The enlargement of 1995 and the placement of austerity policy

The entry of Sweden, Finland and Austria enlarged the EU from 12 to 15 Member States. It was referred to as the EFTA enlargement, even though the remaining EFTA member, Norway, ultimately voted no. This enlargement occurred on Jacques Delors’ watch as President of the European Commission. Known for having pushed European integration forward by overseeing the creation of the single market (1986) and the Maastricht Treaty, Delors also emphasised the importance of both the continuous construction of a Social Europe and social dialogue in Europe.

The period during which the 1995 enlargement was negotiated is a good juncture from which to assess the direction of the EU from the perspective of EU legal and constitutional developments. Appraising this through the lens of the Swedish position concerning the approaching enlargement of the Union in which it would take part, it is noteworthy how strikingly focused it is on Economic and Monetary Union.Footnote ⁸

It is probably true, as is often suggested, that the fall of the Berlin wall represented the loss of the ‘neutrality’ argument, which had long been used by the Swedish Social Democratic Party to morally motivate staying out of the EC. However, the context in which EC membership was first suggested is telling in terms of the positive arguments put forward for membership.Footnote ⁹

Sweden was in deep financial crisis during the early 1990s. Public debt was at 75% of GDP in 1993, high interest rates were hurting private homeowners, GDP growth rate was negative and EC membership was seen as one way out of this financial crisis. During the Autumn of 1990 the intention to seek EC membership was first announced by the Social Democratic government as one measure among others in an economic austerity program.Footnote ¹⁰

The Swedish government’s (first Social Democratic then Centre-Right) view of EC/EU membership between 1990-1994, leading up to the referendum, was essentially constructed as an economic argument. Both the Social Democratic and Centre-Right governments insisted on the importance and benefits of adapting to the Maastricht convergence criteria, specifically to cut public spending and privatise the public sector (albeit privatisation by varying degrees).Footnote ¹¹ The impetus was not merely, as is continually repeated in government reports, for the sake of obeying future EU rules in the event of membership, but because these structural reforms were considered the right and necessary politics for Sweden as a means of recovering from a financial crisis.Footnote ¹²

These economic assumptions should be looked at as part of a broader trend. Adopting a global outlook on this economic tendency, Nancy Fraser describes how from the 1980s on:

It is therefore important to point out that the sharp decrease in public sector jobs in Sweden between 1993 and the present day, as well as the direction the Swedish welfare system took towards privatisation, is not, I argue, best described as simply a result of EU membership.Footnote ¹⁴ Sweden did, however, embrace the economic rationales of Economic and Monetary Union as a method for overcoming fiscal crisis and therefore from the outset accepted the idea of macro-economic austerity politics at the EU level. Sweden arguably consolidates, rather than questions, a specific view of what EU macro-economic policy should look like – all of which happens, as Fraser points out, in the context of a broader shift.

In 2003 Sweden voted ‘no’ to joining the third stage of Economic and Monetary Union, which commenced in 1999, and entailed namely the introduction of the Euro currency. Sweden therefore finds itself in a unique position as the only member state that implemented the budget rules of the first two stages of Economic and Monetary Union (initiated in 1990 and 1994 respectively) but later rejected the common currency in a referendum, while (unlike the UK and Denmark) never signing an opt-out agreement from Economic and Monetary Union.

This position, which combines scepticism towards EU integration while affirming EU-level austerity budget rules, was again discernible during the Eurozone crisis.Footnote ¹⁵ Fast forward to the period between 2009 and 2015, and two consecutive Swedish governments showed support for austerity policies regulated through bailout loan conditionality in other member states such as Greece, Ireland and Portugal.Footnote ¹⁶ In 2013 the Swedish Prime Minister Fredrik Reinfeldt (Centre-Right government) spoke to the Swedish Riksdag on the Eurozone crisis: ‘we need to be clear about (our position) when everyone is calling for investments in social protection around Europe, our main concerns is who they (‘southern Europe’) think should pay the bill.’Footnote ¹⁷ From 2015 onwards the Social Democratic/Green Party government used more moderate rhetoric, while still supporting the idea that bailouts should be made conditional upon the introduction of austerity politics – often referring to what Sweden ‘learned in the 1990s’.Footnote ¹⁸

