The Impact of Austerity on Local Public Services in EuropeJudith CliftonUniversity of CantabriaJudith.clifton@unican.es

Public LectureOctober 24, 2014

Kaufmann Auditorium Goldwin Smith HallCornell University

Supported by CRP & CIES Einaudi Innovation Grant

Bloc in Europe Starts to Balk Over AusterityFriday 17, October 2014

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TIMEPre-crisis policy on public services -- austerity policy -- post-austerity

Framework for policy analysis

Drivers

Venue

OutlookContent

Justification

My argument• …is that the consequences of austerity policy

on local public services in the EU are significantly constraining governments

• Austerity policy is quite different – in many ways – from pre-crisis policy

- Differences in the drivers, justifications, outlook, venue & even content

• But as regards overall consequences, austerity policy goes in the same direction as pre-crisis policy but is more extreme and more unequally felt

- Pre-crisis policy had already started to significantly constrain government’s ability to plan public service delivery: austerity exacerbates this (very unevenly).

Organization of my talk1). Reflect back on the immediate pre-crisis public service policy in the EU

2) Draw out the consequences for planning and public services

3). Examine the most salient characteristics of EU austerity policy on public services 2008-2014

4) Evaluate consequences for planning and public services

5) Conclusions: compare pre and crisis policy.

Judith Clifton (2014) “Beyond hollowing out: straitjacketing the state”. The Political Quarterly, 85(4).http://onlinelibrary.wiley.com/doi/10.1111/1467-923X.12123/abstract

1.Pre-crisis public service policy

• From the 1980s, policy on public services is heavily marketized

- “Single Market” policies• Captured as “hollowing out” government (Rhodes 1994; Peters 1994).

• Hollowing out referred to increased delegation of government functions to external actors (privatization, NPM etc.)

- Government does less day-to-day but is ultimately responsible for public services (reversible)

• Since then, Single Market policies gain importance - governments start to lose authority over public services

• Hollowing out no longer captures policy in the EU

1. Pre-crisis public service policy

• Competition law particularly important – originally applied to the manufacturing sector – is applied to services, including public ones

- This occurred in a subtle way (technical, disciplining, bureaucratic, day-to-day politics in most part).

• As a result, gradually, governments have become more constrained when enacting their preferences on public services

• This change is understated in the hollowing out metaphor

- Government sovereignty is overshadowed by the EU

• A new metaphor is required: straitjacketing the state

• Straitjacketing the state occurs when a state signs up to a new set of supranational rules which purportedly will help avoid it damaging itself, by restricting room for localized inefficient practices.

• However, due to the strength of the jacket, the state ends up being significantly restricted as regards choosing policies for domestic implementation according to its preferences.

1. Pre-crisis public service policy

1. Let´s take an example…• The EC has become increasingly influential in shaping how public services must be understood across Europe: Eurospeak

• Words and concepts matter• “Public services” deemed confusing• Formally replaced in 1996 by “Services of General Economic Interest” (SGEI) and “Services of General Interest” (SGI)

• So what? From Eurospeak to Euroaction (words to practice)

Euroaction: Public Services

SGI• These services are “not economically viable” (but may become so)

• National and local government is the authority

• “Safe haven” (exempt from competition)

SGEI• These services are “economically viable”

• The European Commission is the competent authority

• Must be subject to competition unless this damages provision

What does “economically viable” mean? Could all public services be considered “economically viable”?

2. Implications for local public services and planning

• Beyond hollowing out: governments are straitjacketed• Ever-evolving change in policy discourse and practise means government involvement is set on a slippery downward slope

• Renders EU policy technocratic and remote: most people never heard of SGI!

• Asymmetry is at the heart of this issue: local governments v. the EU institutions

- Local governments have to provide the “burden of proof” that competition would damage service delivery, or that they are not “over-compensating” public services with local finance

- Local governments say it is the EC which should provide the burden of proof

- Controversy: life-line ferries in remote Scottish Isles

3. All change? Austerity policy from 2008

3. Austerity policy from 2008• The crisis produces “virtuous” (creditor) and “non-virtuous” (debtor) countries

• Pits country against country: Europe is divided. Old hatreds resurface to haunt Europe

• Greece, Ireland, Portugal and Cyprus have to accept international bailout programs monitored by the “Troika”

• Troika not an EU institution but an alliance hurriedly formed in 2010: EC, ECB and IMF

• Other countries such as Spain received financial support packages from the Eurogroup (without an accompanying bailout program)

3. Austerity policy from 2008• How does this affect public services?• Bailout packages known as “Economic Adjustment Programs”

• These programs explicitly demand change in public service policy as part of a broader economic restructuring

- Washington Consensus in Europe• Privatization (sales and increasing private participation) in public services

• The Troika’s demands differ by country.

