European Integration and Path Depend- ence

European Political Economy Review Vol. 3, No. 2 (Winter 2005-2006), pp. 87-111

ISSN 1742-5697 www.eper.org

European Integration and Path Dependence: Explaining the Evolution of EU Social Policy Dimitris Tsarouhas*

Abstract This paper argues that explaining the development of EU social policy requires an understanding of the role of European business. It asserts that EU social policy remains dependent on the willingness of economic actors, centred on the European Roundtable of Industrialists and UNICE, to facilitate steps towards a more cohesive social policy framework. The paper shows the path dependent nature of the EU integration process and the limited ability of European trade unions to reach far-reaching agreements with employers on the basis of the latter’s powerful position as the instigator of the EU’s revival in the 1980s.

Keywords: business interests, European integration, institutions, social policy *

Dimitris Tsarouhas PhD, Assistant Professor, Department of International Relations, Middle East Technical University (METU), Ankara, Turkey.

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Introduction

The process of European integration, defined as the process whereby ‘distinct national settings are persuaded to shift their loyalties, expectations, and political activities towards a new centre, whose institutions possess or demand jurisdiction over the preexisting national states’ (Haas, 1968: 16), received a strong boost following the signing of the Single European Act (SEA) in 1986. Apart from reinvigorating the process of ‘ever closer union’, it became the first in a series of steps towards ‘a comprehensive strategy of Europeanization capable of producing and sustaining a new equilibrium between the Community, the state and an emergent transnational (civil) society’ (Chrysochoou, 2001: 95, parenthesis in the original). Subsequent developments, such as the signing of the Maastricht Treaty in 1991 that expanded the realm of autonomous decision-making by the Commission, indicated that the analysis of European integration could not be restricted to a debate centred on the jurisdiction of national governments and the extent of their authority, but had to incorporate the notion of governance as a key element of EU policy-making (Bulmer, 1998: 367). At the same time as the process of integration was gathering pace, an ever-increasing literature was pointing to a serious crisis in the organizational and ideological profile of European social democratic forces, mainly related to the inability of pursuing Keynesian demand management policies (Koelbe 1991; Padgett & Paterson 1991; Lemke & Marks 1992). The rise of neo-liberal policy arguments in the western world, resting on rational expectations theories manifested in ‘self-clearing’ labour markets and the simultaneous lowering of inflation and unemployment through deregulation and de-organisation (Crouch, 2000: 206-208), had a profound effect on the policy agenda of some EU members, particularly those linked to the ‘Anglo-Saxon’ model of capitalism (Hooghe, 1998: 458). The ‘Social Dimension’ of the European Union, though firmly anchored to the agenda set in the 1980s regarding the need for deregulation of Community markets and adjustment to a post-Fordist economic paradigm, acquired increased significance with the signing of the Maastricht Treaty. The latter permitted the initiation of direct negotiations and binding agreements between the representatives of labour and capital at European level, mainly the European Trade Un-

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ion Confederation (ETUC), and the Union of Industries of the European Community (UNICE) (Geyer & Springer, 1998: 208-209). This paper aims to explain the limited progress of the Social Dialogue in enhancing labour rights and strengthening the Union’s Social Dimension. To do so, it will utilise a historical institutionalist approach, whose value added consists of two factors. First, it allows us to go beyond the debate between inter-governmentalism and neofunctionalism and incorporate a meso-level of analysis to the study of European social policy. Secondly, it is instrumental in explaining the growth of the Social Dialogue after 1985 due to its utilisation of path-dependent analyses in explaining policy outcomes. The evolution of social policy points to the usefulness of a historical institutionalist approach: its reinvigoration in the 1980s and 1990s was not predicated on the need for a ‘Social Europe’ but was a reaction to the process of economic integration, whose centrality in the ‘Europe project’ conditions the development of social policies. What is more, economic integration accelerated when a consensus around neoliberal policy instruments and policies was emerging at global, and therefore also European, level. ‘Indeed, the 1992 programme for completing the internal market…is one of the most ambitious and far-reaching examples of neo-liberal policy’ (Grahl & Teague, 1990: 18). The prioritisation of capital over labour in the context of European integration means that, although social policy and the Social Dialogue, often associated with the preservation of a European Social Model’ (Wincott 2003a) have become annexed to the project for Europe as a counterweight to economic integration, economic forces have shaped the path of European integration. They have not only provided the impetus for institutional reform, through the SEA project (Green Cowles & Smith 2000:7), but also the cognitive map for an ‘ever closer Union’ (Dinan 1999). Thus, the paper’s second aim is to highlight the limitations of the Union’s social policies as well as the structural impediments faced by European trade unions in their attempts to extract social policy concessions from employers. The latter, the paper will assert, is largely the result of the Union’s development ever since the 1980s, which has been taking place in an ideational climate conducive to economic restructuring according to neoclassical economic theory. In that context, the institutional setup of the integration process favours certain groups over others (business as opposed to labour), and is reinforced by the

