Industrial Relations in Europe 2012 - European Commission - Europa

GDP), Denmark (3.2%), Cyprus (0.9%), Luxembourg (3.3%), Netherlands (0.5%), Finland (4.3%)
and Sweden (2.2%) and the situation deteriorated thereafter. As table 4.3 indicates, in 2011 Estonia,
Hungary and Sweden were the only EU 27 countries with a surplus (1.2%, 4.3% and 0.2% of GDP
respectively). The highest deficit (as % of GDP) and most negative trajectory occurred in Ireland
(2008: -7.4%; 2009: -13.9%; 2010: -30.9%; 2011: -13.3%), a consequence of supporting its banking
sector. Greece (-9.5%), Spain (-9.4%) and the UK (-7.8%) also continued to maintain sizeable
deficits in 2011. Overall, the deficit in the EU as a whole stood at -4.4% of GDP in 2011 compared
with -6.5% in 2010.
In terms of general government debt in 2011 and changes since 2007, there is considerable variation
between countries. Greece was the most indebted EU country at 171% of GDP in 2011, followed by
Italy (121%), Portugal (108%), Ireland (106%), Belgium (98%), France (86%), the UK (85%), and
Germany and Hungary (81%). The lowest level of government debt in 2011, measured as a
percentage of GDP, was recorded in Estonia (6%) as well as in Bulgaria (16%) and Luxembourg
(18%). The Czech Republic, Latvia, Lithuania, Slovakia and Sweden documented debt levels
around 40% of GDP, with Romania slightly lower.
Public Sector Reform
The capacity of governments to finance their deficit had a crucial influence on the timing and form
of fiscal consolidation packages adopted, but government action and market sentiment has also been
influenced by other considerations. In particular, the legacy of previous public sector reforms to
enhance productivity has mitigated the shock of the crisis and encouraged a degree of continuity
with programmes of modernisation (Vaughan-Whitehead 2012). For many years, an important
strand of public sector industrial relations analysis has focused on the extent to which Member
States have reformed their public sector and moved employment regulation closer to patterns
prevailing in the private sector, broadly associated with the adoption of NPM reforms (Bordogna
2008; Demmake and Moilanen 2010). Although it is widely recognised that there has been no
convergence between countries in the adoption of NPM measures, the pursuit of structural reforms
or modernisation has reformed public sector industrial relations in many countries including
Denmark, France, Germany, Italy, Sweden and the UK, albeit to a varying extent (Bach and
Bordogna 2011; Bordogna and Neri 2011; Ibsen 2011; Keller 2011). These prior reforms have
assisted countries in maintaining public finances more under control and created more scope for
governments in these Member States to respond to the crisis in ways that fit prior patterns of
structural reform. This has especially been the case in Germany, Sweden and Denmark. The UK is
an unusual case because it has been subject to extensive structural reform over the last decade, but
this was accompanied by rapid expansion of public employment and expenditure (Bach and Kessler
2012). Moreover, it has not joined the Euro, providing more scope for policy options other than
internal devaluation. It has continued public sector restructuring, via initiatives such as outsourcing,
but in contrast to many of this cluster it has resorted vigorously to cutback management, with large
reductions in public employment.
These responses contrast with Member States that have experienced limited public service
modernisation, in which the crisis has created pressure for far-reaching structural reforms of the
public sector in the aftermath of more immediate cutback management. The analysis of public
management reforms in countries including Greece, Portugal and Spain point to pervasive
difficulties in improving operational effectiveness because of rudimentary systems of governance,
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