Post-Crisis Economic and Social Policy

Abstract

Managing the euro crisis has been a process of institutional transformation for the EU. The European Semester has emerged as a powerful tool for economic policy coordination between the Member States. Beyond the new enforcement tools that the Semester affords the Commission and Council in case of non-compliance with country-specific recommendations, the management of the crisis has given the Commission experience in structural reforms. The Commission now regularly uses this experience in formulating its yearly country-specific recommendations to Member States. Far from a stalwart of untethered neoliberalism, the Commission has been fashioning itself as the manager with a human face, the institution that understands both the structural reform requirements for a global economy, and the special need for strong social institutions that could shield European citizens from the worst of the shocks provoked by globalized markets. Hence the name, “Structural Reforms 2.0,” per the Juncker Commission. In this chapter, I review the Commission’s emerging structural reform “know-how,” as represented in its latest reflection papers and European Semester documents. The European Commission seems to have drawn from its experience in managing loan conditionality for debtor countries like Greece, Portugal, and Ireland, in order to come up with the set of structural reforms that it considers necessary for any country to thrive within the context of the euro. At the same time, it has taken on board the critiques of structural reforms that point to the potentially negative short-term effects of structural adjustment. Thus, the Commission seems to have fully embraced the idea of the EU as a soft alternative to unfettered globalization and has taken it upon itself to monitor certain aspects of the welfare state in Member States. The Commission’s recommendations, however, while presented in the mode of technocratic expertise, entail deeply political choices in almost every imaginable regulatory field. Despite constant assurances that there is no “one-size fits all” model for structural reforms, what is shaping up through the European Semester is effectively a list of desirable reforms—a set menu of options—which the Commission now openly characterizes as “EU best practices.” If applied, they would provoke deep restructurings and adjustments of national political economies with winners and losers to boot. These demands for deep restructurings are couched in a language of technical adjustment and fine-tuning that does not do justice to the qualitative reform required of the Member States nor to the substantive trade-offs between market efficiency and social fairness that only a democratic process can legitimize. Contrary to some observers, I conclude that the inclusion of social policy goals into the European Semester can be an indication of both the success of socially minded actors in influencing the content of macroeconomic governance, and of the success of market-minded actors in adapting to demands for “social fairness” in macroeconomic governance without ceding much space in terms of the kinds of reforms required. Much of this “socialization” of the European Semester will depend on how the rest of the management of the common currency evolves.