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power resources business can utilise to further its interests. Such ‘organizational resources’ can be decisive in building ‘effective frames’ of policy (Campbell, 1998: 400). The first part will discuss the usefulness of historical institutionalism in analysing European social policy. The next section will elaborate on the economic origins of the EU project’s revival in the 1980s and 1990s, while the next part will account for the history and development of the EU’s social policy. The following section will analyse the successes of that strategy thus far while also pointing to the structural constraints impeding any substantial progress. Finally, the conclusion will summarise the main findings and underline the contribution of historical institutionalism in understanding the limitations of creating a ‘Social Europe’.

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Historical Institutionalism and EU Social Policy

The development of policy competencies at the supranational level has given new momentum to new institutionalism in explaining policy outcomes. That is so because the formation of an EU policymaking arena ‘increasingly relies on a distinctive set of collective policy norms and everyday regulatory practices’ (Chrysochoou, 2001: 113). For a large number of political scientists, institutions ‘provide the structure in which social interaction – as opposed to random encounters – takes place; they tend to pattern behaviour in different ways’ (Stone Sweet et al, 2001: 7). New institutionalism, for all the diversity that characterises its three main sub-disciplines (rational choice, historical and sociological institutionalism) seeks to further the study of institutions in social life and identify the ways in which institutions impact on political processes (Thelen, 1999: 370). ‘Without an institutional framework, the research on outcomes tends to be purely descriptive and is often little more than cannon fodder in pitched political battles’ (Rona-Tas, 1998: 109). New institutionalists recognise the complementary role of informal institutional practices and codes of conduct next to formal institutional arrangements, whilst also seeking to show how institutions structure the choices open to political decision-makers (Blyth, 2002: 300).

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The insights offered by historical institutionalism are particularly pertinent and particularly applicable to the Social Dialogue. According to most historical institutionalists, institutions retain a historical quality that places them in a chronologically earlier starting point than any of the policy choices they wish to analyse. Institutions are perceived as having an enduring and dynamic quality that goes beyond everyday political interaction (Hall & Taylor, 1996: 940). Further distinctive features of this type of institutionalism reveal that it goes beyond the deterministic and structuralist accounts of rational choice and sociological approaches. Rational choice analyses account for the resilience of institutions on the basis of solving collective action problems serving a functionalist purpose of utility maximisation (Tsebelis & Garrett 2001). Institutions play an important role to the extent that they allow for the conceptualisation of a complex matrix consisting of sanctions, rewards and eventual outcomes around which behaviour is centred (Hall, 1997: 190). Also, individual behaviour is deemed optimal with regard to the institutional surroundings in which it takes place (Tsebelis, 1990: 40), and institutions can help generate or maintain desirable equilibria (Thelen, 1999: 371). On the other hand, sociological institutionalists assert that people act according to a ‘logic of appropriateness’ with institutions shaping preferences and behaviour (Risse-Kappen 1996). Institutions and culture are here somehow blurred as the former also includes norms, symbols, and moral templates (Hall & Taylor, 1996: 947). Institutions are of utmost importance, as they not only determine the preferences of actors but also contribute significantly to the shaping of those preferences that agents will later opt for, and constrain their behaviour (Rona-Tas, 1998: 107). They provide people with a cognitive chart through which they construct their identities and thus decide on a course of action not based on prudent calculations but rather culturally derived maps (Rothstein, 1996:147). Historical institutionalism tends to differ. While they share a lot of common ground with rational choice theorists in that they deem actors to be strategic and calculative, favouring specific course of actions over others on the basis of their preferred outcome, historical institutionalists acknowledge that institutions are structures whose effectiveness has to be judged over time (Pollack, 2004: 139). They also assert that priority should be given to identifying the patterns of institutional formation in contextualised temporal processes (Thelen,

