure. Romania received also more specific requests for spending cuts. The second addendum of the 2009 MoU tasked the Romanian government to cut transfers to local governments and to ‘streamline’ (i.e., to reduce) the number of schools and hospitals; this in turn reduced the availability of key public services in disadvantaged rural areas (MoU, Romania, 2nd addendum, 20 July 2010; see Chapter 10). Several prescriptions for Romania targeted SOEs. The 2009 MoU asked the government to reduce subsidies to public enterprises, and the third addendum requested that SOEs cut ‘operating expenditure, including personnel’ (MoU, Romania, 3rd addendum, 19 January 2011).

Prescriptions on expenditure levels related to the binding ceilings on public spending that national governments had to introduce following the strengthening of the SGP by the Six-Pack and Two-Pack laws as well as the Fiscal Treaty (Chapter 2). Accordingly, not only Ireland and Romania but also Italy received a prescription to this aim (Council Recommendation Italy 2011/C 215/02). The spending ceilings in turn curtailed investment in public services further.

Commodifying prescriptions on resource levels prevailed from 2009 to 2013, but the picture started to change after 2014. After Ireland and Romania left the conditional financial assistance programme at the end of 2013, they ceased to receive prescriptions requesting direct spending cuts on public services. From 2014 onwards, Germany got prescriptions to increase public investment. Until 2019, the wording of these prescriptions for Germany became gradually more explicitly decommodifying. The 2014 prescription that asked Germany to increase public investment also urged it to make its public services more ‘efficient’. In the following European Semester cycles, this specification disappeared when the German government was urged to deliver a ‘sustained upward trend in public investment’ (Council Recommendation Germany 2016/C 299/05). Prescriptions for Germany also requested more investments ‘at all levels of governments’, including the Länder and local level (Council Recommendation Germany 2014/C 247/05). The accompanying recitals noted a significant backlog in investment, albeit without acknowledging the role played by the opening of an EDP against Germany in 2010 (Council Decision Germany 2010/285/EU) and the debt brake that its government applied across all government levels to reduce the public debt and deficit.

We classified the prescriptions for more investments as decommodifying, as they have the potential to increase resources for public services (Chapters 4 and 5). Nonetheless, the prescriptions’ decommodifying policy orientation could also be informed by an overarching commodifying script. Increased public spending could go towards private service providers also, namely, in a context where NEG prescriptions demand a further marketisation of public services, as we shall see below. The recital accompanying Germany’s prescription for more investment in 2016 noted that ‘a more efficient use of public procurement could also have a positive impact on investment’ (Council Recommendation Germany 2016/C 299/05). The recital also deplored the fact that ‘alternative instruments to traditional state funding of transport infrastructure, including through public-private partnerships, are used only to a limited extent’ (Council Recommendation Germany 2016/C 299/05). Finally, the Commission’s Country Report linked the need to increase investment with the need ‘to maintain Germany’s competitive advantage’ (Commission, Country Report Germany SWD (2019) 1004: 47). Tables A7.1–A7.4 in the Online Appendix therefore show the semantic link to the policy rationale informing these decommodifying prescriptions.

EU executives also issued decommodifying prescriptions on resources for public services to the other three countries but in a less consistent way. In 2012 and 2013, the Italian government was asked to ‘upgrade infrastructure capacity with a focus on energy interconnections, intermodal transport and high-speed broadband in telecommunications, also with a view to tackling the North-South disparities’ (Council Recommendation Italy 2013/C 217/11). Similarly, in 2016 the Romanian government was urged to ‘Extend basic infrastructure … in particular in rural areas’ (Council Recommendation Romania 2016/C 299/18). The accompanying recitals cited transport and broadband networks as examples of lacking infrastructures that foster disparities between urban and rural areas. In 2017, a prescription urged the Irish government to ‘enhance social infrastructure, including social housing and quality childcare’ (Council Recommendation Ireland 2017/C 261/07). A similar prescription was present in the 2018 CSRs, but with a broader scope, including also transport and water (Chapters 8 and 9), which the Irish government planned to support through the adoption of a National Development Plan (Council Recommendation Ireland 2018/C 320/07).

