Strangling the Balkans: The Price for Europe

“Uh! Europë, ti kurva e motit…”

Oh Europe, you old bitch…

– Gjergj Fishta, Albanian Franciscan

A little-publicised report about low wage labour in Eastern Europe interested me. It outlined the shocking exploitation of workers in sweatshops all across the east of the continent, which claims labourers often earn “even less than their counterparts in China”.[1] For all the talk about the European Union being a securer of jobs, growth and stability (even that is debatable), its darker side is rarely discussed. In the shadow of Brexit, the whole idea of Europe has been brought into question, and not just by Britain.

The report, which also appeared in another poorly publicised Guardian article, outlines clearly illegal wage practices.[2] For example, footwear workers in Albania were earning as little as 49p an hour including overtime, and that one Macedonian factory, which produced Geox shoes, was paying illegally low wages of just €131 (£113) a month, with overtime. It identified the little-known legal loophole that manufacturers used to bypass industry standards; the outward processing trade (OPT) scheme, which the report outlines as:

…an EU-initiated trade scheme created in the 70s whereby pre-cut inputs are exported to be assembled and sewn before being re-imported free of duty. Although this practice saves higher, value-added workplaces in Western Europe, it sees the labour-intensive, low value-added work outsourced to nearby low-wage countries. OPT has long been proven to be a dead-end scheme for workers, national economies and businesses.

The report covered Albania, Bosnia-Herzegovina and Macedonia as examples of “developing countries” and Poland, Romania and Slovakia as examples of three EU member states with “significant footwear sectors”. What is significant about these states is their relatively poor GDP per capita; of the six states, only Poland and Slovakia exceeded the $10,000 mark.[3] Contrary to popular belief, the main obstacle to the economic development of these countries is in fact the restrictive policies of the European Commission and the IMF, which the report argues:

“…play an important role with their loan-related conditionality that aims at fiscal discipline with restrictive wage policies. These imposed policies exert pressure on salaries across the whole economy, particularly on minimum wage setting. It contributes to the gulf between minimum wage and cost of living. So far the EU has put no European minimum wage policy in place to protect workers from poverty.

In effect, these policies strangle the development prospects for these nations who, in the hopes of either achieving EU accession or attaining loans, accept harsh conditions to the detriment of their workers. Minimum wages have been frozen in many Eastern European countries (which were not even widely enforced in the first place), severely impacting the lives of workers who already have to work more than one job to survive.[4] Furthermore, imposed wage restrictions and general austerity for these countries has serious implications for their economies, including a depression of aggregate demand, deflationary spirals and a “reinforcement of economic stagnation”.[5]

This sad story of stunted development has often been documented in many countries in Asia and Africa, where the IMF often places similar conditions of austerity in exchange for loans. The story may come as a surprise to those in the West who could never imagine Europeans to be living under those circumstances. But for those living with those conditions, it is a familiar story. It is a story of poverty and hopelessness. And it is probably the main reason why many Eastern Europeans are emigrating in huge numbers westwards, which is something that the IMF ironically acknowledges is contributing to “slower income convergence”.[6] It is an issue that has been exacerbated by systemic corruption, economic mismanagement and a lack of investment in technology, education and infrastructure.

Could it be, that the European elite quite simply do not care? After all, it is these same institutions that forced Greece to accept yet more notorious austerity-riddled packages last summer, despite the victory of the left-wing Syriza party and the rejection of austerity by their people. It is these same institutions that forced through the extremely unpopular Lisbon treaty. And it is these same institutions that continue to ignore the plight of ordinary people, whether it be Eastern European workers, Syrian refugees or the ‘pesky’ British underclass, the vast majority of whom voted to leave the European Union not so long ago.

The impact of Brexit has been great on these European countries. A joint statement by the so-called ‘Visegrad’ countries of Poland, Hungary, Slovakia and the Czech Republic have recently called for the EU’s Brussels-based executive to be reined in. They fear that deeper integration would create a “two-speed Europe” that would leave them in the slow lane. With Brexit, these countries have lost a key ally in Britain in their quest to push for the repatriation of powers to national capitals “to make the EU more democratically accountable”.[7] But the issue of a two-speed Europe is already highlighted by the fact that Eastern European countries take out far more than they pay into the EU budget, to the ire of large contributors such as Germany and France. Suggestions of decentralisation from uppity nations are not likely to be considered, at least for the time being.

Therein lies the supposed conundrum for Eastern Europe. The institutions that force austerity, suppress wages and destroy local industries also happens to be a significant source of income (and I suppose, “prestige”). It is difficult to see how that could be replaced in the short term.