Ensuring that the legal protection offered by Social Europe was guaranteed in countries such as Greece, Portugal and Ireland during these years of severe economic distress was not a policy consideration for the Swedish Centre-Right and Social Democratic/Green Party governments in power between 2008 and 2015. Did Sweden give Social Europe any consideration before membership, when Sweden itself was experiencing a financial crisis?

I would argue that the Swedish discourse in that period, as formulated in doctrine and by the government in a series of preparatory works, very rarely posited the idea of an affirmative legislative agenda for Social Europe, notwithstanding Delors’ ongoing work on the Social Pillar.Footnote ¹⁹ Prior to Community membership, the government committee report which focused specifically on the effects on the Swedish welfare system found that most of the minimum standards offered by Community rules would presumably be below the Swedish standard anyway. However, it added that if the Swedish economy continued to plummet as a result of the financial crisis it would in that case be possible to resort to the Community standard.Footnote ²⁰

The preparatory works thus introduce the notion that Social Europe would provide some form of social protection guarantee of last resort. This perspective, while arguably reductionist, did not reappear during the years when fiscal crisis was a fact of life in other countries.Footnote ²¹ I would therefore be sceptical of any depiction of a Sweden that, by enlarging the Community and by virtue of its national political tradition, had straightforwardly strengthened Delors’ case for a more Social Europe – one favoured by some writers.Footnote ²²

In the early 1990s, Sweden’s orientation towards austere EU-level macro-economic policies is a harbinger of sorts, during a period when the EU performed a double role of both working towards a strengthened Social Europe for workers,Footnote ²³ while in the same historical context instating a form of financial politics with long-term consequences for European workers.

The enlargement of 2004 and displaced transnational workers’ protection

The EU expanded from 15 to 25 Member States in 2004. In its election manifesto for the 2004 European Parliament elections, the Swedish Social Democratic Party, at that point in government since 1994, celebrated the ‘eastward enlargement as a project of justice and cooperation’, but the main election promise was that ‘poverty in new Member States should not be used to force diminished labour protection and weaker collective agreements on Sweden’.Footnote ²⁴

On 21 November 2003, the Social Democratic Prime Minister stated that Sweden wanted ‘freedom of movement for workers, but not social tourism, we cannot be naive’ when discussing the ‘eastward’ enlargement.Footnote ²⁵ Shortly thereafter the Government announced its intention to seek transitional rules for workers from the new Member States, except for Malta and Cyprus. The concern was articulated as relating to ‘an increase in workers from the new member states’ without Sweden being able to ‘maintain working standards in accordance with Swedish collective agreements equal to what a Swedish worker would be guaranteed in an analogous situation.’Footnote ²⁶ After thorough debate, this government proposal never became law.Footnote ²⁷

The idea of ensuring that the Swedish system of collective bargaining should remain rigorously unmodified notwithstanding EU membership is also represented in the preparatory act to the legislation implementing the Posted Workers Directive of 1996. In Sweden, the minimum wage is established in collective agreements and not by legislation. The drafters of the Posted Workers Directive, with inter alia the Swedish situation in mind, therefore introduced a mechanism, Article 3.8, whereby collectively bargained national sector-specific minimum wage standards could be ‘universalised’ and applied to posted workers. Sweden, however, did not use the option provided for in Article 3.8.

