CoordinatingmacroeconomicpoliciesintheEurozone
OnthehierarchicalnatureoftheMacroeconomicImbalanceProcedurein
ItalyandBelgium
Paperpresentedatthe15thBiannualConferenceoftheEuropeanUnionStudies
Association,Miami,4-6May.1
(Paperforconferencepurposesonly,pleasedonotcitenordistributewithout
permission.)
Abstract
ThispaperanalysesthehierarchicalcharacteroftheMacroeconomicImbalance
Procedure(MIP).IthasbeenarguedthattheMIPcanconstrainnational
democraticdecision-makingandthusaddstoaperceivedtechnocraticdominance
oftheEU.OntheothersideofthedebatesomearguethattheMIPisstill
insufficientlybindingtoinduceMemberStatestoenactthereformsthatare
deemedappropriateforawell-functioningEurozone.Withinthecontextofthis
debatethispaper–thesecondofaseries-providesempiricalevidenceofwhether
recommendationsundertheMIPcontributetorealpolicychangeandhowthisrole
istobeperceived,whetherashierarchicalimpositionormoreintermsof
constructivedialogue.Itdoessobytracingtheroleoftwodomesticallycontested
MIPrecommendations,namely:theliberalisationofprofessionalservicesinItaly
andtheBelgianpracticeofautomaticwageindexation.Itarguesthattheinfluence
oftheMIPshouldbeseenintermsofagendasettingandpossiblepoliticalpressure
ifthedomesticenvironmentallowsforitratherthanlegalcoercion.Secondly,it
arguesthatovertheyearstheinstrumenthasbecomemorepolitical,interactive
andnon-hierarchical.
Economicgovernance,technocracy,peerpressure,policycoordination
DavidBokhorst
PoliticalEconomyandTransnationalGovernanceResearchGroup
UniversityofAmsterdam
[email protected]
1TheresearchforthispaperhasbeenfinancedbytheHorizon2020programmeoftheEU
throughtheENLIGHTENproject(enlightenproject.eu).
1
Introduction
Oneofthemainnoveltiesofthenewpost-crisiseconomicgovernance
frameworkoftheEuropeanUnion(EU)istheMacroeconomicImbalance
Procedure(MIP).Theprocedureaimstodetect,preventandcorrectimbalances,
suchasdebtoverhangorcompetitivenessdecline,inEurope’seconomiesandis
embeddedintheEuropeanSemestercycleforsocioeconomicandfiscalpolicy
coordination.TheMIPcanbeseenastheEU’sresponsetohavingfailed
sufficientlytomonitorandaddresseconomicproblemsinIrelandandSpainin
therun-uptothecrisis.Bothstateshadpursuedsoundfiscalpoliciesandwere
seenas‘goodpupils’duetohigheconomicgrowth,butstillneededabailout.
Accordingly,policy-makerswereconvincedthatthepre-crisisframework
showedsignificantshortcomings,sincecrisesandbailoutscanbecausedby
otherfactorsthanlevelsofpublicdebtorfiscaldeficit.Thisperceivedgapinthe
oversightframeworkwastobesolvedbyestablishingamacroeconomic
counterparttotheStabilityandGrowthPact(SGP),namelytheMIP.
TheCountry-SpecificRecommendations(CSRs)thattheCommissionmakesto
MemberStatesaspartoftheMIPshouldnotbeinterpretedaslegally
enforceabledecrees.However,theinclusionofasanctioningprocedurefor
excessiveimbalancesdoesimplyamoreobligatorycharacterofthe
recommendationsthanunderpre-crisiseconomiccoordinationregimes.With
recommendationsandpotentialsanctionstouchinguponsensitivedomainsof
nationalsocioeconomicpolicy-making,suchaswagesettingorhealthcare,the
procedurehassparkedconsiderablecontroversyinacademiccircles.Two
debatesstandoutinparticularandwillleadustothecentralquestionsofthis
paper.
SomeoftheearlyliteratureisfocusedonthelegitimacyoftheMIP.Legal
scholarshavecriticizedthebroadandlimitlessdefinitionofan‘excessive
imbalance’(whichistakentomean‘anytrendgivingrisetomacroeconomic
developmentswhichareadverselyaffecting,orhavethepotentialadverselyto
affect,theproperfunctioningoftheeconomyofaMemberStateorofthe
economicandmonetaryunion,oroftheUnionasawhole’(Reg.1176/2011,Art.
(2)(1))).Thisbroaddefinitioncouldresultintoomuchdiscretionaryauthority
beingplacedinthehandsoftheEuropeaninstitutionsandcouldimply
overreach(JoergesandWeimer,2012;Chalmers,2012).Politicalscientistshave
criticizedtheMIPasexcessivelyconstrainingnationaldemocraticdecisionmakingandassuchconstitutingamovetowards‘executivedominance’(Crum,
2013;Curtin,2014),basedon‘governingbytherulesandrulingbythenumbers’
(Schmidt,2015),orconstituting‘alegallyandpoliticallyunconstrainedexpert
regime’(Scharpf,2013).
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TheseauthorsseemtoassumethattheMIPrepresentsatypeofhierarchical
impositionofpoliciesonMemberStates.Yet,thisinterpretationofthenew
economicgovernanceregimebasedonstudyingitslegaldesignmight
misrepresenttheMIPasitignorestheagencydimensionanddoesnotinclude
theMIP’sevolutionovertime.TheJunckerCommissionspeaksinitsdocuments
ofcreating‘politicalownership’andengagingin‘genuinedialoguewiththe
MemberStates,whichdoesnotseemtosuggestastrictlycoerciveapproach(EC,
2015a).MemberStateshaveovertheyearspushedbackagainstanoverly
prescriptiveapproachbytheCommission(LithuanianPresidency,2013),butthe
moreopenandfocussedapproachofthe‘political’JunckerCommissionhasbeen
warmlywelcomedbyMemberStates(EFC,2015).
SomeofthemorerecentliteraturemovesfromanalysingtheMIP’sdesignto
compliance.HerewefindsomeofBrussels’leadingeconomicthinktankswho
arguethattheMIPismostlyanemptyshell,asimplementationrateson
recommendationsareweakanddeclining,peerpressureisseenasanineffective
mechanismtoensurecompliance(GrosandAlcidi,2015;SapirandWolff,2015;
DarvasandLeandro,2015;Zuleeg2015).TheconclusionthattheMIPlacks
effectivenessfuelsthediscussiononwhethertheCommissionshouldbemore
rigorousinapplyingtheMIP(ECB,2016),whethermonitoringshouldmovetoa
‘moreindependent’institution(Schäuble,2016)orwhethernewinstruments
andcompetencesatEuropeanlevelarenecessarytoincreasethe
implementationrate(EuropeanParliament,2016;VanRompuyetal.,2017).The
FivePresidents'ReportarguesinthiscontextthattheMIPshouldbe
strengthenedandthesanctionprocedureshouldbeusedmoreforcefully
(Juncker,2015).
Oftencriticismsofeffectivenessarebasedonaquantitativecountof‘full’or
‘substantial’progressonrecommendationsonayearlybasis.Thistellsuslittle
aboutthecausalmechanismsbehindtheMIP.Anditcanbeseenasa
questionableapproachwhenmeasuringstructuralreformsindeeplyembedded
governanceareas,whicharebynaturehighlycomplex,multi-annualprocessesof
compromisebuilding.AsarguedbytheEmploymentCommitteeChair:‘IfaCSR
getsimplementedafterfouryearsduetothecomplexitiesofthenational
process,Iwouldstillthinkthisisa100%implementationandnot25%asweare
sometimestold–ortellourselves’(Bevers,2016).TheCommissionservices
concludeintheirfirstassessmentthattheMIPhascontributedtoenhancing
policycomplianceandthatMemberStateshaverespondedambitiouslyand
moretargetedtowardsaddressingimbalances(EC,2016a).Besides,the
assumptionthatmorepressureoradditionalinstrumentsandcompetences
wouldleadtobetterimplementationonCSRslacksasufficientempiricalbasis.
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ThispaperstartsfromthepremisethatwecannotsimplyassumethattheMIPis
socoerciveastobreachallsortsoflegitimacystandards–asclaimedbysomeof
itscritics.NorcanweassumethattheMIPistoosoftandflexibletobringabout
requiredpolicychangeandaccordingly,thatitshouldbemademorebindingto
increaseeffectiveness.Whatismissinginthesedebatessofarisasystematic
accountofhowtheMIPhasbeenappliedinpractice,inordertodetermineits
characteristicsempirically.Weshouldnotonlystudytheinstitutionaldesignof
theMIPand/ortakeannualimplementationratesatfacevalue.Tounderstand
andevaluatetheMIP'sreal-worldeffects,wehavetotraceitspracticaloperation
overmultipleyearsandmultiplecases.Thispaperpresentsanaccountofthe
evolutionoftheMIPandabriefoverviewoftwocasesoutoffivecoveredinmy
PhDproject.Thecentralresearchquestionsthatfollowfromthe
abovementioneddebatesarethefollowing:howhierarchicalistheMIP?And
secondly,totheextentthattheMIPisindeedhierarchical,howeffectiveareits
hierarchicalfeaturesininducingnationalpolicychange?
Thenextsectionwillbrieflyelaborateontheconceptofhierarchy,the
methodologyandthecases.ThethirdsectionexplainsthelegaldesignoftheMIP
andpresentsanaccountoftheinstitutionalevolutionoftheMIP.Thefourthand
fifthsectionsassessthecasesofprofessionalservicesmarketliberalisationin
ItalyandthepracticeofwageindexationinBelgium.Thefinalsectiondiscusses
somepreliminarylessonswecandrawfromthesetwocases.
Concepts,methodologyandcases
Economicsisnotanexactscience,sopoliciescannotbedesignedintheabstract
andsimplybedemandedtobeimplementedbyMemberStates.Thiswouldmake
nationalpoliticsaprettyemptyphenomenon.Overlystronginsistenceor
pressureonimplementationtooverturnreservationsofdomesticpoliticalelites
wouldlegitimisethecriticismsoftheMIPthatrecommendationsarebiased,
discretionaryorillegitimate.Whilethismaybetrue,thispaperaddstothis
assertionthatonecannotfullydismisstheeconomiclogicbehindthe
recommendationseither.Ateverylevelofpoliticsthereisinteractionwith
expertsortechnocracyandineachfieldthereisconstantdebateoverthebest
approach.ThequestioninjudgingthecharacteroftheMIPiswhatformdoesthe
interactionbetweenthecentralandnationallevelstake?Inotherwords,does
thisconstituteahierarchicalrelationinwhichcentralnormsareimposedon
MemberStates?
