The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 218 the single market, the enhancement of “knowledge and innovation for growth” (ibid.:21f.) by means such as increased public spending as well as the creation of “more and better jobs” (ibid.:26f.) by fostering adaptability through the combination of flexibility and security as well as the increase of overall investment in human capital and lifelong learning activities. Concerning the further development of the supranational institutional set up, the Commission took up the proposals of the 2004 High Level Group (cf. ibid.:15f. and 32; High Level Group 2004:39ff.; cf. above). It added the personalisation of the strategy by the newly created position of a national ‘Ms./Mr. Lisbon’ and acknowledged that the “governance of the Lisbon Strategy needs radical improvement to make it more effective and more easily understood [given that] [r]esponsibilities have been muddled between the Union and the Member States [with] … too many overlapping and bureaucratic reporting procedures and not enough political ownership” (European Commission 2005b:10; cf. ibid.:11 and 31). As finally decided by the 2005 Spring European Council (cf. European Council 2005; European Commission 2005c:6), the renewal and re-launch of the Lisbon Strategy brought about a further integration of the EGs and the BEPG, welding them into one single document (cf. European Commission 2005c:7, 2005d:3). It, moreover, established one single economic-employment co-ordination cycle, fusing the different national socio-economic cycles into one single ‘National Action Programme for Growth and Jobs’. This new cycle, leaving intact the revised ‘policy ID’ of the 2003 EES (cf. chapter 3.2.3.2.2) also more closely involves national parliaments (cf. European Commission 2005b:31). With this 2005 renewal of the Lisbon Strategy, the EGs now form part of the ‘Integrated Guidelines the Growth and Jobs’ (cf. European Commission 2005c:10). Their position behind the macro- and micro-economic guidelines, yet, allows for suspicion concerning their (slight) subordination within the welded supranational socio-economic policy co-ordination framework (cf. also chapter 3.3), even though the Commission’s Communication stated differently, attributing the EES “the leading role in the implementation of the employment objectives of the Lisbon strategy” (cf. European Commission 2005c:25). The related guidelines 17 to 24 cover a period of three years (2005-2008) (cf. Council of the EU 2005d:23; table 51). 3.3 In How Far?: European Employment Policy Co-ordination and the Constraints of Supra- and International Economic Integration As outlined above, the achievement of a high level of employment is influenced by and dependent on the favourable combination of constant economic growth, monetary and price stability and sound public finances (cf. chapter 2.2.2.3). Thus, European employment co-ordination through the EES, as one of the vertices of this socio-economic square (cf. graph 5) is flanked, empowered, and potentially fettered by supranational monetary policy-making and budgetary as well as economic policy co-ordination within EMU, the SGP, and the BEPG. International activities, such as The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 219 those of the OECD and the IMF, add to these interrelations. Given this connectedness, it is of particular relevance to analyse in how far these supra- and international activities impact on the Europeanisation potential of the EES, in order to evaluate the latter. “In the early 1990s, employment debates and actions were essentially linked with the need to get monetary union up and running, and with the hope of combining it with a project of ‘grands travaux’ at EU level, as well as with the broader spread throughout the EU of some common EU changes in labour-market paradigms” (Goetschy 2003:70). Yet, the launch of EMU, with its strong focus on price stability (Art. 105 TEC) and low inflation, “has had a deep and profound effect on member states [with] … a considerable and highly visible impact on national economic management” (Ladrech 2004:63) and employment policies (on EMU cf. Barrell/Dury 2000:637; Crouch 2000; Dyson 2000c; Friedrich 2004; Issing 2002:345 and 349; Jones 2002; Jonung 2002:1; Kasten/Soskice 2001:57ff.;). The treaty provisions on EMU prescribe reference values for the ratio of the planned or actual government deficit to GDP at market prices (3 pp) and for the ratio of government debt to GDP at market prices (60 pp) to be obeyed (Art. 104 TEC) in order not to challenge EMU by excessive domestic deficit spending and economic mal-performance. Especially since the