What might explain this choice by the Swedish government? The preparatory works somewhat obliquely state that ‘the current system is sufficient’.Footnote ²⁸ However, the specific context is important. It should be pointed out that most posted workers are active in the construction sector.Footnote ²⁹ In Sweden, within the construction sector, the social partners bargain locally, often per construction site, not nationally. Moreover, just like the disputed construction site in Laval (I will soon turn to the facts of the case), the vast majority of posted workers are stationed in the Stockholm region, where salaries were (and are) higher than in the rest of Sweden.Footnote ³⁰ This may help explain the incentive to insist on local rather than sector-specific national collective agreements. One of the most prominent Swedish labour lawyers, the late Tore Sigeman, described the implementation strategy as ‘disputable’.Footnote ³¹

In November 2004, Swedish implementation of the Posted Workers Directive was put to the test at a construction site outside Stockholm when workers from an EU member state of seven months’ standing, Latvia, together with their employer Laval, refused to sign a local collective agreement presented to them by the Swedish Builders Union (Byggnads), which would have provided the same level of pay and workers’ benefits afforded to Swedish workers working on that same site. What unfolded was a situation in which the European Court of Justice ultimately declared the collective action taken, namely a lockout hindering Latvian workers from entering the construction site, to be disproportionate and therefore an unjustified infringement of the freedom of movement of services.

Reading Laval as a case where the European Court of Justice legally construed the freedom to provide services as being weightier than the right to take collective action led many to note, in no uncertain terms, the end of an era.Footnote ³²

In 2010, in response to Laval, the Swedish government, at that point Centre-Right, reformed the rules guiding collective action and posted workers to specifically state that collective action can only be lawful if taken to enforce a national collective agreement pertaining to a certain industry. Moreover, any collective action would be unlawful if the posted worker could show that such a national agreement had been entered into (this came to be known as ‘the proof rule’). This meant that according to Lex Laval it was in principle never lawful to take collective action to enforce a local collective agreement (as Byggnads had done in Laval).

In 2012, the same Swedish government asked a parliamentary committee to evaluate Lex Laval a mere two years after it was enacted.Footnote ³³ The results were presented in 2015 and were under review by a sizeable number of experts and stakeholders until April 2017, when the Swedish Riksdag, as proposed by the then Social Democratic/Green Party government, voted to repeal Lex Laval and in principle (however, in vague terms) to reinstate the right to collective action to enforce locally bargained collective agreements.Footnote ³⁴ The new law entered into force on 1 June 2017.

It is elucidating to understand this seven-year process of national parliamentary work, which ultimately led to the restoration of the pre-Laval order regarding collective action, as running parallel to the Social Europe legislative context.

In 2012 (as in 2011) the Swedish Riksdag issued the highest number of Reasoned Opinions under Protocol No. 2 to the Lisbon Treaty in the whole EU.Footnote ³⁵ One of these opinions (which should state why a national parliament considers a draft piece of EU legislation to be noncompliant with the principle of subsidiarity) concerned the Monti II Regulation. The regulation, long underway, was constructed so as to address the question of the right to strike in the context of freedom of movement.Footnote ³⁶ Monti II triggered a total of 12 such Reasoned Opinions, enough for a ‘yellow card,’ and the Commission, without agreeing with the arguments advanced in the Reasoned Opinions, withdrew the proposed Monti II Regulation.Footnote ³⁷

There were two main Swedish arguments for why a proposal that aimed to transnationalise collective action breached the principle of subsidiarity. First, the regulation’s Article 2, which established that the right to strike and the fundamental freedoms of service and establishment were of equal weight, would not make the applicable law any clearer. Second, the alternative dispute resolution mechanism in Article 3 would jeopardise the ‘well-functioning Swedish system’.Footnote ³⁸ This reasoning appears oblique, but might be explained as resulting from a combination of disinterest in new forms of collective action on the part of the Centre-Right and a desire to maintain the Swedish status quo on the part of Social Democratic parliamentarians.

