STOCKHOLM: Labour laws row divides Swedes over value of EU’s Lisbon strategy

Sweden often seems to have found a way to square the economic circle. The country not only enjoys reasonable economic growth but also high levels of social protection and ambitious welfare programmes. Some people even say that Sweden’s internationally competitive (and increasingly sustainable) knowledge-based economy is becoming the sort of post-industrial model envisaged by the EU’s Lisbon strategy.

It is certainly true that for the past eight years Sweden has been able to tick many of the Lisbon strategy’s boxes. Information technology is spreading, R&D spending is rising, markets are being liberalised and the country is a champion of renewable energy. Swedes are upgrading their skills, modernising social protection and combating climate change.

However, Sweden’s approach to the European project may be about to enter a new phase as deeply held convictions about the national welfare state are being challenged by ever-increasing European market liberalism. Some Swedes would even argue that lop-sided market freedoms undermine traditional Swedish labour rights and threaten the welfare system.

The flashpoint for many Swedish people was a ruling by the European Court of Justice back in December 2007 on the case of a Latvian building company, Laval, which had been operating in Sweden. Swedish trade unions mounted a blockade against the firm’s Latvian workers because Laval refused to enter into negotiations with the unions on a collective agreement to fix wages (among other things). The court accepted the unions’ right to take action and did not try to outlaw Swedish collective agreements. However, it did rule that the obligation to enter into negotiations was too far-reaching to be imposed on a non-Swedish company when important conditions, such as the level of the minimum wage, had not been fixed beforehand in a transparent way. The court also said that the trade unions’ lock-out was out of proportion to the purpose of the action.

Sweden’s centre-right coalition government, which broadly supports the trade unions’ stand, says it is willing to consider amending Swedish labour law – including introducing a statutory minimum wage. Trade unionists and parts of the opposition Social Democratic Party are incensed by the Court’s ruling. They see the European court’s decision as a nail in the coffin of the country’s labour market model, which relies on negotiations between employers and employees’ representatives, with little government interference.

Sweden’s trade unions are now divided over the best way forward. Rank and file members want to preserve their labour market practices by rejecting deeper EU integration and by making their support for the ratification of the Lisbon treaty conditional on stronger workers’ rights. Their leaders – along with the Social Democratic elite – advocate a European solution and argue in favour of stronger EU social legislation.

These are issues that clearly have significance for all European states, not just Sweden. There will be an opportunity for EU members to revisit the fundamental relationship between Europe’s social agenda and market economics when the EU launches its follow-up to the Lisbon strategy next year. Member states could chose to integrate labour market safeguards into this core economic policy as a counterbalance to the dominant forces of liberalisation in the global economy.

It would be an important decision and one which would help to determine the future direction of the EU as a political system. If the next EU economic strategy incorporates an enhanced social dimension, it will mean that Europe has opted for a holistic and pro-active approach to globalisation. This would send the world a strong signal that Europe is willing to coordinate the way traditional welfare states adapt their national models to new economic circumstances.

On the other hand, if social and labour issues are ignored in the successor to the Lisbon strategy, the EU will be supporting those people who predict that economic globalisation will lead to a steady erosion of social security systems and a competitive “race to the bottom.” Such a trend could lead to a protectionist or even an outright nationalist backlash as countries resist the increasingly tangible and negative consequences of globalised market economics.