entry into force of the third stage of EMU, these reference values built a strong corset for domestic economic policy approaches (cf. Kasten/Soskice 2001:34ff.). As EMU “has a very real and explicit EU impact on governments with public finances approaching the 3 per cent limit” (Ladrech 2004:51), it is extremely difficult to unrestrictedly react to domestic crisis such as cyclical increases in unemployment. With this effect, EMU ties the hands of member governments to freely choose their domestic financial and fiscal strategies. In doing so, it also transformed certain instruments to reform national economic and employment policies, such as financing active labour market policies through Keynesian-style anti-cyclical economic programmes accompanied by high levels of public deficit spending as practiced during the late 1960s, into unfeasible options. Quite contrary to such anti-cyclical policy-making, EMU is viewed to support procyclical attitudes. “During booms, there are no efficient limits to growth of public expenditures and to reductions in taxes. In recessions, on the other hand, the rules of the SGP force fiscal policy-makers to reduce government expenditures and raise taxes. In short, the standard textbook recipe for Keynesian counter-cyclical policy prescription is turned upside down” (Jonung 2002:4; cf. Hodson/Maher 2004:803; Schäfer 2005:173 and 203). Alongside these restrictions to national policy-making autonomy, especially the “uneasy mixture of policy instruments (such as the interest rate), intermediate targets (such as the budget deficit and possibly the exchange rate) and ultimate objectives (such as inflation)” (Boltho 1998:143) have repeatedly provoked criticism, questioning the entire design of EMU. Also created as a means to counterweight EMU, the EES aimed at helping “to reconnect monetary and social policy, albeit with a very different logic than a [pure] Keynesian one” (Jenson/Pochet 2002:4). The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 220 Backing EMU, the SGP, “signed in December 1996 at Germany’s behest, is a means of ensuring that Eurozone member governments continue to manage their finances in such a way as to maintain low budget deficits and low inflation” (Ladrech 2004:51; cf. Heipertz/Verdun 2005:986f.). The main targets of the SGP are the prevention of national budget deficits to rise above the 3 pp of GDP ceiling and the achievement of “a medium-term budgetary position of close to balance or in surplus” (Hodson/Maher 2004:799; cf. Konow 2002:76ff.; Schäfer 2005:187). It roots in a hard policy co-ordination process with unique features among the OMCs given that it “restrictively coordinates national budgetary policies to ensure ‘zero deficit budgets’ as fiscal policy rule in the European Monetary Union” (Heise 2004:10). In doing so, it “incorporates multilateral surveillance procedures and the exchange of information in conjunction with medium-term stability programmes submitted by national governments” (Issing 2002:349; cf. de la Porte/Pochet 2002b:33; Konow 2002:200ff.). If member states fail to follow the Pact, ECOFIN is empowered to address recommendations towards them, obliging them to re-adjust national policies to EMU requirements (cf. Hodson/Maher 2004:799; Issing 2002:349; cf. Konow 2002:28ff.). Such sanctions, which, due to the threat of exclusion from the future Eurozone are assessed to have been a more “powerful catalyst for fiscal prudence during the 1990s” (Hodson/Maher 2004:798) than after the entry into force of EMU’s third stage, include early “formal warning, non-interest bearing deposits and, at the limit, non-refundable fines” (Hodson/Maher 2004:799; cf. Schäfer 2005:187). Regardless of the possibility to impose such sanctions in case of malperformance, breaches or near-to-breaches behaviour have not been a seldom phenomenon, diminishing the efficiency of the SGP in the past (cf. de la Porte/Pochet 2003:55). As a consequence, “[c]onfidence in the Pact’s substantive rules has been severely shaken since the launch of EMU [particularly] by the fiscal performance of four member states. Portugal breached the deficit ceiling in 2001, France and Germany followed suit in 2002, and Italy … in 2005” (Hodson/Maher 2004:799; cf. Heipertz/Verdun 2005:994). Especially caused by the need to cope with the economic burdens of reunification and a parallel economic slowdown (cf. Ladrech 2004:60), Germany, the once strongest proponent of the Pact, continuously breached the SGP since 2002 (cf. Schäfer 2005:172). In 2006, it was finally formally given notice to reduce budget deficit in order to reach the 3 pp ceiling again until 2007 and to include “structural adjustment of cumulatively at least one per cent point in the years 2006 and 2007” (European Commission 2006a:5; cf. Council of the EU 2006a:7f.). So, “[u]nlike Britain, where the rules of EMU are not explicitly binding, the sense of economic constraint imposed by EMU has been [one of] the single greatest issue[s] affecting German politics” (Ladrech 204:58) to achieve economic recovery during the second term of the Schröder coalition government. Facing these violations of the SGP, ECOFIN, due to domestic political pressures within single EU member states (cf. Heipertz/Verdun 2005:992ff.), was, yet, reluctant to impose formal sanctions against Portugal and Germany in 2002 and against The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 221 France and Germany in 2003 (cf. Hodson/Maher 2004:799 and 801; Schäfer 2005:172). This reluctance, the subsequent temporary suspension of the Pact (cf. Heipertz/Verdun 2005:986), and the related overruling of the Council decision by the European Court of Justice in 2004 led to the “painstaking reform” (ibid.) of the Pact in 2005. This reform, however, did not strengthen the Pact. It, quite the contrary, procedurally softened it even more, increased the flexibilisation of mediumterm budgetary positions and weakened the basis for the imposition of sanctions by reviewing the “concept of exceptional excess over the reference value resulting from a severe economic downturn” (Council of the EU 2005b:5 and a; cf. Hodson/Maher 2004:801). Thus, in practice, the hard law letters of the Pact turned out to become soft law action by this reform (cf. Heipertz/Verdun 2005:994; Hodson/Maher 2004:800f.; Schäfer 2005:172). Yet, regardless of this dilution, the Pact indeed added to and strengthened EMU Treaty provisions (cf. Artis/Buti 2000:564) as it “shortened the timeline of the decision sequence, defined the distribution of possible fines …, clarified the notion of ‘exceptional’ and ‘temporary’ deficits as exemptions from sanctions, introduced an urgency procedure” (Heipertz/Verdun 2005:998). Concerning labour market structures and performance, EMU “requires nominal convergence” (Heylen/Poeck 1995:574). In reality, this demand can, however, be hampered by different domestic variables, such as diverging wage formation systems that–in case of shocks–are likely to create differences in wage and price evolution that–in case of decreasing national economic competitiveness–can lead to increasing unemployment due to rising labour costs (cf. Belke 1996:3ff.; Casey 2004:335; Soltwedel/Dohse/Krieger-Boden 1999:4 and 8; generally Crouch 2000). So, if unemployment turned out structural in some member states, “persistent divergence in unemployment ..[might] undermine the EMU” (Heylen/Poeck 1995:574; cf. Jonung 2002:27; Soltwedel/Dohse/Krieger-Boden 1999:23). As a consequence, the functioning of EMU requires to level differences between partially rather rigid and inflexible national labour markets of member states (cf. Jonung 2002:6). It also increases wage-setting transparency (cf. Jenson/Pochet 2002:3) in order to balance unemployment levels, leading towards a convergence of systems and policy similarity, i.e. ?-convergence (cf. Mósesdóttir 2003:190). Hence, “differential labour market responses are likely to be eroded as EMU-induced credibility effects will persuade wage-earners to behave in similar ways across Europe” (Boltho 1998:146; cf. Heylen/Poeck 1995:576). Moreover, “consequent privileging of neo-liberal reform strategies, retrenchment of welfare-state provisions, and difficulties of sustaining non-inflationary national wage-bargaining regimes” (Dyson 2000a:646) are potential negative consequences of EMU on the domestic labour markets (cf. Jenson/Pochet 2002:3). Its impact also includes the options of increasing “[t]axes and cutbacks in social protection and job creation as well as regulation .. becom[ing] national instruments of competitiveness and macro-economic stabilisation, in the direction of a ‘race to the bottom’ and social dumping” (Jenson/Pochet 2002:3). Resulting from this impact, the dominance of supranational monetary policymaking over employment policy co-ordination and its partial reinforcement by the The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 222 real operation of the Lisbon Strategy runs counter the original intent and ‘policy ID’ of the EES (cf. chapter 3.2.2). It, moreover, does not pay tribute to the fact that “the conditions for a return to full employment in Europe rest simultaneously upon structural reforms, such as those foreseen by the EES, appropriate macroeconomic policies …, and better coordination between structural and