As of now, there are only two foreseeable solutions for Europe. One, further centralisation of the European Union, which could have potentially disastrous consequences for Eastern Europe: economically and politically with a further loss of autonomy than they currently experience, but also facing a prospect of a European army “to combat Russia and other threats”[8]. Or two, the obsolescence of the European Union: either through decentralisation – which would probably make functions such as the Euro utterly incoherent – or complete dissolution. It need not have come to this, say proponents of a “Social Europe”.[9] But it is precisely because the EU refuses to change its purpose as a “neoliberal project based on free trade and free movement of the factors of production” that it cannot provide this welfare net. It necessarily thrives on cheap labour and exploitation. That is its nature.

Of course, this is not the dream that Eastern Europeans were sold. They were given dreams of wealth and prosperity through a free-market European Union that would give them the right to work anywhere in Europe. The reality, however, is far harsher. As a result, Euroscepticism has seriously intensified in these regions[10] and can be found in all levels of society, from extreme-left to the far-right. Interestingly enough, “Euroscepticism is most likely to be stronger in those candidate states where accession is perceived as a more immediate prospect than in those candidate states where it seems more distant”.[11] The implication here being that once the accession talks begin and the restrictions take their stranglehold, the dissatisfaction with EU “meddling” grows. This can now be seen in the Balkans, where candidate countries have accepted austerity for years in the hope of fulfilling the conditions for accession.

The EU faces a more immediate challenge at the moment, and that is handling the fallout from Brexit. It hopes to contain the Eurosceptic fever that has gripped much of the continent following the referendum. But the EU shows no sign of reforming the very problematic elements of federalism and austerity that has caused the Euroscepticism in the first place. It is not expected that the exploitation of ordinary workers will stop any time soon. But for those at the bottom, they will continue to pay the price for a dream that was never meant for them.


[1] Report: Labour on a Shoestring – the realities of working in Europe’s shoe manufacturing peripheries in Albania, Bosnia-Herzegovina, Macedonia, Poland, Romania and Slovakia http://labourbehindthelabel.org/report-labour-on-a-shoe-string/

[2]  ‘The expensive ‘Italian’ shoes made for a pittance in east European sweatshops’ by Gethin Chamberlain https://www.theguardian.com/fashion/2016/aug/20/shoes-uk-high-street-made-for-a-pittance-eastern-europe-sweatshop

[3] GDP per capita figures dating from 2013

[4] For more discussion, please read: “Stitched up – Poverty wages for garment workers in Eastern Europe and Turkey”, Christa Luginbühl and Bettina Musiolek, 2014: www.cleanclothes.org/livingwage/stitched-up and Schmidt, Verena, Vaughan-Whitehead, Daniel (2011): The Impact of the Crisis on Wages in South-East Europe. ILO Geneva: www.ilo.org/wcmsp5/groups/public/—europe/—ro-geneva/—sro-budapest/documents/publication/wcms_172434.pdf

[5] Schulten, Thorsten (2012): European Minimum Wage Policy: A concept for wage-led growth and fair wages in Europe, p.88. In: Social justice and growth: The role of the minimum wage. ILO, 2012

[6] “Eastern Europe exodus risks creating vicious circle, IMF warns” by Gemma Tetlow: http://www.ft.com/cms/s/0/e58f527a-4dc4-11e6-8172-e39ecd3b86fc.html#axzz4IfVTjHNt

[7] See “Eastern Europeans bemoan Brexit and shun closer EU integration” by Neil Buckley in London and Henry Foy in Warsaw: http://www.ft.com/cms/s/0/bee6d64e-3e14-11e6-8716-a4a71e8140b0.html#axzz4IfVTjHNt and “EU failed to learn lesson from Brexit, Poland says” by Aleksandra Eriksson: https://euobserver.com/economic/134458

[8] “We need a European army, says Jean-Claude Juncker”: http://www.bbc.co.uk/news/world-europe-31796337

[9] “The Solution to Brexit lies in Eastern Europe” by Zoltán Pogátsa: https://www.socialeurope.eu/2016/07/solution-brexit-lies-eastern-europe/

[10] “Intensifying Euroscepticism in East Central Europe”: http://www.esee.fnst.org/Reports-News/1213c27180i1p/index.html

[11] Parties, Positions and Europe: Euroscepticism in the EU Candidate States of Central and Eastern Europe. Paul Taggart and Aleks Szczerbiak (2001): https://www.sussex.ac.uk/webteam/gateway/file.php?name=sei-working-paper-no-46.pdf&site=266