As these prescriptions asked governments to increase the resources for public services, we classified them as decommodifying. Compared, however, with the earlier, opposite prescriptions issued within the MoU, their constraining power was weak. The prescriptions were also vaguer. They did not specify that increased services should be provided by public service providers, leaving open the question of private providers stepping in to benefit from increased investment. Neither did they acknowledge the negative effects that the previous, more coercive, NEG prescriptions on public-spending curtailment had had on the dire state of Italian, Irish, and Romanian public services. As in the case of Germany, the prescriptions on public spending levels must furthermore be assessed in their semantic context, including the enduring commodifying prescriptions on the provision of public services, as analysed below. The recitals of the 2016 CSRs for Italy, for example, ascribed the low public investment to ‘uncertainty associated to the transition to the new code of public procurement and concessions’ (Council Recommendation Italy 2016/C 299/01). This indicates that these notionally decommodifying prescriptions on more public spending were semantically subordinated to overarching, commodifying policy objectives.

Finally, a similar conclusion can be drawn in relation to the 2019 prescription for Italy, which urged its government to invest in the skills of public service employees (Council Recommendation Italy 2019/C 301/12). The call to invest more resources in public service employees also points in a decommodifying direction. However, the 2018 Country Report linked the issue of Italian public employees’ apparently ‘low skill profile’ to a commodifying discourse that suggested relating wages more closely to performance evaluation (Commission, Country Report Italy SWD (2018) 210 final: 45–46).

Sector-level governance mechanisms: As discussed above, the NEG prescriptions on expenditure levels differed across time and country, reflecting countries’ different locations in the EU political economy and the NEG policy enforcement regime at a given time. Nonetheless, not only Italy and Romania, but also Germany, received prescriptions that urged their governments to change the governance mechanisms for public services at sectoral level. All of them were commodifying, demanding increased competition among public service providers, as well as tightened financial monitoring and surveillance of their operations. By contrast, Ireland did not receive any general prescriptions in this category, only sector-specific ones for the healthcare sector (Chapter 10).

In Germany, the NEG prescriptions in this category focused on public procurement. To shape the institutional framework towards more competition, the 2013 and 2014 prescriptions urged the German government ‘to significantly increase the value of public contracts open to procurement’ (Council Recommendation Germany 2013/C 217/09) under EU procurement legislation. In its assessment of Germany’s progress regarding the 2013 Council Recommendation, the Commission noted that ‘further efforts are needed to identify the reasons behind the low publication rate and to open public procurement to EU-wide bidding’ (Commission, Country Report Germany SWD (2014) 406 final: 23). In 2017, the call to increase public investment in Germany was accompanied by a prescription to ‘address capacity and planning constraints’, which also implied the use of ‘private sector know-how’ and the speeding up of investment approval procedures by public authorities (Council Recommendation Germany 2017/C 261/05 and 2018/C 320/05).

Almost all MoUs and Council Recommendations for Romania issued between 2009 and 2019 demanded more effective public procurement procedures. In 2011 and 2012, Romania received another prescription aimed at fostering competition in the EU single market, namely, the request to set up a single contact point to help foreign firms to enter Romania or for cross-border provision of services, echoing provisions of the Services Directive. As in the case of prescriptions on public procurement, it is noteworthy how the Commission used NEG prescriptions here to further advance by new means its commodification agenda, which had already underpinned its legislative agenda in the Services Directive case.

Calls for increased competition in public services featured prominently in the NEG prescriptions for Italy. Between 2012 and 2016, NEG prescriptions recurrently called for more competition in the private and the public services sector. In 2014, for example, a prescription tasked Italy to ‘remove remaining barriers to, and restrictions on, competition in the professional and local public services, insurance, fuel distribution, retail, and postal services sectors’ (Council Recommendation Italy 2014/C 247/11). In 2013 and 2014, the government was asked to ‘improve coordination between layers of government’ (Council Recommendation Italy 2013/C 217/11). Although the meaning of this prescription is not immediately accessible, its commodifying policy direction becomes very clear when it is analysed in its semantic context (see Chapters 4 and 5). The 2013 Country Report noted that ‘insufficient coordination between the central and local levels of government and lack of clarity on the division of responsibilities across them’ (Commission, County Report Italy SWD (2013) 362 final: 32) hampered the implementation of liberalising EU law, namely, the Services Directive.

