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Workers say zealous eurozone reformers are eroding their sacred rights

Union powers and workers' protections have been severely curtailed to make Europe's struggling economies more competitive. Some say the cuts have gone further than necessary.

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“If you look at measures like the lowering of the minimum wage in Greece, or the relaxing of hiring and firing in Spain, these have no direct impact on the state budget,” says Martin Behrens, expert on industrial relations at the Hans Böckler Foundation, a research institution of the German trade unions.

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For Mr. Behrens such measures represent a certain idea of how an economy, and how a welfare state should be organized. “It is quite obvious that within the European Union and its institutions, the proponents of an unrestrained free market society have the upper hand now. For governments which depend on financial support from the EU, this has consequences for their budgetary and social policies.”

From 'sick man of Europe' to powerhouse

Those who support austerity measures often quote Germany as an example for a successful implementation. Here, years of wage restraint and the so-called Agenda 2010, a reform package introduced in 2003 by then-Chancellor Gerhard Schröder which liberalized the labor market and cut unemployment benefits and pensions drastically, are seen as important reasons behind Germany’s booming economy and its solid budgetary situation.

From being “the sick man of Europe” in the 1990s, Germany’s economy has turned into the most competitive on the continent. According to a study by Commerzbank, the output of the French and Italian car manufacturers combined shrank by almost 30 percent between 2004 and 2011. In the same period, German carmakers increased their output by 22 percent.

Turning Europe into the most competitive region in the world by 2020 was the official aim of the so-called Lisbon Agenda, an EU initiative launched in 2000. Ten years later, with Europe in the grip of its worst economic crisis since World War II, the Lisbon Agenda was silently buried and replaced by Europe 2020, a more modest strategy aimed at “reviving the European economy.”

The current course, which demands sacrifices from large parts of the working population in the eurozone, is welcomed in the business world. “Prime Minister Monti is very much in line with our view of the situation,” said Emma Marcegaglia, head of the Italian industry association Confindustria.

But German trade unions point at the price to pay. While Germany’s unemployment rate is at a 20-year low of 7.2 percent, and while three quarters of the German population profited from the labor market reforms, one quarter did not. One quarter of all employees work for a low wage, every fifth child grows up in a household officially rated as poor. And the number of pensioners below the poverty line will grow faster in Germany than in any other Western economy, according to the OECD.

Hardly surprising, in southern Europe it is this side of the story people like Greek researcher Mr. Kapsalis remember. “The German miracle is not a miracle for everyone," he says.

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