The European Labor Unions That Could Destroy Austerity

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The government austerity budgets being put into place around Europe have raised the ire of powerful labor unions which have already proven this year that they can disrupt the business and government operations of  entire countries. These unions are so powerful that they can potentially force changes to austerity legislation to protect the wages and pensions of their members. These huge labor organizations can severely damage national economies by pushing national legislatures away from planned budget cuts, older retirement ages and new taxes.

The near-failure of the Greek economy in the spring touched off a round of suspicion about the debt of a number of Europe’s countries and the validity of the opinions which major credit rating agencies issue to guide investor decisions. As a result, ratings of the countries were slashed.  Governments needed to prove to the capital markets that they would not be swamped by their debt. The prospect of sovereign defaults began to be raised. Many experts still believe that the situation in Greece is so bad that the country will need to renegotiate its debt which would almost certainly cause it to be expelled from the eurozone.

Unions have a long history of using disruption to force both businesses and governments to make decisions that favor their members. This has been particularly true in the US. The coal worker’s strike of 1902 involved more than 130,000 people and was such a severe threat to the national economy that President Theodore Roosevelt needed to intervene to prevent a national crisis. The strike lasted 163 days. The 1952 United Steel Workers strike almost shut America’s industrial operations. These are only two of a series of labor stoppages that affected the US economy over the period of the last century and a half.

There are no longer unions in the US strong enough to hamper national economic activity through strikes because they have lost too much of their power. The most visible symbol of this is the way in which the UAW was forced to stand by as the American car industry was dismantled.

Europe is a different matter. The two largest unions in France shuttered much of the energy transportation operations across the country. The French government estimated that the action cost $200 million a day in lost business activity and damaged GDP recovery each day. Labor has struck both government operations and industry in most of the nations which have begun to institute austerity measures and the same unions are threatening to stage huge strikes again.

The challenges facing national governments which have begun austerity measures are extremely complex.  Cutting spending only helps the economy if government receipts do not collapse. Labor stoppages can also quickly erode tax revenue. Businesses that cannot operate lose sales and those lost sales eventually translate into lost taxes. Unions can negate austerity cuts if they damage GDP improvement or even cause GDP shrinkage by bringing parts of an economy to its knees.

Below is the 24/7 Wall St analysis of eight major European nations and their most powerful unions and labor organization. The analysis lays out the financial problems that cause these governments to take a road to austerity. Furthermore, it describes how they have decided to cut costs and raise taxes. 24/7 Wall St. has also looked at the power of the unions, many of which have already staged massive labor stoppages.