A 2013 prescription for Germany urged its government to improve the enforcement of competition law and to remove restrictions to competition (Council Recommendation Germany 2013/C 217/09). Like Romania and Germany, Italy received commodifying prescriptions concerning public procurement. A 2013 prescription focused on local public services, ‘where the use of public procurement should be advanced, instead of direct concessions’ (Council Recommendation Italy 2013/C 217/11), and the detailed 2014 prescription requested ‘streamlining procedures including through the better use of e-procurement, rationalising the central purchasing bodies and securing the proper application of pre- and post-award rules’ (Council Recommendation Italy 2014/C 247/11). Successive recommendations for Italy issued between 2015 and 2019 called for the adoption of an annual ‘competition’ law ‘to address the remaining barriers to competition’ (Council Recommendation Italy 2016/C 299/01). The lack of competition in Italian local public services was also deplored in the prescriptions issued in 2014, 2015, and 2018. Furthermore, Italian public network industries attracted the attention of EU executives, with two prescriptions issued in 2012 and 2013 mandating Italy to improve the ‘market access condition’ in the energy and transport sectors (Council Recommendation Italy 2013/C 217/11). Romania received a similar prescription for these two sectors in 2014 (Council Recommendation Romania 2014/C 247/21).

In this sector-level governance mechanisms category, another theme also emerged, as several NEG prescriptions called for the tightening of central control over public spending across different government levels and departments. The Italian government received prescriptions corresponding to this aim in 2011 and then in 2015–2016, and the Romanian government received them throughout the MoU period. Not only did the MoUs call for central financial control across all government levels, but also the Romanian 2011 P-MoU requested a stricter monitoring of SOEs and PPP agreements (P-MoU, Romania, 29 June 2011).

Provider-level governance mechanisms: Under this category, we identified two main types of prescriptions that all pointed in a commodifying direction: namely, calls for the privatisation or marketisation of SOEs and calls for reforms to render public service providers’ governance mechanisms more market-like. Germany was the only country of the four not to receive prescriptions in this area.

As referenced in section 7.2, the EU ‘Treaties shall in no way prejudice the rules in Member States governing the system of property ownership’ (Art. 345 TFEU). Nevertheless, the European Commission and Council issued several prescriptions for Ireland, Italy, and Romania, which called not only for marketisation but also for privatisation of their SOEs. This is another example of how the NEG regime increased EU executives’ capacity to intervene in areas in which they have no formal policymaking powers. In their MoU, both the Irish and the Romanian governments were tasked to privatise state assets to consolidate public finances. As the Irish government had already announced privatisation plans prior to the bailout (Palcic and Reeves, Reference Palcic and Reeves2013; Mercille and Murphy, Reference Mercille and Murphy2016), it did not receive precise indications on which state assets should be disposed of (MoU, Ireland, 28 November 2010). In contrast, the prescriptions for Romania were more precise. In 2010, for instance, the Romanian MoU included the prescription to take concrete steps towards the privatisation of SOEs in the energy and transport sectors (MoU, Romania, 2nd addendum, 20 July 2010). In the case of Italy, privatisations had already been part of successive government plans to reduce public debt. Between 2014 and 2017 however, Italian governments recurrently received NEG prescriptions that demanded the implementation of the plans (Council Recommendation Italy 2014/C 247/11).

In addition, governments received commodifying prescriptions urging them to render the governance mechanisms of providers that remained in public ownership more market-like. While subject to the MoU programme, in 2011 the Romanian government adopted an emergency ordinance on the governance of SOEs ‘with inputs from the IMF, the World Bank and the European Commission’ (European Commission, 2016a: 85). The reform entailed: ‘(i) the applicability of company law on SOEs, (ii) the separation between the ownership and the regulatory function of the authorities, (iii) the transparent and professional selection of board members and management, (iv) the concept of performance monitoring, and (v) the strengthened protection of minority shareholders’ (European Commission, 2016a: 86). These themes also featured in subsequent NEG prescriptions; for example, in 2019, when the Romanian government was tasked to ‘strengthen the corporate governance of State-owned enterprises’ (Council Recommendation Romania 2019/C 301/23).

Similarly, Italy received a prescription in 2017 inviting the government to ‘improve the efficiency of publicly-owned enterprises’ (Council Recommendation Italy 2017/C 261/11). The accompanying recital explained what improved ‘efficiency’ would mean, namely, corporate governance reforms that ensure that publicly owned companies will ‘operate under the same rules as privately-owned entities’ (Council Recommendation Italy 2017/C 261/11).

