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Abstract

The marginalization of trade unions was a notable feature of the sovereign debt crisis
in the Eurozone periphery. However, governments have recently imposed liberalizing
reforms against union protests in the Eurozone core too. We argue that
organized labour loses influence across the core-periphery divide because the ‘new
economic governance’ puts national governments under enhanced pressure to
compete against each other on wage and labour market flexibility—a process known
as competitive internal devaluation. The article illustrates this argument through
comparative quantitative indicators of liberalization and qualitative process-tracing
in three core countries. Whereas Germany’s outstanding competitiveness position
allowed its unions to extract significant concessions, their counterparts in France
and Finland faced unprecedented defeats from governments aiming to restore economic
growth by closing down the competitiveness gap to Germany. Our findings
highlight the class power implications of the Eurozone’s reliance on the labour market
as the main economic adjustment variable.