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As the Eurozone Crisis has progressed and European Union countries have continued to struggle to devalue their currencies, with the goal of making exports less expensive for importing markets, many countries are now adopting "Americanized" labor policies of dismantling workplace protections to reduce labor costs. In Portugal, the 1.9 million workers that were protected by collective bargaining agreements have now diminished to merely 300,000, while Spain has agreed to ease restrictions on collective layoffs and unfair dismissal. The motive for these actions, as encouraged by the German government, European Commission, and the International Monetary Fund, is to restore competitiveness, increase employment, and recover solvency.
Germany has provided the greatest insight into this process since the early 1990s. The transformation of the German economy began following the German reunification of 1990, when the factories of struggling East Germany defected largely from sector agreements between labor unions and industry associations. The industries of the former West soon followed suit, which led to eroded worker protections and an increase in low-paid, short-term jobs that still account for more than a fifth of the German economy. Today, Germany is seen as an exporting powerhouse with an unemployment rate of solely 5.2%, one of the lowest of the capitalist economies.
In spite of Germany's economic success, many economists fear that these changes in Europe's labor policies will led to increasing long-term economic inequality. Andrew Watt, an economist for the Macroeconomic Policy Institute in Germany, believes that "the push for labor market deregulation will cascade from one weak country to the next, as all engage in a futile race to create jobs by gaining market share from one another in a world of insufficient demand." These labor changes have increased the tension between the European Union's two primary collective economic goals: creating a single European market as well as greater social equality.
Clearly, as the European Union is increasingly becoming more economically integrated, it is now struggling with maintaining its competitiveness as a whole without sacrificing its relatively high levels of social equality. Although it will take time, the German example follows liberal economic theory in that increased labor opportunities spawn from a reduction of barriers to industry development, such as immensely influential labor unions. Protectionist policies as a whole are gradually fading away in an inter-conneced globalized economy for greater competitiveness, and with this competitiveness will come the European Union's desired economic growth.
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