macroeconomic policies” (Goetschy 2003:80). “Recently, however, the mutual reinforcement of the two [, that is, EMU and EES] has come to be re-considered as a positive-sum game for both the economic and the employment processes” (de la Porte/Pochet 2003:14). In this perspective, EMU is viewed to also be in the position to positively affect national labour markets as transaction costs and hazards to exchange rates are minimised through the single currency. Additionally, competition as well as dynamics and flexibility of domestic labour markets can be increased. In the best possible scenario, this reinforcement “in turn stimulates innovation, investment, trade, and growth, thereby improving employment prospects” (Soltwedel/Dohse/Krieger-Boden 1999:4). Nevertheless, at the same time, reinforced interlinkage of EU member states through EMU is viewed to potentially enhance “spezialisation of countries … which will, in turn, increase the likelihood that a given shock will have asymmetric effects in different regions because of differences in their production structure” (Soltwedel/Dohse/Krieger-Boden 1999:7). Yet, also the opposite assumption, the weakening of shocks through transfer between economically interlinked countries is perceived a possible outcome of EMU (cf. ibid.). As a fundament for the interlinkage of macro-economic and structural reforms, the co-ordination of monetary, finance and wage policy within the macro-economic dialogue (the so-called Cologne Process) has been set up by the Cologne European Council in 1999 (cf. Issing 2002:350; cf. below). This coordination cycle aims at strengthening economic growth, increasing employment levels and protecting price stability. It includes the exchange of information, discussion and co-ordination of a broad range of socio-economic policies relevant for the stability of EMU and for employment promotion in Europe. With a view to this dominant position of supranational economic and monetary integration as an intervening factor to counterweight the Europeanisation potential of the EES, it has to be, yet, kept in mind that “macroeconomic policies [alone] cannot resolve the underlying structural causes of Europe’s growth and employment problems” (Issing 2002:346; cf. Schäfer 2005:200). Vice versa, the negative impact of persistently high levels of unemployment is in the position to pose severe challenges to EMU, with “the relationship between wage developments, productivity growth and price stability” (Issing 2002:350) playing a crucial role in this context. Thus, given that EMU “cannot be used to mitigate the structural cause of the relatively modest growth rates and the high levels of unemployment which weigh heavily on most European countries” (ibid.:354), it alone is not in the position to cure the unemployment plague that slays some of Europe’s biggest economic players, such as France and Germany. European structural and labour market reforms, as envisaged and instigated by the EES, are, thus, necessary to “minimize the costs of EMU” (Heylen/Poeck 1995:574; cf. Soltwedel/Dohse/Krieger-Boden 1999:3, 9, 16) and to The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 223 strengthen the potential impact of macro-economic integration on growth and job creation. Hence, with EMU “the ‘culture of stability’ … provided direction to the debate on major issues such as labour market reforms and changes in national pensions regimes” (Bulmer/Radaelli 2004:2), setting a quite persistent and tight framework also for employment policy-making and co-ordination (cf. Soltwedel/ Dohse/Krieger-Boden 1999:18). In the two countries analysed in this study, the outlined effects of EMU and the SGP impact differently, posing a greater burden on Germany than on the UK. “[I]nside EMU the UK would not have any monetary discretion, and would be governed by the combined rule strategy … [of] price-level and inflation targeting” (Barrell/Dury 2000:627), restricting the country’s room for manoeuvre also in view of employment policy reforms. The UK, seeking to preserve its domestic economic autonomy and control over public expenditure, opted out of EMU’s final stage, deciding to enter only by autonomous decision of Parliament, if conditions were assessed to be positive. This opt-out was partly foreshadowed by the withdrawal from the Exchange Rate Mechanism (ERM) after ‘Black Wednesday’, 16 September 1992 (Kingdom 1999:139), after only about two years of ERM membership (cf. Dyson 2000b:899). Within the national perception, this withdrawal “was the prelude to sustained economic recovery – of falling inflation, unemployment, and interest rates, and increased growth – all contrary to the