Requests to marketise public administrations’ governance mechanisms also featured consistently in the NEG prescriptions for Italy and Romania. In addition to cuts to the public sector wage bill (see Chapter 6), the 2009 MoU tasked the Romanian government to implement a reform ‘aimed at increasing the effectiveness of the public administration’ (MoU, Romania, 23 June 2009). The NEG prescriptions in this area included not only the demands on sector-level governance analysed above but also specific, commodifying demands for public service providers, for example, in relation to their human resource management (HRM). As in the case of their NEG prescriptions on SOEs, EU executives continued to prescribe public administration reforms in the HRM area, even after the end of Romania’s MoU programme, until 2017.

From 2013, EU executives recurrently issued NEG prescriptions that tasked the Italian government to reform its public administration. In turn, the centre-left government led by Matteo Renzi (2014–2016) adopted the Madia reform package, which included several decree-laws on a wide range of issues, including administrative digitalisation, administrative reorganisation, and the introduction of new HRM practices. As in the case of its commodifying Jobs Act (Chapter 6), the Renzi government implemented the Madia reform to obtain greater fiscal space from EU executives in exchange, following the more ‘flexible’ interpretation of the SGP by the Juncker Commission and the Council. Subsequently however, the Italian Constitutional Court annulled several parts of the reform as they were unconstitutional;Footnote ⁷ this explains why EU executives continued to issue corresponding NEG prescriptions until 2019.

The Irish MoU did not contain any specific prescriptions on the reform of public companies or administrations, arguably because the Irish government had already started reforming them before the arrival of the Troika in December 2010. Successive governments managed to keep public services reform largely outside contentious politics (Hardiman and MacCarthaigh, Reference Hardiman, MacCarthaigh, Eymeri-Douzans and Pierre2011) – from the heydays of Irish social partnership agreements in the 2000s (Roche and Geary, Reference Roche and Geary2006; Doherty and Erne, Reference Doherty and Erne2010) to the Croke Park public sector collective bargaining agreement of 2010 (Maccarrone, Erne, and Regan, Reference Maccarrone, Erne, Regan, Müller, Vandaele and Waddington2019; Chapter 6). After the Troika’s arrival however, the Irish government established a new government department, the Department of Public Expenditure and Reform, which privatised several public companies and pursued reforms that strengthened its control over all levels of government (MacCarthaigh, Reference MacCarthaigh2017). These unilateral government actions were tightly monitored by the Troika (Commission, Economic Adjustment Programme for Ireland, Spring 2012 Review), even though the policy preferences of the Troika and the Irish government were largely congruent (Dukelow, Reference Dukelow2015). The latter thus exploited the crisis and MoU as an opportunity to implement reforms that would not have been possible in other circumstances (MacCarthaigh and Hardiman, Reference MacCarthaigh and Hardiman2020).

Users’ Access to Public Services

Coverage levels: The only country that received NEG prescriptions on the coverage level of public services in general was Romania. In 2016 and 2017, Romania received decommodifying prescriptions that urged its government to ‘improve [users’] access to integrated public services’ (Council Recommendation Romania 2016/C 299/18). The theme of prescriptions is broad in scope and refers to the unequal access for service users living in rural areas to education, health services, and basic utilities. These prescriptions were clearly decommodifying but had only weak coercive power as they were based on the merely aspirational Europe 2020 strategy. The prescriptions acknowledged users’ unequal access to services but failed to mention that these inequalities resulted from earlier, much more binding NEG prescriptions that commodified public transport and health services (Chapters 8 and 10) and curtailed public spending more generally, especially throughout the period of MoU conditionality (2009–2013). A 2019 prescription nevertheless urged the Romanian government even more explicitly to ‘increase the coverage and quality of social services’ (Council Recommendation Romania 2019/C 301/23), after the recital for the abovementioned 2017 prescription on users’ access to integrated public services deplored the fact that ‘over 45% of Romania’s population live in rural areas’ with very limited access to ‘social services’ (Council Recommendation Romania 2017/C 261/22). This indicates the presence of policy rationales that are not aligned to NEG’s primary, commodifying objectives.

Cost-coverage mechanisms: There is only one prescription under this category concerning cross-sectoral public services, addressed once again to Romania. In this case, the prescription had a clearly commodifying policy orientation. Among the measures indicated to reduce SOEs’ arrears (discussed in the section on resource levels above), the third addendum to the 2009 MoU dated 19 January 2011 also tasked the Romanian government to instruct its SOEs to increase their tariffs for service users. This obviously limited poorer users’ capacity to access public services. In addition, we must note that the prescriptions on the curtailment of resource levels for all countries, discussed above, frequently forced public service providers to compensate their losses of public funding by increasing their charges for service users.

