Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

Before the crash: the EU as a partial
economic success story?
These issues cannot be satisfactorily addressed without an overview of
what EU economic and social policies had achieved in the period before
the crisis broke. The decade prior to the millennium was one of much
soul searching about the EU’s economic record. In the aftermath of
German unification, the Bundesbank’s anti-inflationary squeeze led to
recession across much of the Continent as other members of the Exchange
Rate Mechanism (ERM) struggled to stabilise their parities against the
Deutschmark. Fiscal consolidation progressed as member states sought
to meet the Maastricht convergence criteria for Euro membership.
Unemployment rose sharply particularly among older workers and young
people (and employment participation rates fell) as companies sought
to maintain their core labour force in the face of weak demand. Trade
unions, in cooperation with employers, sought to alleviate the employment
problem through strategies of work-sharing that involved limitations on
working time and extensive early retirement. Whereas until the 1980s the
EU had steadily closed the gap in output per head with the United States,
there then ensued a decade of stagnation. In the mid-1990s a productivity
surge in the United States (often attributed to the information technology
revolution) began to generate fresh fears that Europe was being left
behind.
Policy experts argued that Europe needed to prioritise “economic reform”,
by which bodies such as the OECD meant labour market reforms 1 , to create
more flexibility and weaken trade union resistance to change; further
opening up of product markets, especially in services and the “network”
industries, traditionally dominated by publicly owned monopolies; and
financial liberalisation to create a Single Market in financial services. The
EU bought into an agenda of “economic reform”. However, its conception
of employment policy, embodied in the European Employment Strategy
(EES) that grew out of the Luxembourg Jobs Summit in November 1997,
was more Nordic in conception than the OECD’s and focused on active
labour market policy and raising employment participation. To this mix of
flexibility and active labour markets, in 2000 the Lisbon strategy added a
more social democratic emphasis on both new forms of public investment
in growth through research, innovation and skills, and the idea that
welfare states and social inclusion policies could be re-designed to have a
positive impact on economic performance.
There is considerable academic debate as to whether or not policymakers’
continued emphasis on the “Lisbon” agenda of economic reform
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After the crisis: A new socio-economic settlement for the EU