LO report recommends that Denmark should join EMU

A report on "Jobs and the single currency", published in September 1999 by Denmark's LO trade union confederation, recommends that Denmark should join the third stage of EU Economic and Monetary Union (EMU) and foresees that EMU could in the long term force a European harmonisation and coordination of collective bargaining demands, a development which has already started. The LO report will play a central part in the forthcoming debate about Denmark's participation in EMU. The report counters a number of claims from EMU sceptics, but even hardcore EMU supporters find it hard to face the fact that a "yes" to integration could mean a surrender of sovereignty.

The advantages of Denmark joining the third stage of EU Economic and Monetary Union (EMU, or Den Økonomiske og Monetære Union, ØMU) far outweigh the disadvantages. On the other hand, seen in the light of the economic policy which Denmark has pursued since the end of the 1980s, it would not trigger economic chaos if, following a new referendum, the Danes chose to remain outside EMU. However, if they do, they will of course lose the advantages connected with EMU.

This is one of the conclusions of a report from the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) entitled Jobs and the single currency (Beskæftigelse og fælles mønt), which examines the advantages and disadvantages of EMU from an employment perspective. The report, which was published on 9 September 1999, was prepared by economists from LO and the Economic Council of the Labour Movement (Arbejderbevægelsens Erhvervsråd). The analysis and conclusions of the report are first and foremost intended as a basis for the coming debate on EMU, which will be taken up by the labour movement at the LO congress at the end of October 1999.

The report will also play a central part in the debate which was formally launched at the congress of the Danish Social Democratic Party (Socialdemokratiet) on 11 September. The debate is to be concluded with a final resolution at the party congress in September 2000, when the final date for a referendum on Danish non-participation in EMU is to be fixed.

Denmark is not participating in the third stage of EMU, which has seen the introduction of the euro single currency. This is one of the consequences of the country's initial "no" vote on the Maastricht Treaty in a 1992 referendum, which led to Denmark having a number of reservations inserted in the Treaty, including non-participation in the third stage of EMU. A subsequent referendum resulted in a majority in favour of the modified version of the Treaty among the otherwise "EU-sceptic" Danish population (DK9906127F).

No reason for scepticism

Over time, there has been a change in attitude in LO's position on EMU, and the report is characterised by this development. Much space is devoted to countering a number of claims from the EMU sceptics, such as the claim that the public sector will face heavy cuts in order to meet the economic targets for EMU, as has been the case in Belgium. According to the report, the EMU stability and growth pact has no effect on the size of the public sector, and the size of the public expenditure or revenue is not part of the EMU criteria. Another claim made by the sceptics is that increased economic integration in the EU will result in a sharp fall in wages and incomes, because the countries with the lowest incomes will pull the overall level downwards. On the contrary, states the report, it will be the poorest countries that will approach the EU average and not the rich countries that will adjust downwards towards the countries with lower wage levels. In other words, Danish workers do not have to fear "wage dumping" associated with Denmark joining EMU - a point which which LO president Hans Jensen stressed in connection with the publication of the report. He personally recommended that Denmark join EMU and pointed out four areas in which he claimed Denmark would lose influence by being outside EMU: the interest-rate policy of the European Central Bank (Den Europæiske Centralbank, ECB); the EU's employment policy; the dialogue between the members of the ECB; and, not least, any future European coordination of collective agreements.

Towards a European model?

According to LO's analysis, EMU may have an effect on the whole Danish collective bargaining system - the "Danish model" - which recently celebrated its 100th anniversary (DK9908140F). Indeed, LO's analysis contains the conclusion that the implementation of EMU could force labour movements in the EU Member States to coordinate both their collective bargaining demands and the bargaining rounds themselves. It must also be expected that, at the European level, framework agreements may be entered into between the social partners, the details of which will subsequently be filled in at national level.

