Collective Bargaining under EMU: Lessons from the Italian and Spanish Experiences

This paper seeks to shed light on the question of the likely evolution of collective bargaining in Europe under EMU by considering the experiences of two countries (Italy and Spain) in which governments and social actors attempted to decentralized collective bargaining during the 1980s only to opt in favor of a re-centralization of bargaining during the 1990s. The paper argues that the experiences of Italy and Spain offer two kinds of insights for our understanding of the future evolution of wage bargaining in the EU. On the one hand, they illustrate why governments and social actors may come to favor a consolidation of the structure of bargaining under EMU rather than opt for a further decentralization of bargaining. On the other hand, they also suggest that any such process of consolidation faces great obstacles in moving beyond the national level. The recent experiences of Italy and Spain thus lead us to conclude that the most likely outcome in the EU is that of a reaffirmation of the national and national/sectoral-levels of bargaining within member states, rather than either a radical decentralization of bargaining across the EU, or an effective shift to EU-level bargaining. Driven largely by political, rather than economic, imperatives, European Monetary Union (EMU) represents a change in the structure of economic governance in Europe whose consequences remain uncertain. The change is a profound one not only because it shifts a key element of economic policy from the jurisdiction of governments to a supra-national level, but also because it fundamentally alters the relationship between monetary policy and other elements of economic governance that have undergone no similar centralization. Most often noted among these is fiscal policy, which remains in the hands of the individual member states, presenting a problem of coordination with monetary policy. Yet there are other important variables upon which the effects of the new monetary regime are likely to hinge. As a recent body of work by political scientists and economists suggests, the effects of a given monetary policy regime may depend strongly on the structure of the collective bargaining process upon which monetary policy impinges. The consequences of EMU thus are likely to depend on the way in which collective bargaining, which for now remains highly differentiated across the member states, takes shape in the EMU area. While there is nothing to guarantee that collective bargaining in the member states will evolve in any uniform way or toward any coherent pattern, we can distinguish among several possible future outcomes. One is a simple perpetuation of the current pattern of variation in collective bargaining regimes across member states. The second is a progressive decentralization of bargaining toward the firm-level across the member states. The third is the opposite of the second, a rise of collective bargaining from the national, national-sectoral, and lower levels at which most collective bargaining now takes place in the EU to the European sectoral level coupled perhaps with some form of cross-sectoral framework bargaining between the European trade union and employer associations (ETUC and UNICE). A fourth possible trend is that of a resurgence of national social pacts (or framework bargaining) on wages and other issues. The last of these possibilities would in essence turn collective bargaining into a de facto substitute for the national monetary policy capabilities that have been abandoned. Whichever of these trends comes to dominate collective bargaining under EMU is likely to have important repercussions for the effectiveness of the ECB’s policies. The degree of coordination among economic actors that the overall system of collective bargaining does (or does not) allow, and the extent to which it reflects the interests of exposes as opposed to sheltered sectors, are likely to be particularly important in this regard. Indeed, social actors across Europe may well be influenced by their experience in dealing with a new supra-national central bank in seeking different bargaining arrangements. At the same time, however, collective bargaining developments will have to respond to intense differences in the preferences of bargaining actors across Europe. One particularly important cleavage in this regard is likely to be that between unions and employers in the EU’s high wage/high productivity growth vs. low wage and productivity growth countries. Another is that between countries where employers and unions may be capable of arriving at acceptable bargaining outcomes in the absence of some form of national framework bargaining (or concertation) and those where recent experiences have led to the pursuit of such national bargains to compensate for the lack of such