Theconceptofhierarchy(ratherthanimpositionorintrusiveness)tostudyand
characterizetheMIPfollowsfromtheliteratureonNewModesofGovernancein
theyearsprecedingthecrisis(seee.g.Kohler-KochandRittberger,2006).New
4
ModesofGovernancearetypicallycharacterizedasnon-hierarchicalmodesthat
favourlessprescriptiveregulatoryapproaches,thatcanbeseenasmore
accommodativetodiversityandlocalexperimentationandwhichare
characterizedbydeliberationamongactorsandadaptabilityofbroader
frameworkgoals.TheMIPisoftenseenasamoveawayfromthese
characteristicsofnon-hierarchicalgovernance.Dawsonforexample,seesthe
MIPasexemplaryofthepost-crisisreassertionoftheEUlegalorder’sharder
edge(2015).Ontheotherhand,empiricalevidencefromthesocialsideofthe
EuropeanSemesterclaimsthatpre-crisisnon-hierarchicalgovernancefeatures
suchasflexibilityandlearningstillplayaprominentrole(ZeitlinandVanhercke,
2015).Wecanthereforenotsimplyassumethatthepre-crisisnon-hierarchical
governanceapproachhasbeenfullysubordinatedtoarigorouscompliance
framework,assomeauthorsseemtosuggest.Whetherthisreassertionofthe
debatealsoholdstruefortheMIPisstilltobetested.
Hierarchyingovernanceframeworksisamultidimensionalconcept.Thismeans
thatdifferentaspectsofaframeworkcancontributetoapossiblehierarchical
character.Assuch,theconceptofhierarchyismeanttotranscendthediscussion
ofhardlawversussoftlawthatonecanfindinmuchofthelegalliteratureon
governanceframeworks.Tospecifytheconceptfurther,onecanidentifyatleast
threedimensions:prescriptivenessoftherecommendations;thedegreeof
flexibilitywithwhichEuropeanactorsdealwithnationalreservations;andthe
mechanismsforimplementationenforcement,whichcantaketheformoflegal
coercion,threateningwithsanctionsorsteppinguptheprocedure,peerpressure
oropendialogueanddebunkingofnationallyheldpolicybeliefs.
TheMIPbynaturecanbeexpectedtoincludeamorehierarchicalapproachthan
normalSemesterrecommendations,astheprocedurehasbeendeliberatelysetuptodealwithparticularlyworrisometrends.Buttowhatextentitisindeed
hierarchicalandhowthisplaysoutinpracticeremainsunclear.Forexample,on
paperasanctionprocedureexists,butthefunctionthissanctionprocedure
performsinpracticecannotbeautomaticallyreadofffromthelegislativetexts.
Effectivenesscanbestudiedbyassessingwhethertherecommendationandits
follow-upprocessescontributetoinducingaMemberStatetoadoptthepolicy
approachthatisprescribed.However,giventheaforementionedcallstomake
theinstrumentmorebinding,thispaperassesseseffectivenesswithincases
wherewemightexpectamorehierarchicalapproachduetorecommendations
notbeingimplemented.Itisthusnottheoveralleffectivenessoftheprocedure
thatisbeingassessed,butitspossiblehierarchicalelements.Effectiveness
shouldalsobestudiedintandemwithhierarchy.TheparallelwiththeSGPhere
isstriking,ifthe3%ruleisinterpretedasarigorousruleitisperhapsnotvery
effective,asthethresholdhasbeenbrokenfrequently.Butinterpretedmorein
5
termsofabenchmark,itissurprisinglypowerfulandoveralltheSGPhas
managedtosignificantlyimpactfiscalpoliciesintheEurozone(Begg,2016).
ThehierarchicalcharacteroftheMIPwillbestudiedinthispaperbyassessing
itsdesign,broaderevolutionovertime,andpracticalapplicationthroughcase
studies.EmpiricalassessmentofpolicycoordinationprocessessuchastheMIPis
extremelychallenging.Causalityisnotalwaysdirectlyobservableandworksin
indirectways.Toputitsimply,nopoliticianwilladmitthathe/sheimplemented
areformonlybecausetheEUinstitutionstoldhim/herso.Researchersdraw
completelycontraryconclusions,sometimesevenbasedonsimilarmaterial(see
thediscussionoftheOMCinZeitlinetal.,2014).Inordertoovercomesuch
methodologicaldifficulties,Zeitlinhasproposedacombinationofthreeresearch
strategiestoassessinfluences,mechanismsandeffectsofpolicycoordination:
firstcontextualizedprocesstracingasameanstoidentifyandassesspractical
influenceondomesticactors,debates,proceduresandpolicies;second,careful
triangulationinordertomultiplypointsofobservationandtooffsetpotential
sourcesofbias;andthird,systematiccomparisonoffindingsacrosscountries,
policydomainsandtimeperiodsinordertoidentifygeneraltendenciesand
dimensionsofvariation(2009;215-216).
Inmyresearch,thisapproachboilsdowntotracingtheevolutionandeffectsof
therecommendationsoverallSemestercyclesupto2016,withafocusonboth
empiricalchangeintheMemberStateswithregardtothepolicyareaand
analysisofthecontextinwhichthishasoccurred.Theprocesstracinghasbeen
carriedoutthroughcarefuldocumentanalysisofallrelevantCommission
reportsandrecommendations,complementedwherenecessarybynational
reportsandinterviewstoprovidethecontext.Ihaveconductedatotalof54indepthinterviewsbetweenautumn2015andspring2017.Fortriangulation
purposes,theintervieweesincludethoseactorsmostcloselyinvolvedwithinthe
EuropeanCommission,CouncilCommittees,ministries,economicadvisory
institutions,centralbanks,politicians,socialpartners,representativesof
professionalorders(intheItaliancase)andwhererelevantindependentexperts.
Thestatementsinthispaperhavebeencrosscheckedintheinterviewsasfaras
possible.Thismakesitpossibletocontextualiseeachstepintheprocessto
establishacausalnarrative.Finally,processtracingcanberegardedasasuitable
methodsinceitallowsforaskingopenquestionsonhowtherecommendations
havebeenperceived,wherepressurewasexertedandtowhateffect.
Inadditiontoprocesstracingandtriangulation,thefinalsectionofthispaper
willdrawsomelessonsfromthegeneralassessmentoftheMIPandthecases.In
totalthePhDprojectcoversfivecases,includingalsoMIPrecommendationson
theDutchfiscaltreatmentofmortgagedebt,labourmarketsegmentationin
FranceandtheGermancurrentaccountsurplus.Thefivecaseshaveallbeen
6
identifiedashardcases,wherebytheMemberStatehasformultipleyears
insufficientlyimplementedtheCSR.Assuchthesecanbeseenasparadigmaticof
thephenomenonbeingstudied.Inotherwords,whenaMemberStaterefusesto
implementaCSRwecanexpectamorehierarchicalapproachbytheinstitutions,
providinganopportunitytoexaminehowhierarchyplaysoutinpractice.The
casesinvolvelong-standinghighlypoliticizeddebates,wherethestatusquois
protectedbypowerfulinterests.Thisallowsmetostudytheexpectedclash
betweenthecoldeconomiclogicoftherecommendationsandlong-held
domesticpolicybeliefs.Tobeclear,thequestionisnothowsuccessfultheMIPis
ingeneral,whichwouldimplythatindeedbyselectingonlyhardcasesthis
researchwouldbeselectingonthedependentvariableandpresentanonrepresentativeaccountoftheprocedure.Theaimoftheresearchpartis
exploringthenatureofhierarchyanditseffect,whichrequireshardcases.
TheevolutionanddesignoftheMIP
TheMIP’sannualcyclestartswiththeAlertMechanismReport(AMR),anannex
totheAnnualGrowthSurveyofeconomicpolicyprioritiesfortheEU.TheAMRis
afilteringdevicetosingleoutparticularlyworrisometrends,whichdeserve
furtherscrutinyandthusbecomepartoftheMIP.TheintentionoftheAMRisto
preserveaccountabilityininterpretationofeconomicdevelopmentsby
policymakersandcommentators;hence,itisbasedonasetofindicatorswith
thresholdstosignalwhenavalueisworrisome.Thescoreboardofindicatorsis
notmeanttobeusedautomaticallytoexposerisks.Infacttherecitalof
Regulation(EU)No.1176/2011,cautionsagainstan‘automaticreading’ofthe
AMRandmakesclearthatthebreach‘ofoneormoreindicativethresholdsneed
notnecessarilyimplythatmacroeconomicimbalancesareemerging’.Hereithas
tobeunderlinedthatvaluesinthescoreboardarebackwardlookingratherthan
predictive,theyreflecttheeconomicrealityoftwoyearsbeforeissuanceofthe
AMR.Whetheratrendisinfactworrisomeisamoreelaboratequestiontobe
determinedintheIn-DepthreviewthatfollowsfromtheAMRscoreboard.The
scoreboardof11headlineindicatorsisgroupedintoexternalimbalancesand
competitivenessontheonehand(suchasthecurrentaccountbalanceand
nominalunitlabourcosts)andinternalimbalancesontheother(suchas
unemploymentrateandrealhouseprices).
OnthebasisoftheindicatorstheAMRselectsMemberStatesforwhichanInDepthReviewiswarrantedtodeterminewhetherthereareindeedimbalances.
Tolimitthenumberofdocumentssince2015theIn-DepthReviewsandtheStaff
WorkingDocumentswhichassessthepolicyeffortsofaMemberStateare
mergedintoasingledocument;theCountryReports.TheCountryReportsare
perceivedbymanyCommissionofficialsasthecorebuildingblockofthe
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process.ThisiswheretheCommissionservicesarguetowhatextentimbalances
presentproblems,takestockonwhathasbeendonetoaddresstheimbalances
anddiscusswhatpolicydirectionscouldbehelpfulinsolvingthem.Forlarger
MemberStates,asub-sectionoftheReportaimstoestablishanaccountof
potentialspillovereffectsfortheeuroarea.Whatfollowsisadecisiononthe
levelofimbalances,theselevelshavevariedovertheyears,butsince2016
comprisefourlevels:noimbalances,imbalances,excessiveimbalanceswhich
requiresspecificmonitoringandexcessiveimbalancesrequiringtheopeningof
theExcessiveImbalanceProcedure(EIP).Excessiveinthiscontextmeansthat
imbalancesjeopardiseorriskjeopardisingtheproperfunctioningofthe
EconomicandMonetaryUnion.Onecouldthinkofexternalimbalancesrelating
tocompetitivenessthatcouldriskasuddenstoporreversalofcapitalflowsthat
candisruptthefinancialmarkets,imbalancesthatleadtotheinsolvencyoflarge
financialinstitutions,orinflationdivergencesthatcouldreducetheeffectiveness
ofmonetarypolicy.Finally,theSemesterCountrySpecificRecommendations
(CSRs)–someofwhicharelinkedtotheMIP-arepublishedanddiscussedinthe
CounciladvisorycommitteesofMemberStateofficialsbeforebeingadoptedby
theCouncil.Intheadoptionprocess,theCSRsthatarelinkedtotheMIPare
discussedina‘jumbomeeting’betweentheEmploymentCommittee(EMCO)and
theMIP’smaindriver:theEconomicPolicyCommittee(EPC).
ThemostcontroversialpartoftheMIPisthecorrectivearm:theExcessive
ImbalanceProcedure.TheEIPisbasedonthefollowingsteps:afterathorough
analysisbyDGECFIN,theCollegeofCommissionersmayproposetotheECOFIN
toplaceaMemberStateundertheEIPifindeedexcessiveimbalancesarefound.
