Tag Archives: European Union

Portuguese Labour Market Reforms in the Aftermath of the Eurozone Crisis: The Problems Behind the Recovery

This is a extended repost of a blog written with Jasper Simons for Critcom, the blog of the Council of European Studies.

If one were to believe the assessments of European institutions, Portugal is on the path to recover from the severe economic crisis it suffered from 2010 onwards, and the drastic reforms implemented in employment protection, unemployment benefits and collective bargaining are starting to yield results. Portugal swiftly implemented most of the measures contained in the Memorandum of Understanding (MoU) agreed with the Troika. Since then, exports have gone up, debt accumulation slowed down and unemployment decreased as well.

However labour market restructuring came with a high price tag, and the apparently promising numbers hide somewhat less encouraging developments for the long-term recovery of the country. The imposed changes to its political economy have not only led to a considerable deterioration of social protection, but they also coincided with high levels of emigration. The labour force has shrunk, and an impending demographic problem will be very difficult to reverse.

Portugal’s pre-crisis performance within the euro area, in contrast to Greece and Spain, was rather sluggish. In the aftermath of the financial crisis, José Sócrates’ socialist government (2005-June 2011) responded with a stimulus programme to push consumption and increase investment in the real economy. Active labour market and welfare policies improving access and levels of unemployment benefits were adopted in order to maintain demand and contain rising poverty. The coverage of unemployment insurance (the share of unemployed people actually receiving benefits) had steadily improved since 2000 (Figure 1

Figure1.pngSource: Pordata

With Portugal’s fiscal position worsening, the government quickly turned to spending cuts and deregulation reforms geared towards reassuring markets. These programmes could not prevent bankruptcy, however, and Portugal was forced to request a 79 billion euro bailout with even more severe austerity and flexibilisation policies attached. The MoU included, inter alia, the revision of the labour code and severe reductions in severance and overtime payments, measures increasing the scope for the individualisation of contracts and dismissals and lowering and restricting access to unemployment benefits, which the centre-right Passos Coelho government (June 2011-November 2015) implemented.

Firstly, employment protection and severance payments (of fixed-term contract workers) have been severely affected. Although Portugal still has relatively high protection levels in the European context (and had one of the highest levels in the run-up to the crisis), no other European country has witnessed such a strong liberalisation trajectory since the crisis (see Figure 2). Alongside the flexibilisation of dismissals, minimum severance payment requirements for employers were lowered. For instance, severance pay in case of a redundancy dismissal for a worker with five years of tenure dropped from 21.7 to 14.3 weeks between 2010 and 2013. The minimum wage was frozen at 485 euros/month from 2011 onwards (565 with Christmas bonuses), until the new left-wing coalition that came to power in 2016 increased it again.

Figure 2.jpegSource: OECD

Secondly, unemployment benefits were cut and eligibility requirements tightened reducing overall benefit. If unemployment did not decrease until recently, the share of people receiving benefits did decrease right when the government needed to cut expenditure. Coverage for both social and the ordinary unemployment benefits decreased: if high unemployment levels in Southern Europe often make the headlines, it is seldom mentioned that the actual number of unemployed people who receive benefits is much lower, and Southern Europe has had a rather poor record in this respect. Interestingly, if unemployment levels have decreased, this may have as much to do with the shrinking of the labour force as with the creation of jobs: between 2008 and 2014, the labour force (people in employment or seeking work) has shrunk by 303.000 people. If the number of jobs remains stable but the labor force decreases, unemployment goes down. This partly results from discouragement of workers, but also to a large extent from emigration. In fact, emigration may have had a greater impact because, as the government admitted, the number might be twice as high as official figures display. The Portuguese population has been shrinking since the crisis, and emigration added to an impending demographic problem, with the lowest fertility rates in the EU (1.23 children per woman) (Figure 3).


Source: Pordata

Thirdly, collective bargaining has been decentralised in favour of firm level and individual agreements. Reforms of, erga omnes, extension have led to sweepingly decreasing coverage levels for ordinary workers (see figure 6). Remarkably, both the socialist and centre-right governments largely implemented these policies with the support, albeit lukewarm, of the social partners. Although the larger communist CGTP-IN remained absent, the socialist UGT worked together with employer organisations and both governments on many of the reforms including most of the MoU. This came, however, at the cost of internal division, loss of membership and various general strikes of both the CGTP-IN and the UGT.       Figure4.png            Source: UGT

Alexandre Afonso is an Assistant Professor at the University of Leiden, Netherlands. Jasper Simons is a political economy graduate and former European Economic and Social Committee trainee.



The Big European Political Party Network

Party Network

A new European Parliament has been sworn in on July 1st, with a greater number of populist Eurosceptic MEPs than ever before. Out of the 751 seats in the European Parliament, 48 are now held by the Europe of Freedom and Direct Democracy group, uniting essentially Nigel Farage’s UKIP and Beppe Grillo’s Movimento Cinque Stelle, while 52 are held by non-affiliated parties such as the French Front national, the Dutch PVV or the Austrian FPÖ. After the success of UKIP or the Front National, many media outlets have mentioned earthquakes, landslides and other geological metaphors to describe changing power relationships that would allegedly change the face of Europe. However, in a political system where alliances and cooperation across political parties at different levels are fundamental, the eurosceptic populist right remains badly connected and deprived of access to power.