NEG: A New Avenue to Foster Commodifying EU Interventions in Public Services

Our analysis of the EU’s NEG prescriptions on public services for Germany, Ireland, Italy, and Romania issued between 2009 and 2019 has shown the broad range of issues affected by NEG. Overall, commodifying NEG prescriptions clearly dominated the picture. Over the years, EU executives also issued a few decommodifying NEG prescriptions on resource levels, especially for Germany, but to a lesser extent to the other three states. However, whereas the coercive power of commodifying prescriptions was very significant or significant, echoing the countries’ location in the NEG enforcement regime at a given time, the coercive power of the decommodifying prescriptions was weak.

Hence, the shift to the NEG regime intensified the EU’s commodifying pressures on public services. Our analysis uncovered a consistent pattern of commodifying NEG prescriptions, which tasked the receiving member states to curtail their public spending on public services and render the governance mechanisms at both the sectoral and the provider level for public services more market-like. This indicates the presence of a consistent policy script in favour of public sector commodification deployed through corresponding NEG prescriptions across all four countries. The presence of a common commodification script however, did not lead to the issuing of equal prescriptions for the four countries across all categories at the same time. By contrast, the NEG regime’s country-specific prescriptions enabled EU executives to nudge all member states in a commodifying policy direction, while also taking their unequal public services commodification trajectories into account. The unevenness of the commodifying NEG prescriptions issued to the four countries across time thus echoed different commodification trajectories followed by them before and after the EU’s shift to the NEG regime, rather than the application by EU executives of a different policy script across them.

In addition to the consistent pattern of commodifying NEG prescriptions, we identified some decommodifying ones. As we were analysing the NEG prescriptions in their specific semantic context however, we were able not only to establish their concrete commodifying or decommodifying policy orientation but also to link the detected decommodifying prescriptions to the policy narratives informing them. When analysing the decommodifying NEG prescriptions in the field, we thus detected semantic links to the following policy rationales.

First, some decommodifying prescriptions to increase public investment were semantically related to another concern, namely, to boost competitiveness and growth. This policy rationale is linked to the ailing infrastructure’s negative effects on the member states and the EU’s competitiveness. Several NEG prescriptions to increase public investment for Germany, Italy, Ireland, and Romania were semantically linked to this policy rationale.

A second policy rationale linked to the decommodifying prescriptions to increase public investment was a commodifying one, namely, to enhance private sector involvement in public services. This was the case for the prescriptions addressed to Germany in 2016 and 2019, which linked the need for more investment to more private sector involvement through PPP or public procurement. Also, the prescriptions addressed to Italy in 2012–2013 to upgrade infrastructure capacity were semantically linked to the need to open network industries to competition.

Third, since 2017, few decommodifying prescriptions aimed at increasing public investment concerned the required shift to a green economy. These semantic links were visible in only a few decommodifying prescriptions that tasked the German and the Irish government to increase public investments.

Fourth, some decommodifying NEG prescriptions that urged the German government to increase public investment were linked to the policy rationale of rebalancing the EU economy, as already detected in Chapter 6. This policy rationale relates specifically to Germany’s position at the core of the EU economy. As in the case of higher German wages, increased public investments would boost domestic demand in Germany. This would in turn increase its imports from other EU states and contribute to a more balanced European economy (Council Recommendation Germany 2017/C 261/05).

A fifth policy rationale that emerged from our analysis concerns the issue of increasing efficiency. This informs only one decommodifying prescription, namely, the one addressed to Italy about the need to invest in public employees’ skills.

A few decommodifying prescriptions to increase public investment and the coverage of public and social services were semantically linked to concerns about social inclusion. This policy rationale concerns spatial inequalities (between regions and between urban and rural areas) and social cohesion. It informed a few prescriptions for Romania but was also visible in Irish and Italian prescriptions. Yet, compared with the policy rationales discussed above, the social inclusion rationale played a very marginal role. Indeed, the prescriptions informed by this policy rationale were so scarce and so weak that we can hardly speak of a socialisation of the European Semester (Zeitlin and Vanhercke, Reference Zeitlin and Vanhercke2018). The prescriptions addressed to the Irish government in 2017–2018 to enhance social infrastructure, in particular childcare, relate to a sixth policy rationale, that is, to expand (female) labour’s market participation.