AfterdiscussionintheEconomicandFinancialCommittee(EFC)–theadvisory
committeetotheECOFINCouncilofhigh-levelMemberStateofficials-the
ECOFINadoptsbyQMVandfollowingthecomply-or-explainrule,adecision
openinganEIP.Italsoadoptsarecommendationonthesocioeconomicpolicies
tobeadoptedtocorrecttheimbalances.Inthiscase,theMemberStatesubmitsa
correctiveactionplan,whichshouldbeendorsedbytheECOFIN.DGECFIN
monitorstheimplementationoftheplanandincaseofviolation,theCollegeof
Commissionersproposesfinancialsanctions–forEurozonestatesonly–ofupto
0.1percentofGDP.AfterdiscussionintheEFC,theECOFINCouncildecidesthe
sanctionbyReversedQualifiedMajorityVoting(RQMV)(DeStreel,2015).
RQMVgivestheCommissionconsiderablymorediscretionintheapplicationof
sanctions,meaningthatsanctionsarelesslikelytobevoteddownintheCouncil,
ashappenedbeforewithGermanyandFranceundertheSGP.Moreover,a
sanctioncanbeissuedfortwicefailingtosubmitasufficientcorrectiveaction
plan.Whatmustbeclearlynotedhereisthefactthatthesanctioningprocedure,
asshownbythedetailsabove,isnotbasedonnon-compliancewithaparticular
recommendationasformulatedbytheCommission,butonthebasisofnot
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providingasufficientcorrectiveactionplanasformulatedbytheMemberState
itself,evenifthesehavetobeconsistentwiththeguidelinesandtimeframeas
setoutbytheCouncil(Art.8.1ofReg.1176/2011).Similarly,theEIPcanbe
abrogatedassoonasthereisevidenceofthecorrectionoftheexcessive
imbalance,sothereisanobligationconcerningtheresult,notanobligationto
fullycomplywiththecorrectiveactionplan(Art.11ofReg.1176/2011).Both
examplesshowsubtledifferences,meaningthattheMIPstillpreservesadegree
ofdiscretionfortheMemberState,whilestillhavingtocomplywiththeoverall
objectivesoftheprocedure.ThisshowsacleardifferencewiththeSGP,which
hasmorepronouncedrulesandcriteriadefinedbytheEuropeaninstitutions
ratherthantheMemberStateandwhichaccordinglycanbeseenasmore
prescriptive.
Thesanctionprocedurehasbeenapointofcriticismamonglegalscholars.InEU
lawarecommendationhasalwaysbeenconsideredanon-bindinginstrument,so
thatadecisionoftheCouncilundertheEIPforfailuretosufficientlyaddress
imbalancesinawaythatisconsistedwith‘recommended’actioncouldraise
seriousdoubtsintheEuropeancourts(seequotesbyPresidentoftheEUCourt
ofJusticeLennaertsinZeitlinandVanhercke,2014:57).Somequestionwhether
sanctionscanbeactivatedatall,sincethesewouldbebasedonlegally
ambiguousconceptssuchas‘sufficient’actiontoaddressimbalances(Moschella,
2014).Yetthelegalinterpretationoftheproceduredoesnotfullycapturethe
contextorinterpretationofandintentionsbehindtheMIP,asthesecondpartof
thissectionontheMIP’sevolutionthroughouttheyearswillshow.
Intervieweesdonotseemtorecallmuchcontroversyoverthepossible
applicationofthesanctionprocedurewhentheMIPwasstillbeingdesigned.As
technicalexpertsfromtheCommissionexplain:Thiswasthetimewhenwein
generalwerelookingformoretoughnessinourrules(Interview8*2).Everyone
agreedthatwealsoneededsomebiteintheprocedure(Interview9*).Thelegal
servicesoftheCouncil,CommissionandParliament(EP)approvedthe
regulationonMIPwithoutmuchcriticism.IntheEP–whichwidelysupported
theintroductionoftheMIP-discussionsonsanctionsfocussedratheron
whethertheCommissionwouldbegrantedenoughleewaybytheCouncilto
imposesanctions.MemberStateswerereluctanttoseetoomuchdiscretionin
thehandsoftheCommission;thecompromisethatwasfoundistheformulaon
RQMV.
OneofficialclosetotheECOFINCouncilandEurogroup,arguesthatMember
Statesagreedtothesanctionprocedurebecausenobodyreallybelievedthere
2Interviewquotesmarkedwitha*aremyowntranslationfromDutchtoEnglish.
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wouldeverbesanctionsundertheMIP(Interview49).Commissionofficials
describetheEIPmoreintermsofalastresortinextremecases.Youwouldneeda
verysolidargument(Interview9*).TheCommissionwouldhavetoprovethe
existenceofveryclearspillovereffects,thuslegitimisingmoreforcefulEuropean
action.Anobvioushousingbubblethatisnotaddressedcouldbeanexample.
ButasanevaluationbytheEFCalreadyconcluded,definingandidentifyingspill
overeffectsprovestobeverydifficult(EFC,2014).Allinallthesanction
procedureseemstofunctionmoreasadeterrent,sothattheprocedureistaken
moreseriously,ratherthananythingthatislikelytobeusedanytimesoon.As
ECFINCommissionerMoscovicisummariseswhatseemstobethepredominant
viewintheCommission:penaltiesareafailure,bothforthecountrysanctioned
andthebodyimposingthefine(FinancialTimes,2015).
DiscussionsatthestartofMIPfocussedmoreonotheraspects,suchasthe
scoreboardofindicatorsintheAMR.ItbringsthestateoftheEurozoneeconomy
backtoarelativelyconcisetableofvaluesandthresholdsandthusattractsboth
politicalattentionandcontroversy.Initiallyitwasdiscussedtolimitthenumber
ofindicatorstothree,justtogivesomewarningsignalsandraisepolitical
awareness.Butasthediscussionevolvedeverycountryhaditsownpreferred
indicator,whiledownplayingtheimportanceofindicatorsonwhichtheyscored
poorly.ItalydidnotwantpublicdebttobeincludedintheMIP,butthe
Commissionfeltthathighpublicdebtmakesaneconomymorevulnerableonthe
otherindicators.Germanyingeneralfavouredanintergovernmentalapproachto
structuralreformsovertheMIP,butalsodidnotaccepttheideathatacurrent
accountsurpluscouldbeseenasanimbalance.Theyhadtobereassuredbythe
Commissionthatasurpluswouldnoteasilyleadtosanctionsandonlyagreedto
theMIPwhenthethresholdsweresetunevenly(-4%ofGDPand+6%).3Asone
CouncilofficialexplainstheGermanviewatthetime:
IclearlyrememberSchäubletryingtodownplaytheroleoftheMIP.The
focuswasallonfiscaldiscipline.Andnoonereallydaredtodiscussthiswith
theGermans,everybodyfeltguilty,everyonehadtheirownimbalances
whichalsotranslatedintofiscalimbalances(Interview49).
WhiletheAMRandEIPattractedmuchcontroversy,thosethatworkwiththe
MIPcontinuetodownplaytheimportanceofbothtoolsinhowtheprocedure
worksinpractice.Theanalysesofimbalancesgodeeperthanthescoreboardand
thereismoretocompliancethanasanctionprocedure.TheMIPincludes
3Thisasymmetryinthresholdsisoftencriticizedbyeconomists,whoarguethattoomuchfocus
isputoninternaldevaluationindeficitcountries,withoutappropriaterevaluationinsurplus
countries(DeGrauwe,2013).AtthesametimeGermanyiscriticisedstronglybyotherpoliticians
whointerpretthe6%asaEuropeanrule(e.g.ItalianPrimeMinisterRenziinFT,2015).
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multilateraldiscussionsandthematicsessionsintheCouncilandEurogroupon
economicissuesthatreceivedlessattentionorwereconsideredtaboobeforethe
crisisandeverystepintheMIPisfollowedupwithbilateraldialoguebetween
theCommissionandeachstate.Somewouldarguethatthisiswherethereal
valueoftheMIPlies,characterizationsontheMIP’spurposerangefrom:‘an
authorityargument’(Interview17),to‘itcreatesasolidframeworkforagood
discussion’(Interview5*),or‘weusethesetypesofinstrumentsmainlytoopenup
adialogue’(Interview6*).
ThisinteractivedimensionoftheMIP(andtheSemesterasawhole)hasevolved
overtheyears.Thefirstyearwasdescribedbyoneintervieweeasapurely
paper-basedexercise(Interview16).ECFINofficialswouldsimplyreadreports
andinterpretstatistics.Giventhestateofeconomiccrisisinthefirstyearsofthe
MIPtheCommissioninterpreteditsmandateasstrictlyasitcould.Thefirst
SemestercyclesawmanyMemberStatesplacedundertheMIPandforsome
countriesallCSRswerelinkedtotheMIP.AtthesametimeCommissionofficials
wereinstructednottogiveintoamendmentsontheirCSRsinCouncil
Committees.ThiswasnottakenwellbyMemberStaterepresentatives:
Irememberthatthereweresomeseriousquestionsonthe
recommendationsandtheCommissioncameintothecommitteeandsaid
“wearenotallowedtodiscussthis”.SoIthough‘comeon,whatarewe
doinghereifwearenotallowedtodiscuss?’(Interview47–formerEPC
chair).
Thispolarisation,sotheCommissionwhofeltthattheMemberStateswere
allbadpupilsfocussedondoingaslittleaspossible,thatwasthefeeling
theygaveusatleastandconsequentlythecounterresponseoftheMember
Stateswasasenseof‘weneedtofindwaysaroundtheserecommendations
byanymeansnecessary’.Thiscreatedaveryunproductivedynamic.
(Interview25–Belgianofficial*).
Thetop-downapproachmetheavyresistanceandwasnoteffectiveperse.
MemberStatesstartedcallingfor‘moreleeway’and‘sufficientspace’for
‘nationalownership’(CypriotPresidency,2012;LithuanianPresidency,2013).
OverthenextSemestercycles,newelementswereaddedtoensurethatthe
CommissionandMemberStateswouldbemoreonthesameline.Thenumberof
bilateralmeetingsbetweentheCommissionexpertsandhigh-levelcivilservants
ofMemberStateswasincreased.MemberStatesreceivedtheopportunityto
commentontheCountryReportsanddiscussthesecommentsintheCouncil
advisorycommittees.SpecificMIPfact-findingmissionswereintroduced,which
canalsoincludeexpertsfromcentralbanks,academics,socialpartnersand
economicinstitutes,andcanbeprecededbyextensivequestionnairestobefilled
11
outbytheMemberState.TheCommissionalsosetupofficeswithEuropean
SemesterOfficersineachMemberStateasacommunicationliaison.Andfinally,
itisalsoworthnotingthatwithintheCommissionandbetweentheCouncil
committees,amoreinteractivebalancehasbeenreachedovertheyears,with
betterinclusionoftheactorsonthesocialandemploymentside(seealsoZeitlin
andVanhercke,2014;2015).