The summary of the report's analysis states the following: "The focus on the framework for collective agreements which we are already seeing in neighbouring countries will no doubt be intensified after the establishment of EMU where the differences in wages and prices between the countries will inevitably be highlighted. Therefore, there may be increased cooperation on the coordination of collective agreement demands and bargaining. In the short term, there is a prospect of increased focus on the social dialogue which was contained in the Amsterdam Treaty. In the long term, the dialogue may develop into a forum in which the parties of the labour market will pass a minimum code which will lay down the framework for the European labour market." The analysis subsequently concludes that the efforts at harmonisation will, however, affect workers in Denmark to only a limited extent, as the provisions of collective agreements are far better on the Danish labour market.

However, there can be no doubt that a "sacred cow" is being slaughtered. Central sources in the labour movement have stated to the Mandag Morgen political weekly newsletter that even hardcore EMU supporters find it hard to face the fact that a "yes" to integration could mean a surrender of sovereignty. Integration is like nuclear power, writes Mandag Morgen- it is OK as far as it goes, as long as it is not too close to one's own back yard.

In the report's analysis, LO is open towards attempts at a harmonisation in the collective bargaining field, but notes that, in the long term, general cooperation in the EU will be the deciding factor in how, and to what extent, employment cooperation in the EU will develop. "If employment treaties and social contracts are established between social partners and national governments within a European framework, this may necessitate a more formal system for renewal of collective agreements. This could, for example, take place through the conclusion of framework collective agreements". Such framework bargaining could be conducted at sector level, at central organisation level or at a mixture of these two levels, the analysis continues. Irrespective of the level, it is important to stress that there must be coherence between the various bargaining levels. As possible models for how European collective bargaining may develop in the future, LO mentions the new EU processes on: macroeconomic policy (agreed at the June 1999 Cologne European Council- EU9906180N); the single market (agreed at the June 1998 Cardiff summit - EU9806109F); and guidelines for employment (launched at the November 1997 Luxembourg summit - EU9711168F). The joint overall objective of the three processes is to increase employment, but the Luxembourg process is of particular interest to Denmark. It has at the top of its agenda quantitative employment targets and exchange of experience and results between countries.

There is little prospect of genuine common European collective bargaining right now, the report concludes. On the other hand, the development towards harmonisation has started little by little, it is stated.

In recent years, a number of European industry federations have adopted resolutions aimed at a coordination of collective bargaining. Examples include the European Metalworkers' Federation (Det Europæiske Metalarbejderforbund, EMF) (DE9812283F) and the European Federation of Building and Woodworkers (EFBWW, or Det Europæiske Forbund af Byggeri- og Træarbejdere, EFBT). The contents of the resolutions differ, but the trend is the same: "social dumping" is to be combated. At the same time, the federations promise to keep each other up to date on their respective bargaining, and agree to operate with agreed criteria for wage increases (TN9907201S).


LO's EMU report does not provide any clear political recommendation that Denmark join EMU. The analysis in the report is more of an explanatory nature and is meant as a basis for a "healthy debate" in the labour movement, as LO president Hans Jensen puts it. However, there is no doubt that, overall, the report is a recommendation that the Danish reservation on the third stage of EMU be dropped. The report on EMU is consequently yet more proof that LO has switched from a defensive to an offensive EU strategy. The EU is no longer a bugbear (or a threat), but an exciting opportunity which may be of benefit to the members. This is a far cry from the position in 1972 in connection with Denmark's first referendum on the EC, when LO and the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) maintained that: "We crack the nuts ourselves". In other words, vote "yes" to Europe if you want to, but we will handle collective agreements ourselves, and the Danish model must continue to exist. It now looks as if, in the late 1990s, the labour movement has switched from a defensive to an offensive approach to European/international cooperation. Based on the analysis in the report, the big issue in the discussions in October 1999 will be how much autonomy the Danish labour movement can expect to maintain if the harmonisation efforts really take off. (Carsten Jørgensen, FAOS)

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