Subsidised layoffs

The European Council is to agree on a new system of contracts for member states over their economic policy at its December meeting that could involve measures such as job cuts and wage deflation. A leaked document shows just how opaque and cynical the EU's rhetoric is,  obscuring the actual impacts on real people of these new “automatic austerity” laws.

Europe already has new rules which lock in privatisation, job cuts, and automatic austerity for member states – via the obscurely named Six-Pack, Two-Pack and Fiscal Compact legislation. From the convoluted names and language the EU uses, it is almost as if they do not want citizens to understand exactly what is at stake1.  After this series of confusingly named treaties with massive implications for the future well-being of European citizens, what could they possibly do next to   push EU member states towards neoliberal, corporate-friendly policies?

The answer is “Contractual Arrangements” or simply contracts between the Commission and the Council on one hand and individual member states on the other. A leaked document2 on the internal negotiations at the Council appears to indicate that they are discussing offering subsidies to member states that may be to help them impose job layoffs and benefit and wage cuts that will raise popular opposition. But the jargon is so opaque that most citizens would be hard pushed to decipher the objectives. They say that some kind of subsidy could be given to member states prepared to carry out “structural reforms” to improve so-called “competitiveness”. . While the proposal was tabled in late 2012, most prominently in the Commission’s “Blueprint for a deep and genuine Economic and Monetary Union”3, doubt has remained whether the project was on track. But it seems the European Council is bent on adopting the framework at its December meeting, and then start the negotiations on specific contracts some time next year.

The concept of the “Contractual Arrangements” has not been much further developed since late 2012, it seems. The main features of the contracts, as they are described in the leaked paper, don’t go much beyond what’s in the Commission’s “Blueprint”. In fact, the language that’s being used makes you wonder exactly what kind of reforms the Council is aiming at. According to the leaked paper: “Economic policy reforms towards competitiveness, growth and jobs […] bring long-term gains, but often these gains are hard to measure and frequently only accrue in the medium term, most of the time beyond the usual electoral cycle. Moreover, they are typically resisted by vested interests who capture economic rents, rents they would lose after the reform. Reforms are thus associated with short-term economic and political costs and the provision of financial support may help overcome them.”4

That makes you wonder who these “vested interests” could be. Is it the big corporations that are so powerful that they’re making governments run their errands while they avoid taxation  Or is it some mobsters that manage to squeeze  municipalities to privatize services to their benefit and deliver only a symbolic service in return to maximise their profits?


We have only a few sources to clarify exactly what kind of reforms the contracts are supposed to promote, and the key source is the draft proposal of the Commission, first and foremost described in its blueprint. There it says: “The financial support should be designed as an overall allocation to be used to contribute to financing measures flanking difficult reforms. For example, the short-term impact of reforms raising the flexibility in the labour market could be accompanied by training programmes financed in part through support provided.”5
In other words, “support” could mean subsidising layoffs, and in that case the “vested interests who capture economic rents” would be those workers that still have some form of job security left, where the new contracts are set up to enable the destruction of such job security. It seems we need a new dictionary to decipher EU economic policy lingo. The cynicism and the opacity that has made its way into key EU documents is quite beyond most people’s imagination.