Ihalainen: EMU has increased the importance of collective bargaining

– Finland s decision to participate in Economic and Monetary Union has reinforced the foundations of the Nordic collective bargaining society and the importance of tripartite co-operation between labour market confederations and the government. The standing and significance of the trade union movement have also grown in the eyes of both the government and the employers. EMU has given the trade union movement major responsibility through the success of economic policy. Excesses in collective bargaining lead quite directly to unfavourable employment trends. This was the message of Lauri Ihalainen, President of the Central Organisation of Finnish Trade Unions SAK, when discussing the impact of Finland s EMU decision at a Swedish trade union seminar held in Visby, Gotland.

The EMU seminar arranged on Sunday 6 July in Visby opens this year s Almedalen Week. This annual meeting of political parties in Gotland is a major political event in Sweden. The dominant theme of the Week this year is European Economic and Monetary Union as the country prepares for a membership referendum in the autumn. The country s largest employee organisation, the Swedish Trade Union Confederation LO, has decided to adopt no official position on possible Swedish membership of the Euro zone.

According to Lauri Ihalainen Finland has had no cause to regret its decision to join. EMU has brought much needed monetary stability in such forms as stable and low interest rates, although Ihalainen is also quick to point out that the durability of the system has yet to be tested in true crisis conditions.

EMU subdued efforts to decentralise collective bargaining

Lauri Ihalainen reminded his Swedish counterparts that the decision of SAK to support Finland s EMU membership aspirations was not without conditions, even though this was part of a consistent integration policy. The 1996 Delegate Conference of SAK imposed one condition on the organisation s support for the EMU project, which was that EMU should not undermine collective bargaining, impede universally binding collective agreements or cause cuts in agreed wages. These terms have been respected in practice.

– Nowadays employers are using new concepts alongside the idea of wage flexibility, and are talking about stability, predictability and commitment to low inflation. Employers in Finland have also come to recognise that broad co-ordination of wage policy is necessary under EMU conditions. Comprehensive incomes policy settlements are one of the most important instruments in this area. It might even be argued that EMU subdued the most enthusiastic efforts to decentralise the collective bargaining system and encouraged the employers to follow a course of close co-operation with their employees, Ihalainen explained.

Buffer funds a condition of EMU

In addition to assurances for the collective bargaining system, SAK also insisted that as a condition of EMU membership Finland should establish buffer funds to shield the national economy against external disturbances. According to Ihalainen, these buffer funds were necessary to compensate for the loss of exchange rate flexibility accompanying membership of EMU. The social insurance buffers negotiated by SAK in the spheres of unemployment insurance and employment pension insurance have functioned as agreed in Finland and have now matured.

– Membership of EMU requires preparation for cyclical change in the economy to enable policies for tackling such change. This means that a strong national economy and favourable business balance sheets are among the most important economic cycle buffers when any subsequent downturn arrives.