While still opposing Monti II, the Swedish government (Social Democratic/Green Party) has sustained the EU Commission’s proposal for the revised Posted Workers Directive presented in early Spring of 2016.Footnote ³⁹ This proposal, while imposing new regulations on temporary work agencies and sub-contracting, also contains a provision which would make it possible to demand that posted workers should be guaranteed locally negotiated pay standards and benefits. When in June 2016 Bulgaria, Estonia, Croatia, Latvia, Lithuania, Poland, Romania, Slovakia, The Czech Republic, Hungary and Denmark opposed the revised Posted Workers Directive draft, again amounting to a yellow card, the Commission simply stated that the posting of workers regime is transnational in nature and hence the subsidiarity principle by definition cannot be violated in this instance.Footnote ⁴⁰ The Swedish government, pleased with the Commission’s decision to not consider the ‘yellow card’, urged it to continue working on its proposal for the revised Posted Workers Directive.Footnote ⁴¹ In October 2017 the European Council largely agreed on the Commission’s proposals, including the proposal which would make it possible to demand locally negotiated pay standards and benefits.Footnote ⁴²

In the meantime, as we know, the Swedish government went ahead and repealed Lex Laval while the revision of the Posted Workers Directive was still in progress. It is possible to argue that the Swedish law that entered into force in June 2017 is compatible with the proposed revised Posted Workers Directive. However, its compatibility with the Posted Workers Directive currently in force is more questionable, since the new Swedish law still does not ensure that there is a sector-specific national collective agreement in place for posted workers. Rather than the end of an era, it appears that the Swedish preference is prevailing.

What is behind this strong resistance to EU proposals for transnational collective bargaining? What is the motivation behind the positions taken – first, when implementing the Posted Workers Directive; then when repealing Lex Laval; and finally, when supporting the revision process of the Posted Workers Directive – implying that that national collective agreements are not enough to protect workers who live in Sweden as well as workers who are posted in Sweden from another member state country?

The sociologist Anders Neergaard has written about trade unions and migration in Sweden and his work offers a valuable contextual illustration of the way in which the Swedish position on posted workers might have been a lost opportunity for achieving actual solidarity among a broader category of workers. Neergaard uses the concept of ‘imagined solidarity’, relying on Hyman, who in turn has written that trade unions ‘are agencies whose role in the aggregation of interests may also involve the (re-)distribution of gains and losses: not only between workers and employers but also among workers themselves. Typically, the definition of union-relevant interests has systematically reflected the existing distribution of power within the working class.’Footnote ⁴³

Neergaard carefully traces the position of the various Swedish trade unions within the Swedish Trade Union Confederation, which is closely linked to the Social Democratic Party,Footnote ⁴⁴ and describes how these Unions, amidst a decrease in membership, have each chosen different ways to approach workers from other countries.

Neergard describes how the defendant in Laval, the Builders Union (Byggnads), holds a very strong position within the Swedish Trade Union Confederation due to a historically high level of organisation, the highest pay levels within the Confederation, and because it is composed almost exclusively of white men (11% of its members are born outside Sweden and 1% are women).Footnote ⁴⁵ As described earlier, most posted workers are active in the construction sector and a vast majority of these are posted in Stockholm where construction wages are higher than in the rest of Sweden (regional pay differences amount to around €2 per hour); the locally negotiated collective agreement is very much a central focus of Byggnads.Footnote ⁴⁶ This is in contrast to Kommunal for instance, a trade union triple the size of Byggnads, which organises public sector workers but bargains nationally and consists of 80% women. The members of Kommunal make on average €700 a month less than the members of Byggnads.

The overall Swedish strategy on the Posted Workers Directive, while often depicted in Social Democratic political communications as a means of saving the ‘Swedish model’, arguably caters to the interests of a relatively specific fraction of workers.Footnote ⁴⁷

This is a very close look at the heart of the Swedish position. Laval has habitually been framed as a clash between the social and the economic within the EU, implying that the social argument was displaced or indeed lost.Footnote ⁴⁸ I argue that if you look more closely at what in such accounts has been described as ‘the social’, what is displaced is an all-embracing approach to the protection of European workers, to the benefit of a specific group of Swedish workers.