AclearturningpointintheusageoftheMIPhasalsobeenthechangeofthe
Commissionin2014.Junckerfromthestartbelievedinamorepolitical
approach,basedmoreonencouragementanddialoguethanthreatsand
sanctions:’Youcannotrunasinglecurrencyonthebasisofrulesandstatistics
alone.Itneedsconstantpoliticalassessment,asthebasisofneweconomic,fiscal
andsocialpolicychoices’(Juncker,2015a).AsoneCommissionofficialexplains
thechange:
TheformerCommissionwasmuchmoreabout‘wehavetherightanalysis
andifyouareopentocommonsense,youwillcometothesameconclusion’.
ThisCommissionismoreabout‘wehaveagreedtogetheronthepolitical
direction,solet’snowdoit’.(Interview16).
PoliticalintheeyesofCommissionofficialsmeansthattheJunckerCommission
usesamorepragmaticapproachintheMIP,withknowledgeandfeelingforthe
politicalcontextinaMemberState(Interview8*).Politicalmeansthatthey
recognisethatthereisnoconsensus,basedonscientificevidence,abouttherebeing
onlyonepolicyoption.(…)Sowhenitcomestothepoliticallysensitivestuffitis
muchmore‘handsoff’(Interview16).
TheJunckerCommissionhasalsorespondedtoCouncilcriticismsofanoverly
prescriptiveapproachbyslimmingdowntheSemesterCSRstokeypriority
issuesthatareactionableandmonitorablewithinatwelvetoeighteenmonth
timescale(EC,2015b).However,MemberStatesforwhichmoresevere
imbalanceshavebeenidentifiedcontinuetoreceivemoredetailedandtimeboundCSRs,withmoreintensifiedmonitoringonimplementation(EC,2016).
Furthermore,in2015theCommissionfounditselfneedingtoexplainitsflexible
interpretationofthefiscalrulesoftheSGP.Initsexplanation,theCommission
establishedanexplicitlinkbetweeneffortswithregardstostructuralreforms
anddecisionswithintheExcessiveDeficitProcedure(EC,2015).Asarguedinthe
introduction,MemberStates’representativeshavewelcomedJuncker’smore
openapproach.ButwheretheBarrosoCommissionwasseenastoo
deterministic,sotheJunckerCommissionhasbeencriticizedasmakingthe
Semestermoreambiguous,withcomplianceratesdeemedinsufficient.
12
Insum,thissectionhasarguedthatinterpretingthehierarchicalcharacterofthe
MIPfromalegalreadingoftheprocedurealonedoesnotfullycapturethe
underlyingdynamicsandpurposeoftheMIP.IthasalsoshownthattheMIPhas
evolvedovertimebasedonlearning-by-doingpracticesanddiscretionary
engineeringwithintheproceduretoadapttonewrealities.Fromastudyonthe
designoftheMIPorthesurroundingdebatesingeneral,however,onecannot
reachaconclusiveassessmentofeitherthehierarchicalcharacteror
effectivenessofthemorepoliticalapproachthathasemergedoverthepast
years.Thisrequiresin-depthcaseanalysis,asthenextsectionsintendto
provide.
TheliberalisationofprofessionalservicesinItaly
ItalyisundoubtedlyaprominentcasewhenassessingtheMIP.Itiswidelyseen
asexperiencingsevereimbalancesintheeconomy,mostnotablythehighest
publicdebtstockintheEurozoneincombinationwithpersistentloweconomic
growth.TheItalianeconomyhasstructurallyunderperformedcomparedto
otherlargeEurozonecountriessinceitintroducedtheeuroandhasseenasteep
declineinGDPduringthecrisisyears.TheIMFwarnedthatwithoutsignificant
changesItalyisnotexpectedtoreturntopre-crisislevelsofeconomic
performanceuntilthemid2020s.OtherEurozonestateswillhavegrown2025%largerthan2008bythen(IMF,2016).Theprospectofnotone,buttwo‘lost
decades’willnotonlycreateeconomicaldifficultyintermsofservicingthedebt
orforthealreadyvulnerablebankingsector,butalsochallengeconfidenceinthe
politicalclasstodeliverresults.SomeeconomiccommentatorsfearItalianswill
ultimatelyturnagainsttheeuroandtrytostepoutoftheEurozone(e.g.Fuest,
2016;Münchau,2016;Stiglitz,2016).
WeakproductivitygrowthiswidelyacknowledgedastherootcauseofItaly’s
pooreconomicperformance.EspeciallyTotalFactorProductivity(TFP)-the
portionofeconomicoutputthatisnotexplainedbyincreasesinlabouror
capital,butratherbyadoptingnewtechnologiesormoreefficientbusiness
practices-hasdeclinedby0.3%onaverageeachyearsinceeuroadoption.
Productivityinmanufacturinginthe1980sandearly90swaswellabovethe
levelsofGermanyandFrance.ButthesectorsinwhichItalyhadspecialized
faceddiminishingdemandandstrongcompetitionfromlow-wagecountriesin
recentyears.Theslowdowninproductivitypredatestheeurointroduction,so
causalityisnotagiven.
Productivityisoneofthemostdifficulteconomicvariablestoaffectthrough
policy,thefunctioningofthelabourmarket,educationalsystem,efficiencyofthe
publicadministration,taxincentivesandthebankingsystemareallpartofthe
13
story.ForItalythismeansthatallCSRsarelinkedtotheMIP.Onesegment
whereproductivityhasbeenespeciallylowistheservicessector.Accordingly,
Italyhasbeenrepeatedlyrecommendedtoincreasecompetitioninservicesto
driveinvestmenttowardsmoreproductiveproviders.Tacklingbarriersto
competitionintheservicessectorshouldbeseenaspartofabroaderpackageto
incentiviseatransitiontowardsamoredynamicindustrialstructurethatbetter
allowsresourcestoflowtomoreproductivesectors.Thissectionwillzoominon
oneaspectoftheCSRoncompetitionintheservicesmarket,namelythe
liberalisationofprofessionalservices,arecurringpolicyissueintheSemester’s
CSRs.ForItalythereisaspecificfocusonthreeheavilyregulatedprofessionsin
theCSRs:lawyers,notariesandpharmacists.
Aswithmanystructuralreforms,thebenefitsofincreasingcompetitionarenot
alwaysdirectlyvisibleorobviouswhereasthecostsareoftenimmediatelyfelt.
Inthecaseofprofessionsthishasresultedinheavyresistancetowardsthe
measuresfromtheprofessionalorders,makingimplementationofmeasures
particularlydifficultandthusclassifyingasahardcase.Thepositionofthe
Europeaninstitutionsisclear,asexemplifiedintheconclusionofaspecialreport
fortheEurogrouppublisheddaysaftertheresignationoftheBerlusconi
governmentinNovember2011: Tosecurebroadandlastingsupport[forstructuralreforms],the
governmentneedstoclearlyandconvincinglyexplaintheunbearablyhigh
costsoffailure,pitthebenefitstothesocietyasawholeagainstthe
unavoidableresistancefromvocalinterestgroups’loathtolosetheirspecial
privileges,andensurethateverybodycontributestotheadjustmentefforts
withfairnessprinciples(EuropeanCommission,2011;8).
LikemanyotherEuropeanstatesItalymakesadistinctionbetweenregulated
andnon-regulatedprofessions.ButinItalytheordersthatcontroltheregulated
professionshavebeenparticularlypowerfulandautonomous.Untilthefirstbig
reformofprofessionalservicesin2006startedtoerodetheirautonomy,the
ordershadatightgriponthemarket.Theycouldsetqualificationstandardsto
controlentry,setorrecommendtariffsandrestrictcompetitivepricing,thesale
ofcertainproducts,advertisingorbusinessstructuressuchasmultidisciplinary
firms.Fornotariesandpharmaciststherearealsoquantitativerestrictions,
drivingupcostsforlicenses.ManyItaliansperceiveoftheprofessionalsasan
eliteclassthatenjoysspecialprivileges,aworldwhichisdifficulttopenetratefor
outsiderswhodonothavetherightconnections(Carboni,2015).Liberalisation
ismeanttoopenupthesectors,increaseproductivityandlowerprices.Atthe
sametimeprofessionalordersregardthemselvesasofferingapublicservicethat
isnottobetreatedinasimilarfashionasnormalfirms.“Lawisanart,nota
trade”isanoften-heardargumentinthesedebates.Findingagood
14
communicativenarrativeonhowseeminglydetailedmeasuresrelatedtoissues
suchastheownershipoflawfirmsfitabroaderproductivitystrategyhasbeena
bigchallengeforItalianpoliticians.
Repeatedeffortsbypoliticianstoopenthisrestrictiveenvironmentfacedheavy
resistance,oftenproposalsweredelayedinparliamentanddiscardedwhenthe
governmentchanged(MicelottaandWashington,2013).ButfollowingtheEU
ServicesDirective(2006/123/EC)thepro-liberalisationProdigovernment
managedtobreakthroughtheprotestsandintroduceaseriesofservices
liberalisation,includingonprofessions.TheseliberalisationsmadeItalyjump
significantlyintheOECDProductMarketRegulationindexandstandoutasone
ofthebiggestdejurereformersofthatperiod.ButthePMRscoremeasures
legislationonly.Defactothereformsfaceddifficultiesinimplementationand
therewasstillsignificantroomforfurtherliberalisation,althoughtherewas
clearlysomesuccessfromthereform(OECD,2009;Pagliero,2015).
Inthesummerof2011theECB’sPresidentTrichetandPresident-electDraghi
tookanunprecedentedstepofsendingaconfidentiallettertobothItalyand
Spainwithalistofreformsuggestions.4ForItalythelettermentionsincreasing
competitioninservicesasakeychallengeandcallsforthefullliberalisationof
professionalservices.Thecentralbankerswereworriedaboutthesteeprisein
interestratesinthebondmarketsandexpectedbothcountriestocomeupwith
alegislativeresponse.ThelettermakesnomentionoftheECB’sSecurities
MarketProgrammebywhichthebankcandirectlyinterveneinsecondary
marketstocalmtheriseininterestrates.However,toallrelevantplayersitwas
obviousthatthereformlistrepresentedtheconditionalityattachedtothis
programmeastheECBheldoffonitsdecisiontoinvoketheprogrammewhile
waitingforaresponsefrombothcountries(Sacchi,2015).TheEurozoneleaders
endedupacceptingtheresponseoftheBerlusconigovernmentaftermonthsof
negotiationinacrisissummitonOctober26.Butbythenmarketshadlostall
confidence.Italyfoundlittledemandforitspaperinthemarketandinvestors
alsostartedturningagainstthesomeofthelargerbanks.Asiscommonlyknown,
thisledtothedownfallofBerlusconiandtheinstalmentofthetechnocratic
Montigovernment.