disasters that the government had foretold would occur if Britain left the ERM” (Kavanagh 2000:79). Under New Labour, the negative view on EMU did not alter considerably compared to its predecessor Conservative Major government. British EMU entry remained foremost reliant on the performance of the union and the single currency (Dyson 2000b:898). Membership would only be implemented, after EMU passed the five economic tests set up by the Treasury. These tests cover the compatibility of UK-Eurozone economic structures and business cycles, flexible problem-solving capacities, the improvement of economic conditions and investments due to EMU, the competitiveness of the British financial service sector under EMU and finally growth, job and stability promotion through EMU (cf. Barrell/Dury 2000:626; Dyson 2000b:899). Only if these five tests were passed, the UK would decide on joining the club or not. Opposite to this rather lukewarm official attitude towards EMU membership, some experts recognise advantages of membership, that is, the decrease in uncertainties in exchange and interest rates and the fact “the UK would benefit from lower inflation variability and a more stable price level in the medium term if it were to join EMU” (Barrell/Dury 2000:641; generally cf. Soltwedel/Dohse/Krieger-Boden 1999:4). Regardless of the formal British EMU opt-out, the country “is still required to meet the convergence criteria in terms of spending deficits and inflation targets” (Kavanagh 2000:80; cf. Dyson 2000b:898), which the country–with a view to the 3 pp deficit ceiling–was not able to achieve in the financial years 2004/05 to 2006/07. As a result, ECOFIN, in January 2006, officially addressed recommendations to the British government, obliging it to end the excessive deficit and to “ensure an The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 224 improvement of the structural balance by at least 0,5 percentage points of GDP between the 2005/06 and 2006/07 financial years” (Council of the EU 2006b:6). As a consequence of the need to follow the Pact’s obligations, the UK is not entirely free to pursue its own economic policy approach. It is, thus, also restricted in terms of financing active labour market policies, even though the country disposes over a wider range of reform options than Germany that, as a full member of the Eurozone, is entirely bound to the outlined restrictions. Within the supranational socio-economic policy co-ordination square, the BEPG (Art. 99 TEC) constitute the overarching Community “framework for the definition of overall economic policy objectives and orientations” (Issing 2002:349) as well as for multilateral surveillance of EU member states’ economic policies in order to prevent EMU from being jeopardised. By this linkage, EMU substantially strengthens the BEPG as a base for securing EMU stability (cf. Schäfer 2005:122). Art. 126 and 128(2) TEC closely link the EES to the BEPG, obliging the former to be consistent with the latter. Employment policy co-ordination is, hence, closely related to Art. 99 TEC, indicating at the primacy of economic priorities over employment issues. Within the European Employment Pact, the EES is, furthermore, connected to the Cardiff and the Cologne process in order to combine the macroeconomic policy-mix co-ordination with the co-ordination of labour market and employment policy as well as with the fight against structural market inefficiencies (European Council 1999:points 7-17; cf. graph 6). Another sign of priority of the BEPG is constituted by the fact that, until 2003, the annual European economic policy co-ordination cycle began “with the Council setting out policy objectives for the EU as a whole with specific recommendations for each member state in the … BEPG” (Hodson/Maher 2004:804). Within the further process, the European Council, based on the draft BEPG established by ECOFIN and its various committees (cf. Schäfer 2005:126), drew conclusions on the economic policies of member states and the Community. On the basis of these European Council conclusions, ECOFIN then adopted a recommendation setting out the final BEPG. In addition to the co-ordination of national policies, the BEPG co-ordinate different supranational co-ordination processes. Due to this twofold task, the BEPG consist of a general part on overall economic guidelines and of country-specific recommendations for concrete policy adjustment (cf. ibid.:122). As the EES, the BEPG are based on multilateral surveillance processes that include reporting procedures and the formulation of stability (Eurozone insiders) or convergence (Eurozone outsiders) programmes by the member states (cf. ibid.:161). Laying the ground for the Council recommendation, additional information on country-specific economic developments is gathered by the Commission and presented in the Commission’s BEPG implementation report that evaluates the member states’ programmes. Contrary to the EES, yet, neither a consistent supranational economic programme nor concrete measures are formulated in order to attain flexibility, that is, the BEPG’ main target concerning labour markets (Busby 2005:34; Dostal 2004:454; Schäfer 2005:128, 144 and 161). The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 225 On the basis of SGP, EES, and Cardiff process documents as well as of Commission reports, ECOFIN monitors the overall national economic development of EU member states and the uniformity of national economic policies with the BEPG. In case of non-conformity, the Council can issue recommendations. It does, yet, not dispose over any options of imposing sanctions to enforce compliance as in the case of the SGP. As in other cases of OMC processes, this missing legal bindingness (cf. Heipertz/Verdun 2005:997) weakens the strong position of the BEPG. This weakness is accompanied by a low degree of awareness and integration of the BEPG within the domestic political process of EU member states (cf. ibid.; Goetschy 2003:79). By aiming to increase competitiveness, flexibility, and economic growth in the medium run, the BEPG target at preserving short range economic stability (cf. Janssen 2005:2). With this overall direction, the BEPG 2003-2005 touched upon a broad range of socio-economic policy areas, such as macro-economics, public finances, labour and product markets, financial services, wage policies, entrepreneurship, support for a knowledge based society and sustainability (cf. Council of the EU 2003c and 2004a; Schäfer 2005:122f.). With this focus, the BEPG are in line with EMU and the cross European turn towards supply-side policies focusing on monetary stability. In line with this direction, the BEPG 2005-2007 were perceived to “continue to ignore demand side policies. Instead, the central assumption seems to be that ‘stability-oriented’ policies and structural reform policies will create their own demand” (Janssen 2005:1). With their wide thematic array, the BEPG overlap with the focus of the EES with which they became synchronised in 2003 and welded in 2005 for better coordination given that the recommendations under both processes often diverged, indicating at different socio-economic strategies and at tensions between the responsible Commission DGs (cf. Schäfer 2005:161; cf. chapter 3.2.3.1). Thus, when analysing the impact of the EES, not only EMU and the SGP, but also the BEPG have to be kept in mind as potentially intervening in EES related Europeanisation processes. Apart from the above analysed supranational multilateral surveillance processes and EU-induced restrictions to domestic socio-economic policy-making, EU member states are, moreover, integrated into a tight network of international monitoring and multilateral surveillance activities that focus on national economic and employment policies. Outstanding arenas for such international routines, that are also in the position to affect the Europeanisation impact of the EES, are the OECD and the IMF given that “international organizations (including intergovernmental organizations such as the OECD) are frequently engaged in long-term agenda-setting efforts and advance planning exercise” (Dostal 2004:443; cf. Laffan/Shaw 2005:17). In many ways, the OECD’s socio-economic policy co-ordination activities have been formative for domestic sovereignty-preserving (international) multilateral surveillance exercises (cf. Schäfer 2005:62f.). Within many of these international processes, OECD took “a leadership role in creating and disseminating liberal welfare reform and labour market policy proposals between 1994 and 2001” (Dostal The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 226 2004:440), “stressing the primacy of markets and thus of market-based solutions” (Casey 2004:330). In order to counterbalance negative effects of domestic economic policies, OECD every 12 to 18 months monitors national institutional set ups and policies to co-ordinate, evaluate, safeguard, and improve the economic performance of its member states. They commit themselves to OECD standards, neo-liberal policy paradigms, and “supply-side labour market reform” (Dostal 2004:447; cf. Casey 2004:339; Crouch 2000:207) without the opportunity for direct OECD intervention in policy reform (cf. Schäfer 2005:111). Apart from its missing social partner integration (cf. Casey 2004:329), this