Importantly, however, the Swedish preference for the status quo and against moving towards new solutions for enhanced transnational collective action needs to be taken in context. For instance, the Swedish position could be read as an example of resistance to the constitutionalisation of worker’s rights as explained by Judy Fudge.Footnote ⁴⁹ The traditional Swedish method of collective bargaining, which is heavily reliant on negotiation rather than on the judicial resolution of labour conflicts, was backed into something of a corner by the Court of Justice’s fundamental rights conceptualisation in Laval. To some extent, this rights approach was also relied upon in the failed Monti II Regulation, in which the core legal technique was the achievement of a just balance between the fundamental freedoms of movement and the fundamental right to collective action.

It should also be remembered that while the Court turned Laval into a clash of fundamental rights, it never operationalised the national constitutional identity justification, even though the right to take collective action was separately protected under Article 2.14 of the Swedish constitution Grundlagen. This stands in contrast with the fact that the European Court of Justice has on occasion used the concept of constitutional identity to justify a limitation on a fundamental freedom without, as was the case in Laval, the concept having been mentioned in the preliminary reference from the national court. The most prominent examples of this are Omega concerning German human dignity and laser dome games, Dynamic Medien concerning German rights of the child and commercials, and Sayn-Wittgenstein concerning Austrian equal treatment and noble names.Footnote ⁵⁰ In sum, the European Court of Justice’s fundamental rights conceptualisation in Laval, I would argue, was not fine-tuned enough to satisfactorily address all the aspects of the legal conflict.

Perhaps if the European Court of Justice in Laval had focused on the legally problematic Swedish implementation of the directive, which created a situation wherein no national sector specific standard was available, Sweden would have been prompted to address the conflict as a lack of social dialogue between workers from different EU Member States. The opportunity to address Laval’s underlying socio-economic conflict by finding new modes of deliberation between social partners from different member states – with the view to collectively countering forms of exploitation of workers within the internal market – appears at this stage to have been displaced.

The 2007 enlargement – protecting ‘vulnerable’ EU migrants by replacing EU law with bilateral agreements

In 2007 Romania and Bulgaria joined the EU. Romania and Bulgaria have a GDP per capita of, respectively 48% and 52% below the EU average. Sweden, in contrast to the UK and Germany, never asked for transitory rules for citizens from Bulgaria and Romania. The Swedish Prime Minister (Centre-Right) motivated this decision by stating that ‘we saw in 2004 that concerns about “social tourism” were exaggerated’.Footnote ⁵¹

However, in 2014 Sweden’s biggest newspaper broke the story that the Swedish government (Centre-Right) had secretly negotiated with Romania to try to make them use the EU funds they had received from the European structural and investment fund specifically to aid their citizens of Roma origin.Footnote ⁵² The Swedish minister responsible for this initiative maintained that the sharp increase in the number of Romanian and Bulgarian EU citizens of Roma origin begging in the streets of Sweden after the 2007 enlargement was an issue that immediately needed to be resolved. She expressed great frustration that the EU Commission had not earmarked the EU funds in the manner suggested by the Swedish government. The negotiations with Romania, according to the Swedish minister, stalled.

In 2015 the newly-elected Social Democratic/Green Party government established a Commission of Inquiry entitled ‘Seeking a Future’, which was directed at providing a strategy for ‘vulnerable EU migrants’, by which was meant Bulgarian and Romanian EU migrants without residence permits, ‘a majority of whom are Roma.’Footnote ⁵³ The introduction read, ‘Over the last 100 years, Sweden has gone from being Europe’s poorest country to being one of its richest, and with one of the highest levels of welfare provision. When vulnerable EU citizens began begging on the streets (…), Swedish society was unprepared.’Footnote ⁵⁴

Together with this inquiry, and in line with the concerns expressed therein, in June 2015 the government signed a bilateral ‘collaboration agreement’ with Romania aimed at ‘strengthening the cooperation in the field of social policy’, stating that ‘the cooperation will especially target our population groups most at risk.’Footnote ⁵⁵ In February 2016, a ‘letter of intent’ was also signed with Bulgaria concerning cooperation on social policy.Footnote ⁵⁶ Both bilateral agreements specifically identify four main areas for cooperation; ‘children’s rights, gender equality, social welfare and social security.’