Thenew‘nationaleffortGovernment’–consistingofnon-partyaffiliated
technocrats-enjoyedanexceptionalmajorityinparliamentwithallmajor
partiesapartfromLegaNordsupportingit.Thiscreatedauniquereform
momentumwhereinitiallynoonewouldevendaretosaynotoMonti’sproposals
4TheletterwaslaterleakedandpublishedinthenewspaperCorrieredellaSerraof29
September2011.(SeealsoFinancialTimes,2011)
15
(Interview32).ShortlyafteritsinstalmenttheMontigovernmentintroduceda
significantsetofreformsthatcalmedthemarkets,basedonthreepackage-deal
decrees:‘SalvaItalia’,containingmeasurestoensurefinancialstabilityand
‘CresciItalia’and‘SimplificaItalia’,bothfocussedonmeasurestoenhance
growth.Thethreepackagesrepresentedmoreelaborateandboldplansfor
reformthanseenduringtheBerlusconidays,includingontheliberalisationof
professionalservices.Buttheeffectivenessofmeasuresisdependentonthe
detailsinthefewhundredlegislativeactsthatareneededtoimplementthese
decrees.
In2012whentheMIPwasfirstintroduced,Italywassimplyaskedtoimplement
andadopttheliberalisationmeasures.ItisclearfromthedocumentsthatMonti
receivedstrongsupportfromEUinstitutionsandhisapproachispraisedas
determinedandwide-ranging.ThefocusonimplementationbytheCommission
wasnotwhollyunfounded.Montiwasgoverningaverylargecoalitionwithvery
differentpolicypositionsandwhentheriskofdefaultstartedtowanepolitical
divisionstartedtoplayaroleagain.Especiallythecentreright–whichwasin
themajorityintheparliament-adoptedanincreasinglyoppositionalstance
towardsliberalisationmeasures.AfterayearofMontigovernmentlessthana
quarterofmeasuresfromCresciItalia–thedecreewithmostliberalisation
measures–hadbeenimplemented(IlSole24Ore,2012).Ittookparliamenta
yearandfivemonthstopassallthelegislativeactswithregardstoprofessional
services.Inthemeantimetheparliamentmanagedtosignificantlyadaptthe
proposals.
Montiatfirsthadbeenreluctanttowaterdownhismeasuresandhadalso
refusedpriorconsultationwiththeorders.Butthisstrategyturnedouttobe
basedonoverconfidence.WhenMontiignoredalettersenttohimby
Federfarma(representingalmostallpharmacyowners)andsignedby73MPs,
whichdescribedtheliberalisationmeasureasaveryserioussignof
unreasonablenesshewastakenbysurprisewhenBerlusconi’sPdLmanagedto
pushforwardanamendmentthatforcedthegovernmenttoacceptawatered
downversionoftheproposals.AfterthisincidenttheMontigovernmenthadto
takeamoreconciliatoryapproachtowardstheprofessionsandacceptmore
wateringdownoftheproposals.ThemostserioussetbackfromaproliberalizationpointofviewcameafewdaysafterthefalloftheMonti
governmentin2013.Abill(Law247/2012)waspassedbyparliamentgiving
self-regulatorypowerbacktotheorderoflawyers.Thebillre-centralizedpower
backtotheNationalBarAssociationandawayfromlocalorders.Itbacktracked
onthefreedomofcomparativeadvertisingonpriceestablishedunderthe2006
reformsandcontainednewrestrictionstoentertheOrdini.Aslong-timeSenator
andlawyerIchinoexplainsthedebatesatthetime:
16
They[thelawyers]donotrecognisethisproblemofproductivityIthink,
theydon’tacceptthisfieldofdiscussion.(…)TheBarAssociationhasa
particularlystrongpositioninparliament,therearealotoflawyersin
parliament.Iwasfiercelyagainstthisbillandwasseenasatraitor,because
Iwasagainstsomethingthatallthelawyersweresupporting.Allthe
lawyerswereinfavour,inabipartisanway,leftwingandrightwing.
(Interview36)
Monti’sgovernmentmanagedtoadoptanumberofliberalisationmeasureson
professionalservices,butnotsufficientlyintheeyesoftheCommission.Over
2013theCommissionacknowledgesthat‘someprogress’ismade,butcontinues
toupholdtheCSRinacallformoreambition.Intervieweesexplainthat
deliberatedecisionsweremadeatthetimetospendallpoliticalcapitalonissues
withimmediateeffectstocalmthemarkets,suchasthepensionreform.And
whileofficiallytheMIPdoesnotprioritisecertainreformsoverothersitwas
cleartoinsidersthatMontihadstrongsupportinhisapproachfromBrussels.
MontiwasconsideredbytheEuropeaninstitutionsastheirguy(Interview29)and
theworkingrelationshipbetweentheItalianandEuropeaninstitutionsatthe
timewasdescribedasexcellent(Interview47).
Thiswasnotthecaseforthegovernmentthatfollowed.Theelectionsof
February2013createdahungparliamentwithonlyaslightmajorityforthe
centre-leftcoalitionoverthecentre-rightandthestrongriseofthenewFiveStar
Movement.TheLettagovernmentthatfollowedclashedrepeatedlyandpublicly
withtheCommissionoverbudgetaryroomformanoeuvre.Lettahimself
describedthepressureoftheCommissiononbudgetaryissuesastoorigid,
withoutanyflexibility.ButtheSGPframeworkwasalsoveryimportantforhis
government.Itactedasausefulexternalconstrainttoavoidtheassault,the
attackoflobbies,parties,togetmoney,because2013wastheyearwhenwe
startedtosay:‘nowtheworstisbehindus,nowafterthreeyearsoftighteningthe
beltwehavetore-givemoneytopeople’.Butweavoideddoingthistoomuch,
becauseweneededtokeepthebudgetundercontrol(Interview,46-Letta).
TheCommissionhadalsobecomescepticalofthedecreaseinreform
momentum.TheInDepthReviewofearly2014clearlystrikesadifferenttone
thanpreviousdocuments.Italyiscriticizedforaslowpaceofreformsand
sluggishimplementationandcalleduponto‘decisivelystepupthepaceof
reforms’(EC,2014a:10).ItconcludesforthefirsttimethatItalywas
experiencingexcessivemacroeconomicimbalances,whichrequirespecific
monitoringandstrongpolicyaction.Thisstep,wherebyexcessiveimbalancesare
identifiedbutnosanctionprocedureisopened,didnotexistbefore.Itwas
introducedasanalternativetoopeningupthesanctionprocedureforItaly.The
ECBandanumberofMemberStateshadarguedforopeningasanction
17
procedure,buttherewasneversufficientsupportforsuchstepsasthiswasseen
astoopoliticallysensitiveandnotyetjustified.TheItaliangovernmentneverfelt
anycrediblethreat,arguingthatifItalyweresanctioned,Franceshouldbe
sanctionedtoo.
Theideabehindspecificmonitoringwas,asaCommissionofficialexplainsto
makethegovernmentfeelthatwearereallyinsisting.Wecomeandcheckinonce
everyfewmonths(Interview28).Inthe2014periodtherewasamissionalmost
everymonthandinthemeantimetheCommissionwantedtobeinformedonall
sortsofothersteps.Thisputstrongpressureontheadministration,which
struggledtofindenoughresourcestocopewiththerequiredinformation.The
amountofmissionswasperceivedbytheItalianofficialsasoverburdening,as
assessmentoverassessment.Thestepistoobureaucratictoreallyhavean
impactonpoliticians,whoingeneralarenotverymuchawareoftheexistenceof
theMIP.Thereseemstobemerittoclosemonitoringandstocktakingina
politicalsituationwhereimplementationofreformsseemstobeparticularly
challenging.Butasarealpressuretooltheaddedvalueofadditionalmonitoring
missionsishighlyquestionable.Asexplainedbyoneinterviewee:
…wewerealreadyunderclosemonitoringofEuropeaninstitutionsand
otherpartners,itisasifyoufeelthatyouarethekidbeingdisciplinedby
theparents,youalreadyknowthattheyarecheckingonyou.Thentheysay
‘nowwearegoingtoreallyreallycheckonyou’,youwerealreadychecking
onme,what’sthis?(Interview32,politicaladvisortoRenzi)
TheadditionalpressureonItalywasalsoneverreallytested.Soonafterthe
Commission’scriticalassessment,thegovernmentchangedcolourandRenzi
becamethenewPrimeMinister.TheNationalReformProgrammethatfollowed
containedawidesetofnewreformproposalsandforthefirsttimeincludeda
clearscheduleanddeadlines.InresponsetheStabilityProgrammeaskedfora
two-yearextensionofachievingthebudgetarymedium-termobjective.The
subsequentCommissionassessmentremainshighlycriticalofthelackof
progressonthe2013CSRs,butconcludesthatthenewNRPpresentsa
comprehensive,ambitiousandtime-boundplanforactionandthusgivesRenzi
thebenefitofthedoubtandconsidersthebudgetaryflexibilityjustified(EC,
2014b).
OnprofessionalservicestheRenzigovernmentintroducedacompetitionlawto
re-starttheprocessofliberalisation,butthelawfacedasimilarfateasprevious
attempts.Significantchangesweremadeinparliamentleavingtheinitial
draftersandsupportersofthebilldisillusioned:IfIweretheCommissionIwould
bedisappointed(Interview31–publicofficial).Thebillwasaprettygoodbillin
thebeginning,butitwasemptiedbyamendments,nowitshouldberewritten,the
18
wayitisnowitdoesnotmakesense(Interview36–Senator).Consciousabout
theoppositiontohisinitiativeRenziwasconvinceditwouldbebettertofocus
onchangingtheConstitutionfirst.UnderArticle117oftheItalianConstitution
theregulationofprofessionalservicesisattributedtotheregions,which
significantlyincreasesthenumberofvetopointstogetliberalisationlaws
adopted.ThenewConstitutionwouldattributecompetenceonprofessional
servicestothecentralstate.TheCommissionwassympathetictothisposition,as
Renziwasabletodeliverreformsonanumberofotherpolicyareas,most
notablywiththeJobsAct.ButwithItaliansvotingagainstthenewConstitutionin
December2016andthegrowthofTotalFactorProductivityprojectedtobe
almostfullyunchanged,evenslightlynegativeuntil2019(MEF,2016)
intervieweesexpectarenewedfocusonliberalisationmeasuresbythe
Commissioninthefuture.
DespiteItalyremainingintheexcessiveimbalancescategoryoftheMIPexerting
realpressureremainsproblematic.ForalongtimeEuropeplayedanimportant
roleinItaly’spathofstructuralreformsassocalled‘vincoloesterno’,auseful
externalconstraintthathelpedisolateItalianpoliticiansfromdomestic
opposition(Jones,2017).ButwithMontithingsslowlystartedtoturntowards
theexactopposite.ThereformsandausterityhadaheavytollonItalianswithout
clearresultsintermsofeconomicgrowth.Overthecourseofthecrisistherole
oftheEUhasslowlybecomesuspectintheeyesofItalians.WhenBerlusconi
pulledtheplugontheMontigovernmenthearguedforexample:
Thetechnocraticgovernmentisfinishingtodayandwehopetherewillno
longerbeasuspensionofdemocracy.(…)Montihasboweddowninfrontof
EUrequests,particularlythoseofthe‘GermanEuropeanUnion’ofNorthern
Europe,whichonlyleadtorecession(seee.g.Inquirer,2012).