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1999: 384). Interactions between agents take place in a framework of institutional struggle and the results of such struggles are not necessarily derived from the institutional framework within which they occur. In that respect, historical institutionalism rejects the notion of ‘institutions as shared scripts’ employed by sociological institutionalists, which tends to neglect conflicts among and between groups (Thelen, 1999: 387). At the same time, historical institutionalism relies on the concept of ‘path dependency’ inasmuch as the latter subscribes to the view that the same institutional configuration can produce very different results in different settings and in accordance with contextual features1. Finally, historical institutionalism has expanded the realm of explanatory variables in the process of political evolution by incorporating the notion of ideas and ideational change in its analytical framework (Blyth 2002). In particular, historical institutionalists emphasise the salience of ‘underlying normative structures’ (Campbell, 1998: 378) in restraining the options for policy ideas acceptable to elites. In that, they echo the emphasis placed by sociological institutionalists on macrostructures. At the same time, however, historical institutionalism rejects the overt focus on a macro-level of analysis characteristic of new sociological institutionalists, which tends to obscure or disregard altogether the role of agents in the political process (Hall & Taylor, 1996: 954). Furthermore, the existence of a set of formal and informal institutional arrangements functions as a mediation device in translating policy proposals to political outcomes (Campbell, 1998: 379). Path dependency limits the ability of emerging forces (in this case trade unions) to reshape the system at will (Torfing, 2001: 289). Business elites, which had been both creators and benefactors of the old order, were the key players expected to resist a transformation of the European project. At the same time, due to the salience of institutional legacies in the preparatory and formative stages of a new institutional equilibrium, these actors have also retained invaluable resources, in the form of their organisational strength and political 1

While path dependency is conceptually used by both historical and sociological institutionalists (and indeed by economists working on the lock-in effect of certain technological advancements, see Arthur 1989), its application differs due to the dissimilar definition and treatment of institutions outlined above.

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influence that have been utilised to shape the policy path of the emerging structure (Torfing, 2001: 287). The usefulness of a historical institutionalist angle in this regard, as well as the issue of agency-driven policy change, will become particularly apparent below when the role of key individuals in the ERT will be outlined. Paul Pierson has used the case study of the EU’s social policy to show how institutions can critically shape the path of future policymaking through the logic of ‘increasing returns’. Institutions are useful in that they increase the relative benefits of ‘current activity compared with other possible options…over time’ (Pierson, 2000: 252) thereby minimising the opportunity costs of policy actors. In addition, the formation of an elaborate institutional framework results in ‘unanticipated consequences’, whereby decision-making involving many actors cannot always be controlled by policy initiators (Pierson, 1998: 39). In the process, a ‘lock-in’ mechanism comes into play and the high costs associated with ‘exit’ from a given policy structure deter those dissatisfied with the current policy bargain from leaving the bargaining table (Pierson, 1998: 44). ‘Unravelling institutions, let alone starting over again, can be costly or impossible to the extent that actors have invested resources, and adapted their routines, expectations, and relationships with one another, in step with how institutional arrangements have evolved’ (Stone Sweet et al., 2001: 18). Beginning with the Single European Market programme, member states became locked in the process of advancing European integration and thus legitimised the calls for an increased level of social harmonisation (Wise & Gibb 1993). The passage of the Health and Safety Directive played a decisive role in that process: it set the foundations on which the calls for a more ‘Social Europe’ could be based. Social policy assumed a more important role after the passage of that Directive. With regard to the Social Dialogue, the provisions of the Maastricht Treaty, and the Santer initiative of 1996 laid the policy path on which an autonomous Social Dialogue, through which the social partners would be pro-active contributors in policy-making, could flourish (Geyer & Springer, 1998: 211). Importantly, Europe’s representatives of labour and capital were thus encouraged to reach autonomous agreements. They have managed to achieve tangible progress in some policy areas, a progress

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unimaginable when the Social Dialogue was first created in 1974 to deal with labour law and workers’ representation (Gray, 2004: 56). Nonetheless, such progress remains ultimately dependent on the willingness of business to support further steps and is therefore prevented from acquiring a more prominent character in addressing the calls for enhanced social protection.

