European Parliament Committee: Troika responsible for high unemployment in Memorandum countries

On Thursday a public hearing was held by the Committee on Employment and Social Affairs of the European Parliament about the social and employment consequences of the troika’s programmes in Greece, Cyprus, Portugal and Ireland. During the hearing experts stressed that while it was understood that public deficits needed to be reduced the policies implemented failed to produce economic growth expected.

Perhaps one of the most damning condemnations of troika mandated policies relate to the liberalisation of labour markets. Experts noted that while labour market reforms such as wage cuts and weakening of collective bargaining were implemented in order to boost competitiveness, in all four bailout countries unemployment has skyrocketed. As a result citizens, both unemployed and not, have borne the brunt of the effects of these reforms for which they have seen little return.

Alejandro Cercas an MEP and a member of the committee said, “The social side cannot stay out of the Troika programmes analysis. Millions of citizens are victims of those programmes. In order to avoid a fracture between institutions and citizens, there is a need for a democratic dialogue,”

Furthermore the high unemployment rates put pension funds in jeopardy, have already caused mass emigration and, particularly in the case of youth unemployment, if not immediately addressed are likely to lead to structural joblessness with long-term effects on competitiveness and productivity.

Raymond Torres, the Director of the International Institute of Labour Studies ILO, was reported as having said that the negative effects of the Troika’s actions had been underestimated. with reforms happening too fast and without care, with too little input from social partners.

Now the Greek newspaper Eleftherotypia has published what it says are 15 key criticisms (link in Greek) included in a leaked copy of the draft report by the committee. The draft will be voted on by the European Parliament and if it is passed will be included in the final report into the troika’s actions due in the coming months.

Below are the committee’s key findings:

1. European institutions share responsibility for the measures imposed by the fiscal adjustment programmes.

2. The European Parliament was sidelined at all stages of the undertaking: both in the preparatory stage and in the development of the programmes and the corresponding measures leading to a democratic deficit.

3. The programmes in question were designed without regard to impact studies of their likely consequences.

4. The fiscal adjustment policies and structural reforms in the four Memorandum countries have resulted in excessively high unemployment rates, historic levels of job-losses and reductions in employment conditions. It is highlighted that the the consequences of the high unemployment, particularly with regards to the social protection systems and pensions are even more serious as the gap between the goals of the “Europe 2020” strategy and real situation are widening rapidly.

5. Young people are particularly hard-hit by the high levels of unemployment with the situation in countries such as Greece, where the relevant rate is 50%, and in Portugal and Ireland where it is over 30%, being truly desperate.

6. Vulnerable groups such as the long-term unemployed, women, seasonal workers and disabled people – have been particularly affected and show higher levels of unemployment than the national averages.

7. The huge disparities, if they are not addressed in the case of the younger generations, will cause structural damage to the labour markets of the four countries, will hamper the abilities of the countries to recover and will cause mass emigration.

8. The “Europe 2020” strategy rightly states that the factor that must be closely watched is the employment rate which reflects the availability of human and financial resources necessary to ensure the sustainability of our financial and social model.

9. Reductions in the rate of job losses are being confused with a recovery of the jobs already lost.

10. In the last four years the total job-losses amount to 2 million in the four countries which is equivalent to 15% of existing employment positions.

11. As part of the conditions placed upon financial aid, the programmes included recommendations for specific cuts in arenas fundamental to combating poverty such as pensions, basic social services and health care which are necessary protections for vulnerable groups.

12. Between 2008 and 2012 income inequality increased in the four countries at the same time that austerity measures led to cuts in social spending and unemployment benefits.

13.  The proportion of those at risk of poverty or social exclusion has increased in all four countries. In only the past three years the proportion of those at risk of poverty or social exclusion has increased by 26% in Portugal and 15% in Ireland.

14. At least in Greece, Ireland and Portugal the programmes include a series of detailed measures regarding public health system reforms and health care spending cuts, despite the fact that article 168 forbids such interventions.

15. The Council of Europe has already condemned the pension cuts in Greece, deeming them to constitute a violation of article 12 of the European Social Charter of 1961 and article 4 of its Protocol.

Few would deny that high structural deficits in countries such as Greece needed to be addressed at the start of the crisis. However as the European Parliament’s troika inquiry progresses, it is also becoming increasingly clear that in underestimating the effects its dictates would have on employment, the troika has, for now, merely traded one serious problem for another.