In the picture above, I have represented the European political system as a network of political parties connected to each other both transnationally and domestically (high version here). The nodes in the network represent all political parties that obtained seats in the EP in the last European elections, and their size is proportional to their number of seats. Transnationally, they are connected via their membership in the European political party groups. These groups broadly correspond to the traditional party families: the Social-Democrats (Alliance of Social Democrats and Progressives: Labour, German SPD, Italian Democratic party), the centre-right (European People’s Party: the German CDU, the Spanish PP, the French UMP, Forza Italia), the Liberals (Alliance of Liberals and Democrats for Europe: Libdems), the Greens, the Radical Left (United Left: Syriza, Podemos), the Conservatives, and Europe of Freedom and Democracy (UKIP and Beppe Grillo’s Movimento Cinque Stelle).

Many of these parties that cooperate transnationally with like-minded parties are also engaged in government coalitions with other parties at the domestic level. For instance, the German SPD, who is a member of the social-democratic political group, is in a coalition with the CDU, who is a member of the European people’s party. The British Conservatives, who belong to the European Conservatives and Reformists, are in a domestic coalition with the Liberal Democrats, who are a member of the Alliance of Liberals and Democrats for Europe. Knowing who is connected with whom is interesting because it can play a role in coordinating domestic and European policies. In the case of the CDU and SPD, the fact that two of the largest parties in the European Parliament are in a coalition together at the domestic level can provide a strong action power to promote policies.

Unsurprisingly, social-democrats and the European People’s party are well connected via a number of domestic government coalitions. Such “red-grey” coalitions are in place in Romania, Germany, Austria, Greece and Italy. What is perhaps more surprising is the prevalence of liberal/social democratic coalitions, making the Liberals a well-connected party family in spite of their relative electoral weakness. Such coalitions are in place in the Netherlands, Denmark, Slovenia, Lithuania, Estonia and Bulgaria. In fact, network measures of centrality indicate that Liberals parties are even better connected than the Social Democrats. This is essentially due to the fact that the size of these parties doesn’t allow them to govern alone at the domestic level, and they are therefore forced to coalesce with other parties to be in power, increasing their connectedness. Finally, grand coalitions uniting social-Democrats, Liberals and the centre-right, sometimes with other parties, are in place in Finland, Belgium, and the Czech Republic. Coalitions between centre-right and liberals are rather rare, and only observable in Sweden. Compared to the days of red-green coalitions in Germany, Green parties appear as weakly connected, with members taking part in coalitions only in Luxembourg and Finland. The British Conservatives, by deciding to leave the EPP in 2009, have given up on substantial connections in the sense that their partners in the ECR are mostly small and badly connected, with the exception of their Polish (they are not small) and Latvian (they take part in government) partners.

Moving to the Eurosceptic right, in spite of their electoral success, these parties appear clearly isolated, with no link to any coalition government at the moment. This is true both for the parties that failed to form a political group of their own (Marine Le Pen and Geert Wilders did not manage to find partners in a sufficient number of countries), but also for UKIP, whose partners in the “Freedom and direct Democracy” group are not connected to any relevant party in power. This is also true for the radical left group, in the upper right corner. Hence, in the absence of the connections and access to power that the mainstream parties possess, the “earthquake” that the media has been talking about is very unlikely to happen.

A version of this post was published on the European Politics and Policy blog.

The Europeanization of Portuguese Democracy (Book Review)

Nuno Severiano Teixeira and António Costa Pinto (eds) (2012) The Europeanization of Portuguese Democracy. New York: Columbia University Press. 278pp, £38.00, ISBN 978 0 88033 946 9. Buy it here

Europeanisation of Portuguese Democracy 

This book analyses the Europeanisation of democracy in Portugal between the Carnation Revolution in 1974 until about 2010. Portugal has recently come to the forefront of debates on European integration because it has been one of the countries most severely hit by the Eurozone crisis. By contrast to Greece, it has been presented as a rather “good pupil” in the implementation of austerity measures imposed by international financial institutions. However, the academic literature on this country and its relationship to European integration has been rather scarce, and this book is therefore a welcome contribution to a better understanding of the role of European integration in Southern Europe.

The book contains nine chapters dealing with the interaction between European integration and democratisation, the attitudes of political elites towards the EU, the Europeanisation of executive power, of the Parliament, of courts, of interest groups, and of public opinion. The general picture which emerges throughout the chapters is that of a mutually reinforcing dynamic between democratisation and European integration. After the fall of the dictatorship, European integration was seen as the means to definitively part ways with the authoritarian past, stabilise the parliamentary system after the years of turmoil that followed the revolution, and modernise an economy whose structures had been shaped by a huge colonial empire. As a whole, democracy and European integration appear as “brothers in arms”, as emphasised in Vink’s closing chapter.

Many of the contributions provide valuable insights into the workings of the Portuguese political system. However, the book generally gives a fairly dated impression in the light of recent events linked to the crisis, like a book on the GDR that would have been printed in the summer of 1989. Even if the publishing cycle may certainly be responsible for this, there are very few explanatory elements throughout the chapters that could help explain current events, set aside the introduction by Nuno Severiano Teixeira highlighting the decade of divergence that preceded the crisis, or Pedro Magalhães’s chapter showing the decline in popular support for European integration. In many ways, it seems that the strong enthusiasm for European integration emphasised in the book has concealed deeper politico-economic logics that are only superficially tackled. As the harsh austerity measures recently implemented by the Portuguese government have been essentially justified by the fact that “there is no choice” in the face of EU commitments, the relationship between European integration and democracy in this country now seems much less positive.

To be published in Political Studies Review