3. Institution-building and the salience of economic integration: the role of business The signing of the Single European Act in 1986 was a historic step forward in the institutional development of the Union. Apart from modifying the Treaties that had created the European Communities, it also ‘brought major cooperative arrangements more firmly within the framework of what may be termed the Community process’ (Swann, 1992: 3) and granted new decision-making powers to the Council of Ministers and the European Parliament (Swann, 1992: 3). In addition, the SEA incorporated into the Rome Treaty the concept of cooperation in economic and monetary policy and paved the way for EMU (Mehnert, 1991: 83). Even more importantly, the SEA signalled the willingness of Europe to reform and expand its institutional machinery so as to face off the economic challenge of the United States and Japan, whose competitive advantage had grown over the previous decade (Allen, 1992: 37). In all these respects, the SEA proved the crucial turning point in the history of European integration. Nevertheless, no automatic readjustment process took place in a Community that had suffered from prolonged periods of internal strife and divergent policy responses during the oil shock of the 1970s (Martin & Ross, 2004: 5). Instead, institutional reorganisation and development was promoted by transnational business elites who campaigned for the creation of a genuine single European Market through bodies such as the European Roundtable of Industrialists (ERT), a lobby group first brought together by the Volvo chairman Pehr Gyllenhammar (Tsoukalis, 1993: 51; Holman & van der Pijl, 2003: 80). Van Apeldoorn (2002) has shown how the ERT has been able to spur on the Common Market and economic integration by influencing the EU public policy debate in a comprehen-

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sive way ‘at the level of ideas and ideology formation’ (Van Apeldoorn, 2002: 83). The creation of the European Strategic Programme for Research and Development in Information Technology (ESPRIT), a French initiative actively supported by the Commission and involving major European manufacturers, small firms and universities, confirmed the widespread consensus among policymakers and business on the need to expand the notion of European economic competitiveness (Dinan, 1999: 94). The emerging neoliberal consensus had found a key ally in the effective utilisation of the competitiveness paradigm. What is more, the idea of creating a Single Market in the EU could also count on British support, which had traditionally remained sceptical over other forms of European integration. Though normally unimpressed by reference to the EU’s ‘Founding Fathers’, Prime Minister Thatcher did not have qualms in evoking the founding Treaty of the Union when endorsing the plans that the Commission was sketching out. ‘If the problems of growth, outdated industrial structures and unemployment which affect us all are to be tackled effectively, we must create the genuine common market in goods and services which is envisaged in the Treaty of Rome and will be crucial to our ability to meet the US and Japanese technological challenge’ (Thatcher quoted in Dinan, 1999: 96).

Closer market integration and institutional evolution was premised on the active support of ERT. As technological change was gathering pace and a series of mergers was altering the landscape of European business, Gyllenhammar launched his idea of a ‘Marshall Plan for Europe’. In 1982, he called for a European strategy to face off US and Japanese competition and reinvigorate the fortunes of European economies by use of new technologies. Aware of the limited influence of UNICE, the chairman of Volvo sought to create a group with political influence and affect the process of policymaking by courting the Commission and leading politicians. Green Cowles (1995) has shown that the strategy was particularly successful, with the Commission President Davignon and close aides of President Mitterrand frequently meeting with Gyllenhammar. Relying on the ability to influence to further its interests, European business was decisive in bringing about the Single Market programme. Its preparation and execution provided business with a golden opportunity to lock-in policy outcomes favourable to its agenda of de-

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regulation and liberalisation, rendering its cooperation on social policy conditional on the promotion of its agenda. While it is true that business has not always been able to control all aspects of European social policy, since the process acquired an institutional dynamism of its own (following the ‘unintended consequences’ paradigm), it had nevertheless set the parameters on which any future development on that field would depend. In doing so, it ‘simplif[ied] the strategic universe [of relevant policy actors] by prescribing certain decisions and proscribing others’ (Rona-Tas, 1998: 123). The limited results of the Social Dialogue to date, illustrated in section 5, confirm this. The first ERT Conference in 1983, attended by the Commission, brought together, among others, the chairmen and chief executives of Fiat, Olivetti, Unilever, Siemens, Volvo and ASEA. In 1984, the ERT initiated its first project, the European Venture Capital Association (EVCA) and ran the first pan-European venture capital group called Euroventures. In March 1985, the new Commission President Jacques Delors outlined his plan for the creation of a Single Market to facilitate the realisation of earlier European Council declarations regarding the four freedoms of movement for goods, services, capital and persons (Tsoukalis, 1993: 59). Underlining the salience of the ERT in bringing about that document is the fact that in January of the same year, the CEO of Phillips Wisse Dekker, presented the plan entitled ‘Europe 1990’ calling for a unified European market by that year (Green Cowles, 1995: 514). After an Intergovernmental Conference in 1985 and 1986, the Single European Act (SEA) was signed by member states in 1987 introducing qualified majority voting on all issues related to the internal market (Gstohl, 2002: 148). Once it became an institutionalised part of policy making, the influence of business lobbying in the development of the EU remained undisputed. In fact, the signing of the Maastricht Treaty in 1991, a ‘critical juncture’ (Ikenberry 2001) in setting the Union’s future priorities, confirmed the shifting of a delicate balance between labour and capital. Whereas the former had previously maintained a salient role as part of the Keynesian socio-economic model prevalent in most Continental EU states (Gray, 2004: 61), this role was now substantially weakened. Attempts to reduce the public sector