In sum, in line with our methodological approach outlined in Chapters 4 and 5, we have classified all NEG prescriptions based on their primary policy orientation. Accordingly, we have detected a consistent pattern of commodifying NEG prescriptions. Not only were there fewer decommodifying NEG prescriptions, they were also weaker. In a second step, we assessed the semantic links between the decommodifying prescriptions and the policy rationales informing them. We detected that most decommodifying prescriptions were semantically linked to policy rationales that did not contradict the commodifying policy script informing most NEG prescriptions. Furthermore, when we analysed the decommodifying prescriptions to increase public investment in the context of the commodifying prescriptions in favour of marketising public sector reforms, the decommodifying prescriptions also became a vector of commodification, namely, when increased public money was channelled towards private coffers following marketising reforms of public services. This is indeed what we observed in our analysis. Calls for increased public investment have consistently been accompanied by commodifying prescriptions on public procurement, concessions, and PPP. By contrast, prescriptions on the coverage of public services were not semantically linked to commodifying prescriptions on the marketisation of public services, but they were residual as a share of all prescriptions.

Finally, all decommodifying prescriptions related to quantitative measures on public services resource and coverage levels, but there were no decommodifying prescriptions with a qualitative dimension, either on sector- and provider-level public service governance or on cost-coverage mechanisms that shape people’s access to public services. Hence, whereas EU executives agreed to pause and even reverse some curtailment measures after the recovery from the financial crisis, NEG prescriptions continued to call for (qualitative) ‘structural reforms’ over the entire decade 2009–2019.

Vertical EU Interventions in Public Services after the Shift to NEG

The shift to the NEG regime enabled EU interventions in public services by new means, but it has not supplanted ‘older’ tools of vertical governance interventions by EU law. Between 2009 and 2019, the EU adopted several new laws that affect public services. First, the EU’s sectoral liberalisation agenda led to the adoption of new EU directives in the postal, energy, and railway sectors (Crespy, Reference Crespy2016; Chapter 8). In addition to these laws targeting already broadly liberalised sectors, the Commission tried to advance its public services commodification agenda in new areas through sector-specific EU laws, for example, Directive 2011/24/EU on cross-border healthcare (Stan and Erne, Reference Stan and Erne2021a; Chapter 10) or cross-sectoral EU laws, for example, Directive 2014/23/EU on the award of concession contracts and Directives 2014/24/EU and 2014/25/EU on public procurement. In 2016, the Commission proposed a Services Notification Procedure Directive (COM (2016) 821 final), which would have obliged local, regional, and national governments to ask the European Commission for prior approval before implementing any laws, regulations, or administrative provisions on public services covered by the 2006 Services Directive. The Commission’s proposal failed to become law, however, because of opposition in the European Economic and Social Committee, the European Parliament, and the Council, and protest letters from municipalities, unions, and social movements (Hoedeman, Reference Hoedeman2020; Szypulewska-Porczyńska, Reference Szypulewska-Porczyńska, Kowalski and Weresa2020).

In this context, EU executives used their NEG prescriptions to reinforce commodifying pressures emanating from legislative interventions through the ordinary legislative procedure. Some of the areas targeted in NEG prescriptions, such as public procurement, were already part of the EU’s acquis communautaire, but, in other areas, such as the governance of public administration and of SOEs, EU policymakers had no explicit legislative competences. Thus, EU executives used NEG to advance their agenda in areas thus far spared from EU interventions.

Moreover, as we shall see in more detail in Chapters 8–10 on sector-specific NEG interventions, NEG prescriptions have been issued not only in sectors already deeply affected by the EU’s single market agenda (e.g., railways, see Chapter 8) but also in sectors that until the 2008 financial crisis had been partially shielded from direct EU interventions, such as water and healthcare (Chapters 9 and 10, respectively).

This push towards further commodification of public services did not go unchallenged however. For instance, water was excluded from the Concessions Directive thanks to the successful Right2Water European Citizens’ Initiative (Szabó, Golden, and Erne, Reference Szabó, Golden and Erne2022; see Chapter 9). Moreover, due to the effort of unions and social movements, a binding social clause was inserted in the revised 2014 directive on public procurement. Yet, although the EU’s ordinary legislative procedure still offers clear targets for transnational contestation, given that it involves the European Parliament, the NEG technocratic structure makes the emergence of transnational counter-mobilisation much more difficult.