InthedaysofMontiorevenLetta,someEurophileswouldargueforreformsin
thegeneralpublicpolicydebatewithsloganslike‘Europeaskedforit’‘wehave
theirbacking’.Butthisrhetorichadtochangeto‘Giovanniaskedforit’(the
ItalianversionofJoethePlumber),sinceoppositionpartiesstartedmakinga
distinctionbetweenwhatEuropewantedandwhatwasintheinterestof
Italians.Stepbysteprhetorickickedinthatglorifiedtheyearsbeforeeuro
introductionwhentheItalianeconomygrewfast.Peoplestartlookingfora
symboltoblameandtheEuropeaninstitutionsortheeuroareaneasytarget.
Forexample,byleadingFiveStarMovementpoliticianDiBattista:
WhatIknowaretheconsequencesoftheintroductionoftheeuro:theloss
ofpurchasingpower,thedeclineinwages,thereductionincompetitiveness,
thesocialdegradationandunemployment.(translatedfromGerman,Die
Welt,2016)
19
ThechangeinpoliticalrhetoricinpartexplainsRenzi’smoreconfrontational
stancetowardstheEU.Inthewordsofoneofhisadvisors:itdoesnotbuyyou
creditvis-à-visthepoliticalcommunitytoshowthatyouarecompliantwith
Europe,maybewiththe5%thatvotedforMonti,butcertainlynotwiththepublic
atlarge(Interview38).ItfurtherunderlinesthattheCommissionintheMIPis
onlyasstrongasthelegitimacythatisgiventoitinthedomesticenvironment.
TheSemesterwastakenveryseriouslywhenitwasintroduced,buttheleverage
roleoftheCommissionhaswornoffandisnowseenasalienintheeyesofpart
ofthepublic.AsLettaexplainshowpressureworkedinhistimeandnow:
Atthattimethepressurewasthere,withsanctions,notformalsanctions,
butpoliticalsanctions,thismeansitwasaperiodinwhichaninterview
withaCommissionersayingthatItalywasnotdoingitshomeworkwas
terribleintermsofreputationforthecountry.Todaythisisdifferent.
Europeisnotsopopular,sothereisnopoliticalsanctionbyaletterlikethat
oraninterviewlikethat.Butatthattimeitwasimportant,sotheagendaof
thegovernmentwasconditionedbythisattitude.Andyesthishaschanged
completelynow.(Interview46)
WiththeCSRsonlyveryindirectlyaffectingreformsinItalyandevenhaving
counterproductiveeffectsinthepoliticalarena,thequestionbecomeswhether
thereisanyaddedvaluetotheMIPinItaly?Theansweristhatthisaddedvalue
seemstobemostlytechnocraticandrelatedtotheSemesteratlarge,ratherthan
thespecificitiesoftheMIP.Forexampleintermsofadministrativecapacity,all
intervieweeswhoworkedwithintheadministrationfeltthat–despiteflawsand
risks–itwasimportanttocontinuemonitoringItalianreforms.Thenumberof
missionswascriticized,butthemissionsthemselvesandthesequencingofthe
SemesteranditsdocumentssuchastheNationalReformProgrammewereseen
asaclearimprovementwithaddedvaluefortheadministration.Codogno,who
wasresponsibleforthetechnicaldraftingSemesterdocuments,describespolicy
coordinationinItalybeforetheSemester(Lisbonprocess/OMC)asnotvery
compellingandwithdifficultytogettheattentionofdirectoratesinthe
administrationorMinistersthemselves,letalonewiderpublicattention.Butthis
changedcompletelyin2011.
ItchangedcompletelywhenitbecamepartoftheSemester.TheSemesterto
meisextremelyimportant,itmayseemstupidbuthavingthesametime
schedule,abudgetaryscheduleinEuropeandonreformsandhavingan
organiseddiscussiononthis,thiswasagoodchange.Let'sfaceit,thiswas
extremelyimportant.(…)Thisprocesstosomeextentforcedthedifferent
20
partsoftheadministrationtobealigned,sobasicallyitwasawaytoget
everybodyinvolved.(Interview47)
Whenitcomestotheliberalisationofprofessions,theaddedvalueseemstoliein
keepingtheissueontheagenda.Thisisareformwithoutalotofobvious
politicalincentives,asitwillnotleadtoelectoralsupportintheshortterm,nor
isitlikelytoattractmuchpositivemediaattention,whileitwillmakedirect
enemiesinparliamentandcivilsociety.Becauseofthesereasons,havingan
externalinstitutionliketheCommissionincludethistypeofreforminthe
broaderstrategyofproductivity-enhancingreforms,withfactsandfigureson
growthpotentialisthereforeseenasanimportantcontribution.Asone
ministerialofficialinvolvedwithcompetitionsummeditupfromhispointof
view:
WithouttheEUtherewouldnotevenhavebeendiscussioninthepastten
yearsonliberalisationinthisfield,nowatleastwetalkaboutit.(Interview
31)
TheBelgianpracticeofautomaticwageindexation
ManyeconomistsbelievethattheEMUneedssomesortofmonitoringand
coordinationofwagedevelopmentstocounterdivergingtrendsandsince
membersofacurrencyunionlackotheradjustmentmechanisms(exchange
rates)intimesofeconomicdistress(e.g.DeGrauwe,2016;HöpnerandLutter
2014;Sapir,2016).Eurozoneleadershaveidentifiedimbalancescausedby
divergingwagetrendsashavingplayedakeyroleincausingandaggravatingthe
eurocrisis,albeitnottheonlyfactor(Junckeretal.,2015).Butdiscussingwage
developmentsatEuropeanlevelhasalwaysbeencontroversialasthisisseenas
thesovereigndomainofsocialpartners.ECBPresidentTrichetwasknownto
carrychartsonEurozonecountrieswherewagerisesdidnotmatchproductivity
andcontinuouslywarnedEuropeanleadersaboutthedangersofthese
developments,butbeforethecrisisthishadlittleeffect.Article153.5oftheTFEU
explicitlystatesthattheissueofwagesisoutsidethescopeofEUcompetences,a
clausedeliberatelyintroducedatthestartofEMU.
Despiteitscontroversywagedevelopmentswerewidelydiscussedintheearly
daysofthecrisis.In2011Europeanleadersconcludedthe‘EuroPlusPact’,an
intergovernmentalPact,whichstipulatesthatwagesshouldevolveinlinewith
productivityandcallsforreviewingcentralisationandindexationinwagesettingmechanisms.ThestatusoftheEuroPlusPactisunclear;itwasonce
describedbyaCommissionofficialasliketheparrotinMontyPython:‘wedon’t
knowifit’sdeadorjustsleeping’.Asaresult,theMIPcanbeseenastheprimary
mechanismforsmoothingdivergingwagetrends.Atthesametimethe
21
RegulationontheMIPiscautiousabouttoomuchinterference.Recital25states
thattheCommission‘shallfullyrespecttheroleofsocialpartnersand
differencesinsystemsofwagesetting’andArticle1.3statesthattheMIP‘shall
notaffecttherighttonegotiate,concludeorenforcecollectiveagreements’(Reg.
1176/2011).Despitetheselegalsafeguards,wagedevelopmentsandwagesettingpracticeshavefeaturedprominentlyintheEuropeanSemesterandthe
MIP(seee.g.SchultenandMüller,2014).
Belgiumhasreceivedarecommendationonwagedevelopmentsanditssystem
ofwagesettingineverySemestercycle.TheBelgiancaseisespeciallyinteresting
sincetheCSRhasovertheyearsfocussedbothonbringingwagesintolinewith
productivityandondecentralisationofcollectivebargaining.Belgiumisaskedto
reformthecompetitivenesslawtomakesurethatcorrectivemeasurescanbe
takenandthatcompaniescanderogatefromthecentralwageagreements.
Accordingly,thisCSRcanbeseenasoneofthemostprescriptive
recommendationsonwages.Thecriticismisprimarilyfocussedonthepractice
ofautomaticwageindexation,wherebywagesautomaticallyfollowcost-of-living
trendsforalmostallsectors,thuspreservingpurchasingpoweragainstinflation.
MostMemberStatesabolishedthepracticeofautomaticindexationinthe1980s
andhavedecentralisedbargainingarrangementstovaryingdegrees.Indexation
wouldleaveaneconomyvulnerabletowage-inflationspirals,whichsincethe
rapidriseofoilpricesinthe1970sledtoincreasedoppositiontothepracticeof
automaticwageindexation.AtthestartofEMUthesystemagainreceivedheavy
criticism,countrieswithindexationpracticeswereseenashavingstructurally
higherinflationrates,thusimpairingthecommoninflationtargetoftheECB.In
responsetothesediscussionstheBelgiangovernmentinthe1990sintroduced
safeguardstoensurethatwagesandinflationwouldnotfallexcessivelyoutof
line.IndexationwastobebasedontheHealthIndex,whichexcludesprice
changesinalcohol,tobacco,petrolanddiesel.Andaframeworktopreserve
competitivenesswasintroduced:thewagenorm.
Thewagenorm–basedontheLawof1996-isabiannualnationalstandardfor
themaximumrealwageincreasesnegotiatedatsectorallevel.Thewagenormis
basedonaforecastofweightedrisesinnominalhourlylabourcostsinBelgium’s
threemaintradingpartners(France,GermanyandtheNetherlands).Assuch,it
aimstopreservecompetitivenessbyensuringthatwagesdonotevolveoutof
linewithneighbouringcountries.Sowagebargainingatsectorallevelshouldfall
betweentheindexandthenorm.Theindexationishoweverguaranteed,evenif
thismeansthewagenormwillbeexceeded(Art.6.2inthe1996Law).Despite
the1996Law,theCommissionfiguresshowthatthewagegapwith
neighbouringcountriesgrewmuchwiderduringtheperiod2005-2010.During
thisperiod,BelgianwagesrosefasterthantheEUaverage,whileatthesame
22
timetheaveragewagegrowthofthethreeneighbourswaswellbelowtheEU
average.Partofthewagegapcanthusbeexplainedbywagemoderation5in
thesecountries(especiallyGermany),buttheeffectsoncostcompetitiveness
withthemaintradingpartnersisvisiblenonetheless.Higherwagegrowthin
itselfisnotnecessarilyproblematic.Ithelpedpreservedemandintheearlydays
ofthecrisisinBelgium,astheindexationmechanismactedasaneconomic
stabilizer.Butifcontinuedhighwagegrowthiscombinedwithlowproductivity
growth(evenifBelgiumhasahighoverallproductivitylevel),competitiveness
willslowlydeteriorate,externalimbalanceswillincreaseandemploymentwill
suffer.Thetrendofslowdeteriorationofcompetitivenesswarrantedthe
openingoftheMIPandaCSRthatcallsformoreflexibilityforfirmstodeviate
fromtheindexonthebasisofproductivitydifferentials.
ThisrecommendationdidnotgodownwellinBelgianpoliticalcirclesandwas
interpretedasacalltofullyabolishautomaticwageindexationlikeother
countrieshaddoneinthe1980s.
PoliticallythefirstCSRswereseenasafullfrontalattackontheBelgian
socialsystembytheECBandtheEuropeanCommission(Interview19,
publicofficial*).