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and throw the burden of labour market adjustment to employees instead of their bosses or the state (Gray, 2004: 61) confirmed the weakening of labour-friendly forces. The Maastricht Treaty, kick starting the EMU process and setting strict limits on inflation, public deficit and public debt levels to member states, institutionalised the new approach to economic and social policy. In fact, it has been asserted that the institutionalisation of a new policy regime manifested through the EMU ‘…is probably best understood as a alteration in the overall balance between different types of policy, with regulatory policies tending to win out over redistributive ones’ (Wincott, 2003b: 545, italics in the original). For its part, the ERT continued to press for more deregulation, riding on the wave of the opportune ideological transformation in European politics. In 1993 and 1994 it proposed the creation of a European Competitiveness Advisory Group to subject all new EU policy proposals and regulations to the test of international competitiveness. A year later, the group came to being (Holman & Van der Pijl, 2003: 82). Moreover, in the run-up to the next Intergovernmental Conference, different ERT delegations met with Commission President Jacques Santer to stress the importance of business competitiveness to the economic recovery of the EU. Although the centre-left had acquired government status in most EU states by the time of the Amsterdam Treaty, the ERT played a decisive role in the final Treaty by becoming ever more prominent in UNICE (Gray, 2004: 68), and managed to limit the European Employment Strategy (EES) created in Amsterdam to the need for more ‘flexibility’ and ‘adaptability’ on the part of employees (Gray, 2004: 68). The strategy was part of a broader pattern of reforms calling for tax cuts and the loosening of labour protection laws to make ‘hiring and firing’ easier for employers (Gray, 2004: 68). Having succeeded in setting the context within which any future discussion of social policy and the Social Dialogue would take place, the ERT and UNICE will be shown below to have had little difficulty in blocking the evolution of EU social policy towards a more balanced direction.

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4. The development of EU Social Policy and the Social Dialogue 1985-90 After a long period of stagnation resulting from economic recession, EU social policy regained momentum in the 1980s, when the ‘1992’ programme was launched (Guery, 1992: 582). Under the guidance of the Commission President Jacques Delors, a goal was set to create a ‘social space’ alongside increasing economic integration (Tsoukalis 1993). Delors drew inspiration from the German Model of social market economy and urged unions and employers to develop a European-level system of collective bargaining (Van Apeldoorn, 2002: 79; Gold, 1998: 113), threatening the latter with legislation if they refused to cooperate. He therefore acted as a ‘purposeful opportunist’ in creating a new institutional structure ‘as a means of locking in a wide variety of interests in the ongoing process of Europeanization’ (Mazey & Richardson, 2001: 79). A start was made in 1985 with the Val Duchesse talks in Brussels between UNICE and ETUC. In these talks, the ETUC agreed to the Single Market project on condition of the inclusion of a ‘social dimension’ (Knudsen 1995). The fact that the promised ‘social dimension’ remained a vague consolation for trade unionists testifies to the political nature of the bargaining, as well as the importance of power configurations in the evolution of social policy. The Single European Act signed in 1987 introduced qualified majority voting on health and safety issues, was used by the Commission to promote the creation of an interventionist regulatory framework (Pierson, 1998: 52) and encouraged the strengthening of the Social Dialogue (Pinder, 1998: 134; Rhodes, 1995: 98). In 1989 the Social Charter was signed whereby the Community introduced 12 categories of ‘fundamental rights for workers’ (Employment Institute 1989). Nevertheless, most of the Charter’s measures already existed in national legislations and hardly added any substance to the social policy of the Community (Goodhart 1998). 1990-2004 By the time Article 118B of the Maastricht Treaty foresaw direct negotiations between management and labour on issues affecting

