7 - Europe to the Rescue?

Summary

The Great Recession revealed the inadequacies of Europe's economic order. Having lost many important tools of economic policymaking, as described in Chapter 6, member states were unable to protect themselves from the financial storm and were constrained in their capacity to rebuild quickly after the storm had passed. The Great Recession clearly demonstrated that Europe remains divided in terms of its levels of economic development and that its individual member states are exposed to the world's economy in significantly different ways.

In the aftermath of the Great Recession, we find a burgeoning awareness of the role that the EU could, and should, play in filling the policy vacuum. There is a growing chorus of voices calling for the EU to assist member states in overcoming their structural and cyclical challenges. As an earlier European commissioner for employment, social affairs and inclusion noted:

It has been broadly accepted that due to the limited availability of adjustment mechanisms for national economies within the EMU, unemployment and social crises risk developing to a greater extent in a currency union than in a more flexible exchange rate regime, unless they are anticipated and addressed by the currency union on a collective basis. (Andor, 2013a: 2, emphasis added)

This is clearly a step in the right direction. Further progress is evident in the EU's initial response to the COVID-19 pandemic. The varied and asymmetric impact of the pandemic across member states has underscored the need to secure more local responses and resources. Still, Europe has a very long way to go. This chapter considers two of the most important things that the EU could do to help policymakers manage their local labour markets, and then evaluates the EU's progress on both fronts.

The most important thing that the EU could do to support local labour markets is to provide a strong and common regulatory floor, upon which member states could build more elaborate protections (to meet local needs). The EU has the legal authority to provide that regulation, coordinate member state policies and delegate the necessary authority and resources accordingly. Unfortunately, it has proven very difficult to secure these sorts of protections, and much of the EU's recent regulatory efforts have been aimed to facilitate market integration, rather than to protect and advance workers’ interests. The first part of the chapter briefly surveys this regulatory history.