Union crisis puts social partnership at risk

The recent financial scandal concerning the BAWAG bank, owned by the Austrian Trade Union Federation (ÖGB), is thought to have weakened the country’s trade union movement. Experts disagree on whether the current ÖGB crisis will have a far-reaching impact on the country’s system of collective bargaining and social partnership.

In the spring of 2006, the media and the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB) uncovered information about underhand derivatives trading carried out by the federation’s own bank, the Bank for Employment and Commerce (Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG, BAWAG PSK). It soon emerged that BAWAG’s derivatives trading with Refco, an insolvent futures broker in the United States (US), and other speculative financial transactions in the Caribbean had resulted in losses of €1.3 million from 1995 to 2000. Consequently, the ÖGB President, Fritz Verzetnitsch, and the ÖGB Chief Secretary for Financial Affairs, Günter Weninger, were forced to resign (AT0604019I). Most union officials criticised both the ÖGB president and chief secretary for their decision to use several business branches of the ÖGB, including the strike fund, as collateral, without informing other members of ÖGB’s supervisory board. In so doing, unions claim they had jeopardised ÖGB’s capacity to act. Both men had justified their actions as being necessary in the bid to protect the bank.

Rescue package for BAWAG

However, in late April 2006, new claims put forward by Refco shareholders and creditors towards BAWAG prompted US courts to block the bank’s assets available in US territory to a value of $1.1 billion (about €0.87 billion). These funds had been secured for possible compensation payments. As a result, BAWAG was threatened with insolvency, which would have meant the discharge of its ÖGB liability, consequently leading to the federation’s bankruptcy.

The conservative-populist government agreed on a rescue package for BAWAG and ÖGB in order to avoid the negative impact that the threatened insolvency of Austria’s fourth largest bank would have on the country’s reputation as a stable financial marketplace. On 8 May 2006, the Austrian parliament unanimously approved a special law, providing for a temporary security of €900 million for the bank, guaranteed by the federal state. This rescue package has widely been perceived as the only appropriate measure capable of averting the bank’s impending insolvency and, subsequently, that of ÖGB. However, to compensate the state for its commitment, the law entitles it to purchase all of ÖGB’s shares at a reasonable price in the Austrian National Bank (Österreichische Nationalbank, ÖNB). Moreover, ÖGB will have to sell all of its shares in BAWAG by 2007 and to disclose its accounts, including those of the strike fund, to the ÖNB by the end of May 2006. It is expected that the ÖNB will keep this information confidential.

Commentators argue that the lack of dividend payments from BAWAG to ÖGB is likely to damage the Austrian trade union movement and severely limit the trade union federation’s powers. As a result of the BAWAG collapse, Rudolf Hundstorfer, the new ÖGB President, has announced a strict cost-cutting programme for the umbrella organisation and all of its affiliates. In the future, membership dues will constitute the only source of revenue. Furthermore, the plan aims to significantly reduce ÖGB’s workforce and to abolish the current favourable pension scheme for its employees.

Impact on collective bargaining

With regard to ÖGB’s difficult financial situation and its quasi-dependence on the state (through the state’s taking on of ÖGB’s liability for BAWAG), some experts – as well as representatives of employer organisations – question whether the union side is still capable of engaging in collective bargaining. According to the Labour Constitution Act (Arbeitsverfassungsgesetz, ArbVG), employer and employee organisations possess the capacity to conclude collective agreements if they are independent, representative, operate above company level and are in a position to wield effective bargaining power. The last point has been questioned by part of Austria’s business community; a prominent expert of the University of Salzburg, Klaus Firlei, disputes the ÖGB’s independence in relation to the federal state as employer and bargaining partner in the public sector.

However, in formal terms, the public sector is excluded from the right to conclude collective agreements. Although informal negotiations over pay and working conditions do take place between public authorities and trade unions, any regulations in the public sector are unilaterally determined by the public authorities (AT0204202F). Therefore, most experts have rejected Mr Firlei’s arguments. Moreover, the trade unions argue that the ÖGB does not depend directly on the state since the liability relations between the two actors are clearly regulated by law, and in such a way that the unions are by no means at the government’s mercy. However, most commentators agree that significant membership losses over the past weeks have weakened the unions’ bargaining position in relation to the employer.

In order to prove their capacity to act, ÖGB and its affiliates have pointed to a series of major collective agreements that have been concluded since the revelation of the ÖGB-BAWAG scandal in March 2006. It remains to be seen whether the current union crisis will have a lasting effect on the balance of bargaining powers in Austria’s traditional system of social partnership.

Georg Adam, Institute of Industrial Sociology, University of Vienna