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the two groups, the relations between UNICE and ETUC had ‘moved a long way from their hostile relations in the 1980s’ (Geyer & Springer, 1998: 213). While in the 1980s UNICE rejected any kind of binding agreement with the unions, it now became concerned that the Intergovernmental Conference leading to Maastricht could extend the areas of qualified majority voting and impose statutory work councils on multinationals across the EU. Under pressure from some Belgian and French members, it decided to conduct negotiations with the ETUC and sign ‘Framework Agreements’, thereby delaying or cancelling the need for Commission Directives (Gold, 1998: 114-115). For the first time in 1990, the social partners reached a Framework Agreement on vocational training and the establishment of new technology training schemes (Rhodes, 1995: 108). Further, an Agreement on Social Policy was reached in October 1991 and incorporated in the Draft Treaty through the Social Protocol. The social partners gained the right of compulsory consultation on proposed Commission legislation, allowing them to hold autonomous talks and reach an agreement without the Commission’s intervention, entrusting them with the implementation of Directives as well as concluding agreements on any field (European Commission 2002). In 1996 the new Commission President Jacques Santer invited the social partners, primarily UNICE and ETUC, to agree on a ‘European Confidence Pact’ to beat rising levels of unemployment (Geyer & Springer, 1998: 210). The reservations expressed by UNICE did not deter the Commission from pushing its own agenda of delegating responsibility to labour and management. Indeed, the social partners reached agreements that became Directives on parental leave (Directive 96/34), part-time work (97/81) (Van Apeldoorn, 2002: 197) and came together in further Agreements on fixed-term work in 1999, Telework in 2002 and Stress at Work in 2004. The Parental Leave Agreement permits a three-month leave for parents before a child’s eighth birthday and irrespective of the type of contract or the size of the firm they are employed in. The agreement also guarantees their right to return to their job after the leave and allows member-states to increase the three-month provision (Geyer & Springer, 1998: 211). The agreement on part-time work includes one central provision, its clause 4, whereby for the purposes of non-discrimination at work, part-time workers shall be treated equally to full-time employees (EIROnline 1997). Clause 5 calls on member-states to re-

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view their policies regarding part-time work and facilitate the move from part-time to full-time work and vice versa (EIROnline 1997). Moreover, the 1999 Agreement on fixed-term work reiterates the non-discrimination principle regarding fixed-term employees (clause 4) and calls on employers to facilitate the enhancing of their fixed-term employees’ skills and training competencies (clause 6). The agreement on Tele-work reached in 2002 and signed by the representatives of ETUC, UNICE, the European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP) and the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) was different from the previous ones, in that it stipulated that the social partners themselves would be responsible for its implementation (clause 12). The agreement bestows the same protection on tele-workers as to those on conventional types of employment (clause 4) and guarantees tele-workers the same standards for health and safety, as well as access to training and re-skilling opportunities equivalent to that of all other occupational categories (clauses 8 and 10, EuroTelework 2003). Finally, the 2004 Agreement on Stress at Work, also subject to social partner implementation, identifies a series of potential causes for work-related stress such as work organisation and working conditions, and obliges employers to deal effectively with the problem in case this falls under the Health and Safety Directive of 1989 (EIROnline 2004a). In the period after 1997, the Employment Chapter of Amsterdam as well as the Lisbon Strategy was the core initiative in introducing a social dimension to the EU project. The Employment Chapter was the first document drawing on the need for increased employment rates. The Commission set non-binding employment Guidelines for states to comply with and a ‘Jobs Summit’ was held in November 1997, where nineteen Employment Guidelines were created. These centred on four themes: employability, adaptability, developing entrepreneurship and equal opportunities (Pochet 1999). In the Lisbon Summit of 2000, concrete goals on the desirable employment level were defined for the year 2010: 70% employment rate overall and 60% for women. Member states were further required to submit National Action Plans (NAPs) to the Commission demonstrating the measures taken to reach the Lisbon objectives (Begg & Berghman 2002). In Lisbon, the EU heads of state and government sought to

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Developments in the field of social partnership have been more concrete: the Tripartite Social Summit for Growth and Employment created in 2003 convenes every year, bringing together the Commission and the social partners. The involvement of the latter has been underlined through their association with the EES. The social partners have also been active in contributing to the drawing up of Employment Guidelines 2 . Employers and unions have acknowledged the agenda on lifelong learning and the need for new patterns of work organisation. The Commission in particular views employers as more willing to cooperate in comparison to the 1990s, wishing to anticipate change and present their own solutions to the given agenda. Finally, the Stockholm Summit underlined the importance of social partnership and endorsed the creation of the European Observatory for Industrial Change while the Commission heralded their common declaration (before the Laeken Summit in 2003) as ‘an example of high-quality industrial relations’ (European Commission 2002).