Thefirstreportswereabsolutelynotwell-received,itwasveryone-sided
andbasedonthefetishofDGECFIN[consideringautomaticwage
indexationasflawed](Interview23,tradeunionist*).
Theresponsewaslike‘theyaremeddlingtop-downinoursocialmodel’.And
yousawimmediatelythattheserecommendationswereusedpoliticallyby
theright-wingpartieswhoframedtherecommendationasabindingnorm
thatshouldbeimplementedblindly.(Interview25,advisortoDiRupo*)
Atthetime,someactorsbelievedthattheCommissionandECBwereona
crusadetodiminishthepoweroftradeunions.A2012DGECFINstudyhadfor
examplecreatedalotofbadbloodbysuggestingthatreformsleadingtobetter
employmentoutcomeswouldincludeensuringthatwagebargainingwouldbe
organisedina‘lesscentralizedway’,withreformspossiblyresultingin‘an
overallreductioninthewage-settingpoweroftradeunions’(EC,2012a;104).
Automaticwageindexationhasbeenawidespreadpracticesincethe1920sand
iswidelyseenasanessentialpillaroftheBelgiansocialmodel.Theindexation
5Inthe2017AnnualGrowthSurveytheCommissioncriticizesnotonlyMemberStateswhose
wageshaveoutgrownproductivitydevelopments,butalsostateswheretoomodestwage
developmentsleadtoweakeraggregatedemand(EC,2016).
23
practicehasovertheyearsbeenheavilydefendedbythetradeunions.The
Belgiantradeunionshaveastrongpositioninthestatestructure;theycooperate
andenjoywidesupport.Theyaredividedalongideologicallines(Christian,
LiberalandSocialist),ratherthanalongregionallines(FlemishandWallonia),
whichgivesthemadditionallegitimacytocounterdivisivetrendsintheBelgian
statestructure.Thesystemofindexationgivesthetradeunionsanation-wide
negotiationbaseline;fromthere,theycannegotiateadditionaltop-upsin
collectiveagreements,givingthemanadvantageoverthetradeunionsine.g.
GermanyortheNetherlands.Besides,itisseenasanimportantelementof
solidarity,sinceitalsoappliestosectorsthathavelessbargainingpower.Most
politicalpartiesdarenottouchtheindexandevenemployerswanttofocuson
howtomakethesystemworkratherthanabolishingthepracticeofwage
indexationassuch,forstrategicreasons(Interview20).Inthedomesticdebate
(soexcludingCommission,OECDandIMF)untilthecrisisnostudiescanbe
foundthatargueforradicalchangestotheindex(NBB,2012/Annex6).Asone
intervieweesumsupthepositionoftheBelgians:
Theinternaldebateformany,manyyearshasbeen‘nooneshalltouch
indexation’,youcanchangethename,sowhatdoesindexationmean,but
indexationassuchshouldstay,thishasnotreallychangedbecauseof
anything.Thisistheholycow,youshallnottouchindexation(Interview22,
publicofficial).
BelgiumtriedtochangetheCSRsothatthepartonwageindexationwouldbe
takenoutandtherecommendationwouldfocusoncompetitivenessmore
generally,butfailedtofindsupport.PrimeMinisterDiRupoevenbroughtthe
issueuptoEuropeanCouncillevel,whichisveryrare,butitdidnothelphiscase.
ManyMemberStatesfollowthelineoftheECBinclaimingthatindexationdoes
notcontributetoawell-functioningEMU,becauseofitsinflationaryeffects.
Belgiumhascontinuouslytriedtoarguethatduetoitssize,spillovereffects
wouldbesmall,butthesupportforchangingtherecommendationwasverylow.
OneintervieweedescribeddiscussionsintheCouncilCommitteeswheretheECB
wouldbethefirsttobeallowedtospeakandwouldheavilyargueagainst
automaticindexationandotherrepresentativesspeakingafterwardssimply
adoptedthelanguageoftheECB.Otherrepresentativesindeedadmittedthat
theyvaluetheroleoftheECBinCouncilCommittees.Theyareseenbysometo
havethebest-informedpositionduetotheirextensiveresearchservices,but
theyrarelyfindalotofsupportfortheirproposedamendmentstoCSRs.
Therecommendationwashowevernotwithoutitseffects.TheDiRupocabinet
organisedseveralthematicsessionsaroundcost-competitivenessinBelgiumand
askedadvisoryinstitutionstocomewithathoroughanalysisonthe
competitivenessofBelgium(NBB,FPBandCRB,2011).Theanalysisofalossof
24
competitivenesswaswidelysharedamongBelgianpolicy-makers,butthe
explicitlinkwithwageindexationhasbeencontroversial.Theideawastocome
toamorefact-baseddebate,astheBelgianofficialsfoundtheCommission’s
academicunderpinningsthinandbiased.TheDiRupogovernmenttoldthe
Commissionthattheyhadastrategytolimitwagegrowthwithouttouching
indexation,buttheyneededtimetoachievethedesiredeffects.TheCommission
grantedthisflexibility,butremainedofthepositionthatitwouldbebetterto
addressthesourceoftoohighwagegrowth.ThereforeitcontinuedtoissueCSRs
onindexationinasharptone,claimingBelgiummade‘limitedprogress’onthe
issue.ThetoneledtoannoyanceinBelgiumastheDiRupogovernmentfeltit
wasalreadytakingsignificantsteps,leadingtosocialunrestandstreetprotests.
AtthesametimetheCommissionrealiseditsheavycriticismontheindexation
practicewasfallingondeafearsanditwastimetochangetactics.From2014
onwardsthetoneindocumentsismorenuancedandin2015theword
‘indexation’istakenoutoftheCSR,likeDiRupohadwantedallalong.Thisstep
canbeexplainedbythefactineffectivenessofthepreviousstrategy,butalsothe
installationofthe‘political’CommissionJuncker,whichdecidedtotakeamore
distantapproachtowardspoliticallysensitivetopics.WithJunckerhimself
comingfromLuxembourg–whichisoneamongthefewcountriesthathas
automaticwageindexation–andtheSocialAffairsCommissionercomingfrom
Belgium,itisnotunlikelythatthis‘politicisation’hasplayedastrongrole.
However,whatalsohasbecomequiteclearintheinterviewsisthatthe
interactionbetweentheEuropeaninstitutionsandBelgianactorshasplayeda
role.Severalintervieweeshavedescribedamoreopenattitudeandwiderpolicy
focusindiscussionsfrombothsidesinlateryears.Intechnicalmeetingsthe
expertswoulddiscusstheeffectsofindexationintwototwo-and-halfhour
sessionsandpoliticaldiscussionswereheldwiththeCabinetofthePrime
Minister.Somenotethattherewasevensomeconvergenceofpositionstowards
theendoftheDiRupogovernment,withtheBelgiansbecomingmorewillingto
discussthenegativesidesofindexationandtheCommissionbecomingmore
opentowardsthepositives.
Theperceptionoftheproblemhaschangedfromtwosides,alsofromour
side,especiallyintherecommendation,ithasbecomemorediplomatic,
moreneutral.Therewastoomuchfocusonindexation.’Or,‘Ithinkinitially
fiveorsixyearsago,itwas‘wageindexation,itisano-brainer,itdoesnot
makesense’(…)Soalsofromoursideithasevolved,wehavemore
emphasizedthatiteffectsemployment,theadjustmentofyoureconomy
(Interview17–Commissionofficial).
25
Openinguptherecommendationin2015hasmadeitmuchmoreeffective,
ithasopenedupthenegotiationandfindacommonsolution,politically
(Interview24–Belgianofficial).
WhatcertainlyalteredtheimpactthattherecommendationhadontheBelgian
debatewasthechangeofgovernmentinthefallof2014.InthenewMichel
government,thesocialistpartieswerereplacedbytheFlemishright-wingN-VA
party.TheN-VAmadeastrongcaseforachangeofcourseonsocioeconomic
issues,withreformstoenhancecompetitivenessasaprimaryaim.Itis
importanttounderstandthattheN-VAcameintoexistencetoestablishareform
ofthestatetoensuremoreindependencefortheFlandersregion.IntheMichel
government,theydidnotmanagetosecureanymajorconcessionsonstate
reform,whichmakesaclearchangeofcourseonsocioeconomicissuesallthe
moreimportanttopreservetheirelectoralbase.Forthesubstanceofthese
economicreformstheN-VAleaderBartdeWeverinhispolicy-outlinedocument
duringtheformationofthegovernmentcitesallthe2014CSRsforBelgium
literallyandcallsuponthenewgovernmenttoimplementthese(DeWever,
2014).6SuchamovewouldlikelyleadtostrongoppositioninlessEurophile
states.
ToclosethewagegapwithneighbouringcountriestheMichelgovernment
enactedaso-called‘indexjump’.Theindexjumpisaone-offcorrectivemeasure
comprisingatemporarysuspensionofallwageindexationagreementsuntil
inflationhaserodedrealwagesby2%.Intermsofcostcompetitivenessand
loweringunitlabourcost(ULC)growth,itdiditsjob.The2016CountryReport
notesaflatULCgrowthin2014-2016,whichincombinationwithmoredynamic
growthinothercountrieshasresultedinanarrowingofthewagegap(EC,
2016b).TheCommissionneverrecommendedanindexjumpspecifically;for
themthepreferredsolutionhasalwaysbeenareforminthebroadercontext,
thismeantreformingtheLawof1996.But,sinceoveralltrendswerecorrecting,
evenifdonebyothermeans,BelgiumwastakenoutoftheMIP.
ThisdecisiontotakeBelgiumoutoftheMIPwascelebratedbythegovernment
asasignthatBelgiumisontherightpath.Thegovernmenthadtrouble
explainingwhattheyweredoing,astheirmeasuresarearousingheavyprotests.
BeingtakenoutoftheMIPisseenasthattheirworkisbearingfruit.Especially
fortheN-VAthisisanimportantpoliticalsignaltoshowthedifferencewiththe
previousgovernment,whichispreciselythemessagetheywanttogetacross
(Interview27,N-VAofficial).IthastobeborninmindthattheMichel
6InrealityhewouldfocusprimarilyonthepartsoftheCSRsthatwereinrelativeaccordwiththe
viewofhisparty,suchaspensionreform,wagesettingorinpartthetaxshiftawayfromlabour.
26
government(andespeciallyN-VA)isinadifficultpositiononotherright-wing
issues:Belgiumin2016experiencedarelativelylargeinfluxofasylumseekers
whichcreatedalotoftensionandthebudgetdeficitincreasedin2016,whereas
itdecreasedsteadilyunderDiRupo.
However,therealconcernhasalwaysbeenlong-termsustainabilityandthusa
reformoftheLawof1996.WiththeDiRupogovernmentalsopromisinga
reformofthislaw,butneversufficientlydelivering,theCommission’sdecisionto
takeBelgiumoutoftheMIPbeforeadefinitivedealisstruckwastakenbadlyby
anumberofMemberStates.TheyfearedthatthiswouldrelieveBelgiumofthe
necessarypressuretoreformindexation.Intervieweeshoweverstressthat
despitethedecisiontotakeBelgiumoutoftheMIPpressureisstillverymuch
felt.
