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Internal market vs. Scandinavian welfare

The building of a new school in Sweden opens up the debate on the social and economical structure of the European Union

, by Translated by Oronzo Daloiso, Nives Costa

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The Latvian bricklayer gets off in Vaxholm, a small town in Sweden, and it is the beginning of the clash with trade unions: the building company Laval refuses to guarantee the minimum wage of the Scandinavian country. Yet, the Advocate-General suggests to the European Court of Justice to solve the case in favour of Swedish trade unions. If the Court will follow these indications, what will be the consequences for the internal market and for the different social systems in Europe?

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The ECJ of the European Communities will have to decide, in the next months, on a burning issue. It is the Vaxholm case, which someone might remember with regard to the age-old dispute on the Bolkestein directive. It may sound as an exaggeration, but the Vaxholm case counterweighted not only two systems of social security, but also two different visions on the future economic and social structure of the European Union.

On 23 May the Advocate-General Paolo Mengozzi presented his conclusions on the Vaxholm case, which raised the debate in Europe. The Advocate-General held that a trade union’s right to undertake a legal action against a foreign company, in order for this company to sign a local collective agreement, does not violate the principles of internal market.

The affair is not complicated: in Sweden, in 2004, the Latvian company Laval was chosen to build a school in Vaxholm and transferred its employees from Latvia, in order to finish off the works. The conflict arose from the particular structure of relationships among economic actors in Sweden. Strange as it may sound, in this Scandinavian country there is no minimum wage fixed by the law: traditionally, Swedish trade unions and employers reach an agreement in terms of collective agreement and such cooperation is fundamental for social equilibrium. As a matter of fact 90% of Swedish employees working in the private sector have a collective agreement.

the Latvian construction company Laval refuses to apply the Swedish minimum wage standard

Nevertheless, the Latvian employer refused to apply the minimum wage proposed by trade unions, holding he was not supposed to since it is not fixed by the law. Here is the controversy: should one protect a worker’s right obtained in that country, or rather give unconditional application to rules on free performance of services?

The Advocate-General’s opinion was published today, yet it is not definitive: the Court is free to declare the contrary, but in most cases it sticks to the Advocate-General’s opinion. Furthermore, Advocate Mengozzi’s opinion is sustained by his colleague Poiares Maduro, who expressed an opinion close to his on a similar, less advertised case, Viking Line, concerning a ferry company which outsourced from Finland to Estonia in order to pay lower wages.

There exist diverse reasons to welcome with satisfaction the Advocate-Generals’ viewpoint. First of all, these decisions follow the direction taken by the last edulcorate version of the Bolkenstein directive, which is large protection against social dumping. The original version of the directive raised objections and its detractors considered the Vaxholm case as a proof of the proliferation of similar cases, which would cause a progressive erosion of social rights. It would not be wise to show a rather weak democratic sense and retrieve a principle which, on the wrong or in reason, European citizens refused to accept.

The Advocate-General stressed that the demands of the labor unions do not contradict the principles of the internal market.

Also, a large number of people do not share the opinion of the internal market commissary McCreevy, who supports higher competitiveness and fewer hindrances to workers’ freedom of movement. The European Union has already done enough to gain the image of a neoliberal market devoid of attention towards the social. In this sense, the effect of the Bolkenstein directive was devastating for the Union. It is not even sure that fierce competition among European workers is the winning option.

For instance, Sweden and Denmark defend their social model and regularly place themselves at the top of European and world ranking in terms of both competitiveness and social inclusion.

The Scandinavian countries are sufficiently eurosceptical, in spite of offering further concerns about the preservation of their social model.

These considerations are obviously suspended till the Court’s final decision. Now the question is whether the Court will follow or not the indications provided by the Advocate-General.

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P.S.

A street in the centre of Vaxholm. Will the name of the small town become as famous as the name of the soccer player Bosman?

Image source: inaudible/Flickr

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