5. The limits of labour’s strategy Despite the progress achieved in social policy and the agreements reached between the social partners, the emergence of a ‘Social Europe’ remains a remote goal. To start with, the Union’s orientation remains fixed on accommodating the pressures emanating from the reorganisation of production and the internationalisation of financial structures. The 1991 Maastricht Treaty institutionalised the supply-side emphasis on beating unemployment and the need for more employee flexibility to maintain competitiveness and stimulate growth (Hyman 2001). The inclusion of the Employment Chapter in the 1997 Amsterdam Treaty for example, was heralded at the time as capable of generating ‘a collective commitment by member states to job creation’ (Gray, 2004: 55). It was soon made evident, however, that the Treaty highlighted the need for employees and the unemployed to adjust to the functional imperatives of a flexible and 2

Interview with Mrs. Karen Davenport, Expert on Tripartite Social Summit, European Commission, DG Employment, Social Affairs and Equal Opportunities, Brussels, 14. April 2004.

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adaptable labour market, for whose regulation both governments and employers could do little. As Scharpf (1999) has argued, the economic focus of the European integration project in combination with a neo-liberal bias within the EU mean social and welfare policies enjoy a lower level of political importance. The central goal of the European Union’s employment policy, as formulated in the Luxembourg Council, is an increased employment rate and the means for achieving this rests on ‘activation’, stressing the need for those out of the labour market to actively seek work through skills development, retraining and collaboration with labour market agencies. Though such measures do not, per se, demonstrate a uniform application of the neo-liberal economic consensus on the EU, the absence of mechanisms combining employment strategies with demand-enhancing policies does little to allay trade union suspicions that factor labour has become expedient in the process of structural economic change. This process, however, is not solely the result of isolated initiatives by powerful individuals in the ERT or UNICE, but stems from the combined effect of their lobbying efforts, power resources, and institutional set-up of the Union over the last 15 years. By way of a further example, the 2004 European Council recommendation on the implementation of member states’ employment policies provides for four priorities that stress the need for more labour market flexibility and supply-side employment reorientation: increasing the adaptability of the workforce, increasing investment in human capital and lifelong learning, attracting more people to remain in the labour market and securing the effective implementation of labour market reforms through better governance (European Commission 2004). With regard to the Social Dialogue, the creation of an ‘organised space for industrial relations’ (Van Apeldoorn, 2002: 148) has not materialised. Social and labour market issues remain peripheral to the goal of economic integration and the imperatives of the Stability and Growth Pact (SGP). The debate on the European Constitution confirmed this: despite the reference to the draft Constitution of ‘high’ employment as one of Europe’s main goals, the social and employment agenda remained firmly on the margins of the negotiations and a working group to deal with such issues was only created after protracted deliberations between the Chairman of the Commit-

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tee Giscard D’ Estaing and MEPs3 . Moreover, the change in the employers’ approach regarding the Social Dialogue reflects the increasingly similar approach to labour market reform adopted between the Commission and UNICE. Ultimately, the ‘employability’ agenda is in harmony with the goal for enhanced competitiveness through employee retraining, which facilitates productivity growth. Furthermore, the Europeanization of employment policy through the EES does not represent a qualitative shift towards positive integration beyond the functional requirements of market integration (Van Apeldoorn, 2002: 179). According to Featherstone, the EMU is ‘a system of regulation that rules out certain (budget) options (“negative integration”) but which prescribes policy models only in particular “core” aspects of monetary policy’ (“positive integration”) (Featherstone, 2004: 226, parentheses in original). This is hardly surprising when the role of the ERT in the institutional evolution of the Union towards economic and monetary union is considered. Overshadowed by the centrality of EMU, European social policy has functioned as an example of ‘neo-voluntarism’ (Streeck, 1995: 31) imposed by the employers’ confederation, often operating on the basis of the lowest common denominator. The results of the Social Dialogue confirm this. The agreements signed thus far remain very limited in number. Additionally, their provisions have been drafted in a minimalist manner as UNICE has sought to curtail their scope. The provisions on part-time work agreed between the two sides have been criticised by the International Labour Organisation (ILO) on grounds of ‘further promoting the flexible form of labour rather than upgrading its regulation’ (Van Apeldoorn, 2002: 197). In a press release after the Agreement was signed, the ETUC acknowledged the limited scope of the agreement’s provisions and its inability to persuade UNICE on dealing with all forms of ‘precarious labour’ at once (EIROnline 1997). It also admitted that including more detailed provisions would have meant that no agreement would have been reached. Power asymmetries were in this instance clearly evident. UNICE, 3

George Katiforis MEP, Chairman of the Working Group on Social Europe, LSE Association Debate on the Future of Europe, European Parliament, Brussels, 24/3/2004.