3. Austerity policy from 2008• Popular perceptions that an external authority is deciding the fate of national public services increases tensions

• The case of Greece is the “most” extreme, Ireland the “least”.

• In Greece, detailed lists are drawn up with the name of public services to be sold, with timelines

• Ireland the most “lenient”: quantities to be raised rather than actual firms (Palcic and Reeves 2013).

• But from Greece to Ireland, governments feel humiliated.

3. Austerity policy from 2008• Triggers sustained popular outbursts from society (Warner and Clifton 2014)

• Differentiated by country• In the UK, rise of anti EU parties: UKIP• In France, Denmark, Greece, rise of far right (anti immigration) parties

3. Austerity policy from 2008•Austerity pushback has been particulary interesting in Spain.

•“15M” movement: occupation of plazas and political public spaces

•Rise of “Podemos” grass roots political party with 1 million votes

•Foreclosure, evictions and rise of Platform for those affected by Mortages

•“Preferentes” mis-selling of “preferred” shares to Spanish retail clients and platforms

•Sustained contestation: not only “popular” based but also professionally based

•White tide (Doctors halted privatization plans of Madrid’s hospitals)

•Green tide (teachers)

4. Challenges for local public services and planning

• Change is sudden, not gradual• Baesd on division, not consensus• We see extreme forms of curtailing sovereignty “straitjacketing” in the bailout programs

• External, “technocratic” modalities of decision-making

• Questions of Troika legitimacy• Acute sovereignty loss – macroeconomic plan is imposed by Troika

- Countries are inspected by the Troika to check their policies are on track – including privatization. Finance-conditioned

- Concern about legitimacy- Humiliation, stigmatization and division.

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TIMEPre-crisis policy on public services -- austerity policy -- post-austerity

5. Conclusions: comparing pre-austerity and austerity policies

Drivers

Venue

OutlookContent

Justification

DriversPre-austerity policy• Varies, but a pattern: “private rival => ECJ => EC law”

• Mix of more/less democratically elected EU institutions plus role of private transnational lobbies?

Austerity policy• Driven by financial creditors

• Troika as alliance, not EU intitution

• Technocratic• Legitimacy of Troika is questioned

VenuePre-austerity policy• The “usual suspects” – dominant role of the European Commission, often to bolster case law by European Courts of Justice

Austerity policy• Venue innovation/venue shifting

• New venue, the Troika, combines IMF experience in macroeconomic reform with EU institutions

• Troika influences top political positions

• Fast• Legitimate?

OutlookPre austerity policy• Long-term, gradual, ratcheted up

• “Economic viability” test opening up more services to the market

• Hard to reverse – no pendulum of national politics

Austerity policy• Ostensibly short-term, “once-off”, “painful-but-necessary”

• However, how likely that nationalization will occur?

• Disconnect between rhetoric and reality?

ContentPre austerity policy• For all Member States (same rules)

• Legally based (treaties)

• EC and ECJ have competence to push for competition

Austerity policy• For some Member States (creditor countries )

• Along with the ECB and the IMF, the EC calls for privatization (no treaty content…)

• Actual lists of firms and quantities to sell

• Troika goes further than traditional EU policies.

JustificationsPre-austerity policy• Traditional concerns about efficiency

• Planned policy towards a preferred end objective.

• Micro economic focus.

Austerity policy• Little discussion about efficiencies. Not central.

• Fiscal imperative. No option

• Macro economic adjustment without looking at the micro economic advantages

• Focus on speed

5. Conclusions• Austerity policies have had a significant influence on public services in Europe

• They are being increasingly contested as regards expected results

• Before the crisis, EU authority over public services was starting to overshadow governments

• Austerity policy is considerably different to pre-crisis policy

• But the effects of austerity herald an “extreme” version of “straitjacketing” government by pre-empting sovereignty

- Uneven, divisive, unconsensual• It is as much the style of austerity policies as their content which renders them unpopular to European citizens