Labor Reforms in SEE Countries and Recovering from the Crisis

Abstract

Abstract Since 2009, South Eastern European states are confronted with the most dramatic recession throughout Europe. As the 2008 global financial crisis turned to sovereign debt crisis in the EU, the vulnerable economies of the SEE periphery became recipients of IMF loans (granted to a total of sixteen European countries) to tackle the impact of the downturn. In the Balkan region, Greece – a member of the Eurozone - has been receiving financial support from the IMF/EC/ECB troika since May 2010; Serbia and Romania have also borrowed from the IMF; while Bulgaria, also as vulnerable but poorer than Romania, postponed such a deal due to its smaller budget deficit. The loans - either by the IMF or in collaboration with European institutions - were granted under conditional terms of austerity and structural adjustment policies, which imposed public expenditures cuts, anti-protectionism reforms, more labor market flexibilization and national assets’ privatization. Those conditional policies of restructuring towards liberalization ‘promised’ more FDI-favorable conditions, higher employability and thus, growth. However, the suppression of welfare and social security expenditures, the reduction of public and private sector wages, and the promoted labor market reforms have so far deepened recession, accentuated unemployment and decreased social and living standards in all loan-recipient countries. The anticipated recovery from the crisis appears to be uneven and underlines the fragility of the EU. In this context, there is growing concern for the effectiveness of the implemented structural reforms, especially in the vulnerable SEE periphery of Europe. We focus on the Balkan EU-member states of Greece, Romania and Bulgaria, to explore the effect of the memoranda-imposed labor market re/deregulation on their economies. We find that despite the different characteristics of the crisis in these countries, high unemployment is persisting, employment precariousness and risk of in-work poverty is increasing, and their capacity for economic recovery is deteriorating.