SotheytookBelgiumoutoftheMIPnow,becauseitisclearthatwewillbe
backinifnothinghappens.TheCommissionandtheEFCgaveoffthis
warning.’‘..itcreatesstrongpressureonthisgovernmentanditisreallythe
firsttimethatIseethat,thatthepressureissostrong(Interview24).
ThisdecisionbytheEFCputstheCommissioninapositionofleverageinwhich
peerpressureismoreeffectivethaninothercases.Itisclearthatitwouldbea
verybadpoliticalsignforthegovernmentiftheywouldbeputbackintotheMIP.
Andthisputspressureonthenegotiationstocometoanagreement.Inthefallof
2016BelgiumhadtocomewithitsDraftBudgetaryPlanfor2017inorderto
meetthedeadlineforthebudgetaryscrutinyoftheTwo-Packregulation.InMay
2016BelgiumhadjustmanagedtoescapetheopeningofanExcessiveDeficit
Procedure.Theso-calledArticle126(3)TFEUassessment,thefirststepinthe
EDP,hadgivenBelgiumleewayduetostructuralreformsbeingimplemented
thatwouldbenefitpublicfinancesinthelong-term,primarilythepension
reform.ButforthefollowingyearitwasclearthatBelgiumneededtoputinan
extrafiscaleffort(EC,2016a).
Aheadofthesebudgetarynegotiationsitwascleartothegovernmentthatthey
neededtocomeupwithabroaderstorythanjustfiscalcutbacks.Areformofthe
1996Lawwouldbethemostprominentontheagenda.Oneintervieweewho
wascloselyinvolvedinthenegotiationsoverthe1996Lawarguesthatthereisa
clearlinkbetweenthebudgetaryassessmentoftheCommissionandtheplanned
reform:
Sotheysaytothegovernmentonthelawof’96,ifyoubookthat,wewillbe
lessproblematicwiththebudget.(…)IamsurethattheCommissionin
anothersituationwithanothergovernmentwouldneverdothat,becauseit
wouldchangenothing.Butitmeansthatwearenowinasituationwhere
theCommissionalsoanalysesthepoliticalsituationinacountry.(Interview
24–publicofficial)
27
Thislinkisallthemorecuriousgiventhefactthattheassessmentofthe
Commissioninautumnisapurelyfiscalone,dejureeffortsonstructuralreforms
havenoplaceintheautumnassessment.IfaMemberState’sbudgetshows
significantdeviationfromtheplannedadjustmentpath,itisdeemedatriskof
non-compliancewiththeprovisionsoftheSGPandanewassessmentfollowsin
springonwhetherornottoopenupanEDP,theArticle126(3)TFEU
assessment.Onlyinthislaterassessmentaregrowth-enhancingstructural
reforms,i.e.thosethatimprovethepublicfinancesinthemediumterm,included
intheassessmentofwhethertoescalateorde-escalatewithintheprocedure.
FormallytheMIPandEDPareseparateprocedures(apartfromtheindirectlink
intheArticle126(3)TFEUassessment).ACommissionofficialdeniesthe
existenceofadefactopoliticallinkintheautumnassessment,arguinginstead
thatthisispoliticalrhetoricontheBelgianside(Interview48).Butwhilethe
autumnassessmentisapurelyfiscalonemadeandpublishedbytheCommission
services,theCommission(thisincludestheCollegeofCommissioners)also
adoptsaresolutiononthebasisofthisassessmentbytheservices,whichinturn
isdiscussedbytheEurogroup.WiththeadoptionoftheEurogroupas
requirementonecaneasilyimaginethatpoliticalconsiderationsplayarolein
decisionsontheEDP.Asevidencedbythisexplanationonthecontextofthe
previousquote:
Itwassaidinabilateralmeeting;itwasalsothefirsttimeinameeting
betweenthegovernmentandtheCommissionthatthedeskexpertswere
notpresent.ItwasonlythepoliticallevelandtheCommission,fromtheEU
itwaspeopleoftheEFCandtheSecGen.Theywillperhapsnotrecogniseit,
butforthegovernmentitwasveryclear.(Interview24–publicofficial)
OtherintervieweesinBelgiumseemedtohaveasimilarimpressiononlinkages
betweentheEDPandtheMIP,forexample:
Ithinktheywillgivetheirapprovaltothebudget,butthenwehavetoshow
thatweareseriouswithourstructuralreforms,andthatofcourseincludes
thereformofthe1996Law.(Interview27,N-VAofficial*)
InOctober2016theMichelgovernmentagreedonanewbudgetincludinga
reformoftheLawof1996.Asarguedinthissection,thebudgetarypressureand
CommissionCSRonthelawhadbeeninfluentialinthenegotiations.Thereform
didnotabolishindexation,butthenewlawallowsforbettercorrectiontoensure
thatanewwagegapdoesnotemergeinthefuturebymakingthewagenorm
stricter.ThesenewsafeguardssufficientlysatisfiedtheCommission,which
concludedthatBelgiumhadachieved‘substantialprogress’ontheCSR(EC,
2017).ThisinpracticemeansthattheCSRwillbetakenawayinfutureSemester
cycles.Interestinglyenough,theCommissionassessmentonthebudgetshows
28
notracesofapoliticallinkbetweenbudgetaryflexibilityandthereformofthe
1996Law.Theautumnpackageincluded3billioneuroinadditionalsavings,but
theCommissionconcludedthatBelgiumisatriskofnon-compliancewiththe
provisionsoftheSGPsoa126(3)TFEUreportiswarranted(EC,2016c),aclear
setbackforthegovernment.But,hopefulaboutthemoreholisticspring
assessment(whichincludeseffortsonstructuralreforms),theMinisterfor
BudgetaryAffairsWilmespromised:‘For2017Europewilllookwithamore
favourableviewatourcountry’(DeStandaard,2016a*).
Concludingremarks
TheMacroeconomicImbalanceProcedurerepresentsthemostfar-ranging
integrationistinitiativeintherealmofsocioeconomicpolicy-makingsofar.The
MIPrecommendationstouchuponsomeofthecorecompetencesofMember
States,whereEUinvolvementbynatureissensitive.Forthisreasonthe
proceduredeservestheattentionfromEuropeanintegrationscholarsasitoffers
valuablelessonsonboththenecessitytoaddresstheconsequencesofnational
policieswithinacurrencyunion,aswellasthelimitsanddifficultiesofEU
integrationinthisdomain.
ThispaperhasshownthatweshouldnotperceiveoftheMIPasatop-down
complianceframework.Theanalysisalsoshowsthatamoreintrusiveapproach
intheMIPisproblematic,astheEUitselfbecomespartofdebatesalong
domesticpoliticalalignments.Structuralreformsarehighlycontextualand
involvelong-standingdebates.InItalypoliticianshavetodownplaythe
significanceofEUinvolvementinthepublicdebatesincetheperceptionoftheir
involvementhasbecomeanargumentforpoliticiansandinterestgroupsto
argueagainstcertainreforms.InBelgiumanoverlyprescriptiveapproachledto
fierceresistancefrompoliticiansandtradeunionsandtheCommission’s
argumentthatwageindexationassuchisproblematicfailedtoconvinceeven
thosewhostandfavourabletootherreforminthisarea.Itisquestionable
whethertheEUshouldwanttoplayanoverlyprominentroleindomestic
debatesastheEuropeaninstitutionsdonotseemtohavethecapacitytoassume
thepolicyconsequencesoftheirrecommendedaction.Thisshouldbeabasisfor
cautionwhenarguingforformsofautomaticityincompliance,suchasastricter
useofthesanctionprocedure.Thisargumentalsoholdsforcurrentlydebated
innovations;suchasmakingaccesstotheEUbudgetpartlyconditionalon
implementationofrecommendationsortoaccesstoanyformofsolidarity
mechanism/fiscalcapacity.
Giventhesepoliticaldynamicsitisalsoimportanttoremovetheperceptionthat
indeedtheMIPhasactedasaveryhierarchicalprocedureinrecentyears.The
29
Commissioninterpreteditsmandatewithadegreeofrigouratthestartofthe
Semester,butthishaschangedovertimeastheCommissionbecame
increasinglyawarethatithastobalanceinafragileeconomic,socialandpolitical
equilibrium.TheroleoftheCommissionhaschangedovertimebasedon
learning-by-doingandtheinstalmentoftheJunckerCommission,whichhas
introducedamorepoliticalapproachthattakesbetteraccountoflocalcontext.
Thisevolutionovertimehasgonehandinhandwiththedevelopmentofthe
interactivedimensionoftheprocedure.Actorsseetheincreaseofdiscussions
withtheCommissionasuseful.Thebilateralmeetingsalsoforceofficials,both
withinministriesandintheCommission,tocometoaconsensusviewonpolicy
issuesandbriefhigher-levelofficialsonthestateofreform.Discussionsinthese
bilateralmeetings,technicalmeetingsaswellasthematicsessionsinCouncil
advisorycommitteescanhelpintheuploadinganddownloadingofpolicyideas
andbestpracticesandalsoleadtoabetterunderstandingofeachother’s
positions.Itseemsthatindeednon-hierarchicalfeaturessuchasdeliberation
remainimportant.Thedevelopmentoftheinteractivedimensionshouldalsobe
seenasrecognitionthatthestrengthoftheMIPliesperhapsmoreinits
contributiontokeepingissuesontheagenda.Itcanhelpincreatingasenseof
urgencyonimbalancesandensurethatvariousactorsarealignedaroundpolicy
priorities,ratherthanexertingdirectpoweroverthedesignandimplementation
ofreforms.Additionalmonitoringmissionsforcountriesthatexperience
excessiveimbalancesarealsoseenasmoreeffectivearoundthesepurposesthan
astoolsofpoliticalpressure.
Allinalltheroleofthesanctionprocedureseemstobelimitedandpressure
shouldbeunderstoodmoreintermsofpoliticalpressureandreputational
damage,ratherthanlegalcoercion.CharacterizationsoftheMIPastechnocratic
dominanceorasdisplacingdemocracyseemeitherdatedormisplaced.
Reputationaldamageisnotsoftperse:intervieweesinItalydescribethat
politicalpressurefromtheEUinstitutionswasfeltstronglywhentheEU
consideredreformmomentumtobeslowingdown.Belgiumisamoreclearcut
caseinthisregard,inthebudgetarynegotiationsofthegovernmentitwasclear
topoliticalplayersthattheycouldbeplacedbackintotheMIPifthecompromise
didnotalsoincludeareformofthelawonindexationpractices.Asapolitical
signalthiswouldhavebeenconsidereddamagingtoagovernmentthatprides
itselfonagoodrecordintermsofcompetitiveness-enhancingreforms.This
discussionprovesthathierarchicalelements(albeitnotlegalcoercion)canthus
bebotheffectiveandcounter-effectivedependingondomesticfactors.
Determiningthesefactorswithmoreprecisionwillbeoneofthekeychallenges
inmyPhD.
30
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