pioneer character and the application of this prototype multilateral surveillance mechanism at EU-level also led to labelling the OMC and the EES an ‘OECD technique’ (cf. Schäfer 2005:18 and 112). The development of the EES, thus, has to be considered in the light of this pre-existing co-ordination experience and “the role earlier played by the OECD in the diffusion of some labour market paradigms” (Goetschy 2003:71). Moreover and altogether, the “EU frequently adapts OECD discourses at a later stage and engages in subsequent consensus building” (Dostal 2004:4555). This can be assessed to have also been the case with the OECD Jobs Study (cf. below) and the EES. Country-specific reports (so-called ‘Economic Surveys’), (indirect) evaluation of national economic policies through subsequent country reports–temporarily also including evaluations of national labour market and employment policies (cf. Schäfer 2005:112) and targeted recommendations–build the main blocks of OECD policy co-ordination. Moreover, OECD is using policy statements, thematic reports on socio-economic policy-making and on the evaluation of the global economic development as well as recommendations within its so-called ‘Economic Outlook’ to shape the global and domestic economic climate. Country-specific ‘Economic Surveys’ focus on national economic development, structural reforms, fiscal policies, and public finances. Occasionally, they also deal with macro-economic policies, immigration, economic growth potential, product markets and productivity sustainability as well as demography (cf. Schäfer 2005:156). Throughout the 1990s, the “OECD was the only institution that undertook longterm comparative research on its member states’ public employment services and social assistance provisions … and published detailed material about working procedures and organizational behaviour” (Dostal 2004:447). With increasing unemployment during the early 1990s (cf. Casey 2004:329), “OECD Labour Ministers and Economic and Finance Ministers asked the OECD in 1992 to study the underlying reasons for high unemployment levels” (Dostal 2004:440; cf. Casey 2004:331). As the result of this analysis, the OECD Jobs Study, which laid the ground for the OECD Jobs Strategy, was presented in 1994. It represented the main instrument of multilateral surveillance of employment policies by the OECD and, as such, the “long-term platform for the OECD’s work with regard to welfare and labour market policies” (Dostal 2004:448). The underlying neo-liberal approach of the OECD Jobs Study was based on 10 demands targeting at de-regulation and flexibilisation of welfare state and employment provisions as well as at the decentralisation of wage bargaining in order to increase labour market flexibility and combat structural The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 227 unemployment (cf. Casey 2004:330 and 335). Within the OECD Jobs Strategy, labour market related targets were introduced. They have subsequently been monitored within the Economic Surveys (cf. Casey 2004:332; Schäfer 2005:140). Moreover, with elements such as the merger of public “employment services with other benefit providing agencies” (Dostal 2004:449), the OECD Jobs Study targeted at a shift from passive to active labour market instruments, including the introduction of public-private competition in the field, the substitution of “wage replacement and benefit provisions … in favour of ‘in-work’ benefits and tax credits for low-paid worker” (ibid.; cf. Casey 2004:334f.). Given that the thematic alignment of the OECD Jobs Strategy and the EES increased over the years, topics such as lifelong learning, gender mainstreaming, child care facilities, flexicurity and the combination of these elements with social policymaking, such as questions of social exclusion, became prominent elements of the OECD Jobs Strategy as well (cf. Casey 2004:340 and 348; Schäfer 2005:164f.). As the second main source of international multilateral surveillance, IMF concentrates on political consultation, policy co-ordination, collection/analysis of statistical data and related forecasts as well as on technical support and expertise on economic policies and national shortcomings (cf. Laffan/Shaw 2005:17; Schäfer 2005:118). Besides the annual World Economic Outlook, country reports provide for analysis of national socio-economic policies including (1) a description of the national economic situation, (2) targeted, but little formalised policy recommendations, (3) analysis of macro-economic, labour, product and financial markets as well as selected topics, and (4) an appraisal of the analysis by IMF staff (cf. Schäfer 