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on the other hand, depicted the result as an example of ‘negotiated flexibility’ and underlined the added value of the Union’s social policy (EIROnline 1997). The Parental Leave agreement was also far from a triumph for the ETUC: on the insistence of UNICE, the final draft did not deal with compensated leave and left all jurisdiction to the discretion of national governments, effectively penalising those member states that had legislated on the issue. Sweden’s Act on Equality of 1994, for instance, foresaw a compensation level of up to 80% for the first 68 weeks, a much higher threshold from the one agreed in Brussels (Laatikainen, 2000: 147-163). Further, the fixed-term agreement does not necessarily apply to all employees under this category. According to clause 2, the member-states and/or the social partners retain the right to exclude from the provisions of the agreement those employed in vocational training or apprenticeship schemes as well as those on contracts ‘within the framework of a specific public or publicly-supported training, integration and vocational retraining programme’ (European Commission, 2000). Finally, when it comes to tele-work and work-related stress, the voluntary character of those agreements offers few incentives to the employers to implement their provisions. European business has succeeded in setting the path of future integration by making the latter reliant on business cooperation. Social policy remains bound to the provisions of this unwritten contract. Finally, while agreements such as the one on stress at work address real problems in the labour market, they do not deal with the core issues of pay and wage determination, an issue that UNICE refuses to touch upon on the grounds of its complicated nature and dependence on several factors, such as productivity, taxation and competitiveness (UNICE, 1999:14). The heterogeneity and fragmentation of ETUC has also undermined its ability to act as a unified policy actor in pursuit of pan-European pay negotiations (Dolvik, 2004: 302).

6. Conclusion This paper has argued for the merits of a historical institutionalist approach when examining the evolution of the European Union’s social policy. European social policy and the Social Dialogue, strengthened after the signing of the Maastricht Treaty, were inter-

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preted by many as heralding an era where social democratic policies regarding labour rights’ protection and the preservation of social welfare could be addressed at pan-European level. To be sure, the Social Chapter signed at Maastricht may not represent the ‘high-point of the efforts of the Commission to create a social dimension’ (Van Apeldoorn, 2002: 148). Trade unions may still manage to upset the current balance: ‘for those who are disadvantaged by prevailing institutions, adapting may mean biding their time until conditions shift, or it may mean working within the existing framework in pursuit of gals different from…those of the institutions’ designers’. (Thelen, 1999: 385-86). In fact, a Communication published by the Commission on August 2004 calls on the social partners to help in creating a Community framework for transnational collective bargaining and presents its intention to undertake its own monitoring procedures to establish whether autonomous social partner agreements have furthered the Community’s objectives (European Commission, 2004). UNICE responded in a position paper describing such suggestions by the Commission as ‘unacceptable’ and ‘misleading’, confusing the ‘fundamentally different nature’ of pan-European agreements with collective bargaining procedures at national level (UNICE, 2004: 3). Nevertheless, the limitations of the unions’ agenda are overwhelming. By utilising a historical institutionalist approach, this paper has argued that employer lobby groups and powerful associations, such as the ERT and UNICE, have been instrumental in reviving the process of European integration and therefore succeeded in ‘constitutionalising (or institutionalising) an emergent neo-liberal European order’. (Cafruny & Ryner, 2003: 4). In fact, business associations have invested plenty of resources in the process of reviving the European integration process and have thus been able to create ‘win situations in the Euro-policy game’ (Mazey & Richardson, 2001: 74). Opponents of business had to follow their lead so as to ameliorate the difference in power: while the Social Dimension and the Social Dialogue are examples of political and institutional renovation addressing the concerns of labour, they remain firmly subordinate to the institutionalised requirements of EMU and the imperative of macro-economic stability. In fact, and despite the launch of the European Employment Strategy in 1997, the institutionalisation

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of the Social Dialogue has not been accompanied by a corresponding shift of the Union’s priorities towards combating chronic unemployment. Moreover, the new employment policy inaugurated in 1997 has sought to increase employment rates by focusing on the adaptation of European workforce to market-driven imperatives in tandem with further deregulation of employment protection (Van Apeldoorn, 2002: 180). Such policy outcomes confirm the economic bias at the heart of the EU project, institutionalised in Maastricht. For all the claims to the contrary ‘the European Union is essentially a project of economic integration’ (Gray, 2004: 54) whose limited progress in the institutionalisation of comprehensive social protection policies can be attributed to the narrow field of functional requirements necessary to legitimise the Single Market and EMU.

Acknowledgements I would like to thank Ian Bache, Anna Gwiazda and an anonymous referee for their comments and suggestions on earlier drafts of this paper.

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