These agreements do not appear to provide direct financial assistance but rather facilitate collaboration between social services and non-governmental organisations working with Roma rights, and articulate Swedish guidance on how EU structural funds should be used in Romania and Bulgaria.Footnote ⁵⁷

Aside from the Swedish governments’ sustained interest in the way Romania and Bulgaria use their EU funds, the Commission Inquiry also addressed the applicable EU law and described it as ‘developing’, referencing the Grand Chamber decisions Dano and Alimanovic.Footnote ⁵⁸

In Dano, a Romanian citizen, Ms Dano, had applied for a non-contributory unemployment cash benefit in Germany, to which a German citizen in her position would have been entitled. Ms Dano was a legal resident of Germany under German law. The European Court of Justice held that Ms Dano could only claim equal treatment under EU law in terms of access to non-contributory cash benefits if she met the residence requirements expressed in the Citizenship Directive. The European Court of Justice ruled that she did not meet those requirements since she was unemployed and did not have sufficient recourse to means that would allow her to avoid becoming a ‘burden’ on the host state.Footnote ⁵⁹

In Alimanovic the claimant Nazifa Alimanovic was, unlike the claimant in Dano, a job-seeker. However, as in Dano, she applied for a non-contributory unemployment cash benefit. The European Court of Justice held that even if the Citizenship Directive protected her from expulsion due to being a job-seeker, neither the Directive nor primary law precluded discrimination based on nationality in terms of access to this type of, it should be noted, non-contributory social assistance.Footnote ⁶⁰ Nazifa Alimanovic was a Swedish citizen, as the European Court of Justice pointed out, of Bosnian origin.

The Swedish government intervened in Alimanovic, arguing that the Court should continue the restrictive reading of the Citizenship Directive that it had set out in Dano.Footnote ⁶¹ The Swedish government endorsed the position that discrimination based on nationality concerning access to non-contributory cash benefits should also be justified for EU citizens who are job-seekers and as such protected from expulsion under the Citizenship Directive.

The enlargement of 2007 reveals a developing, though already noteworthy, Swedish approach to the best forms of EU social protection for the poorest EU citizens. At the EU level, especially when it comes to the European Court of Justice’s evolving free movement case law concerning ‘non-economically active’ or ‘job-seeking’ citizens, the Swedish government intervened in support of a restrictive approach. What emerges, albeit in a highly preliminary fashion, is a retreat from using the EU primary and secondary law structure to address issues of equal treatment in terms of access to social protection for EU citizens who migrate within the Union, a path, in contrast, chosen by the Italian government when it intervened in Alimanovic.Footnote ⁶²

Instead, the method favoured by two consecutive Swedish governments is to address the issue of social protection of ‘vulnerable EU citizens’, ‘often of Roma origin’, bilaterally with Romania and Bulgaria, by organising working groups with government representatives and supporting non-governmental organisations working with Roma populations, as well as encouraging Romania and Bulgaria to direct the EU funds that they receive to their Roma populations.

The results of these bilateral agreements are difficult to evaluate at this point, but the ’07 enlargement nevertheless reveals a new form of engagement with the structure of Social Europe. The Swedish position appears to combine a consolidation of the trend of further stratifying the right to freedom of movement of people, with an effort to bilaterally improve the living condition of portions of the Romanian and Bulgarian populations. This trend, as well as an in-depth normative evaluation of its merits, I argue, should be the subject of further research as new material becomes available.