2005:120). Analysis of economic development, budgetary and fiscal policies build the thematic core of these country reports, while labour and product markets, structural reforms, macro-economic policies, pensions and trade policies as well as productivity are covered occasionally (cf. ibid.:154f.). These country reports are prepared in close co-operation and after intensive consultations with national officials. Publication of the reports depends on the approval of the evaluated member state and, in the past, has largely been given by the member states (cf. ibid.:119 and 121). Both OECD and IMF activities benefit from broad membership of industrialised countries and a broad base of expertise, but lack autonomous budgetary or sanction power (Casey 2004:330; Dostal 2004:446). Both OECD and IMF–the first following “a neoclassical belief in market equilibrium” (Dostal 2004:451) while focusing on structural reforms and the second on the financial and budget sector (cf. Schäfer 2005:156)–are less specific concerning concrete aims for integrating employment and social policies than the EES (cf. Casey 2004:330). Due to missing enforcement powers they try “to depoliticize issues of economic and social policy-making into questions of ‘pure’ expertise dealt with from the position of ‘best practice’” (Dostal 2004:446). On the contrary, the EU does strongly focus on the formulation and implementation of concrete targets for national adaptation (cf. Schäfer 2005:143). Given that the global economic climate and the internationalisation of economic relations did not leave much room for broad variation between economic policymaking paradigms, the three above outlined sources of multilateral socio-economic The Why, When, How, What, and In How Far of European Employment Policy Co-ordination 228 and employment policy surveillance increasingly became in line with each other over the years. Not only do all three apply similar procedures, mechanisms, and coordination methods (cf. Schäfer 2005:140). With a view to labour market and employment policies they, moreover, increasingly focus on parallel socio-economic paradigms and structural reform priorities. So, they overlap thematically and in view of the recommendations issued (cf. Schäfer 2005:152f.). 3.4 Interim Assessment: The Impact of the EES – Potential to Europeanise or ‘Fettered’ New Mode of Governance? Coming back to the initial question on whether the EES disposes over the potential to Europeanise and if so, what kind of Europeanisation impact it exerts on domestic employment policy formation and policies, a positive, yet, mixed conclusion can be drawn at this point of the analysis. While the why and when as well as the how and what offer a rather positive assessment of the EES’s potential to Europeanise, the in how far balances this impression by pointing at limits of the strategy. 3.4.1 Why and When?: The Slow Path of Bottom-up Europeanisation – Economic Mal-Performance Accelerating Up-Loading Processes Every since the first formal constitutionalisation step of the Treaties of Rome, the further institutionalisation and constitutionalisation of employment policy related topics originated from up-loading processes, that is, bottom-up Europeanisation (cf. chapter 2.1.2.2). Progress was achieved mainly after recurring periods of economic baisse within the EU that forced member states to take joint action. Until the Amsterdam Treaty, these up-loading processes focused on the institutionalisation of employment policies and policy co-ordination rather than on their further constitutionalisation within the supranational treaty framework. They, yet, also resulted in the transfer of new tasks and competences to the EC/EU level accompanied by the, albeit hesitant, establishment of distinct European employment policy co-ordination structures. This development, moreover, went hand in hand with a shift from the early focus on supplementing the single market by social policies towards employment policy co-ordination in its own right. European institution-building during the 1960s and 1970s established different expert committees on employment policy under the European Commission and, later on, also under the Council. These committees brought together national and supranational experts that, for a long period, constituted a rather closed and small epistemic community (cf. chapter 2.1.1.2.3). They formed the institutional nucleus for the further development of supranational employment policy co-ordination structures. Within these (up-loading) institutionalisation processes, the European Council and the European Commission were particularly strong compared to other supranational