National social and labour market policy reforms in the shadow of EU bail-out conditionality: The cases of Greece and Portugal

This paper asks whether the Memoranda of Understanding on specific economic policy conditionality (MoUs), signed between bailed-out member states and the EU, have changed the latter’s potential to intrude in the reform of national social and labour market policies and, if so, how. What have been the effects of the measures and reforms taken under the MoUs on national social and labour market policies? The MoUs of Greece and Portugal are analysed with a focus on pension systems and labour market policies. It is argued that the MoUs have been unprecedentedly intrusive in national social and labour market policies. The level of intrusiveness has varied, depending on the difficulty of implementing the MoU reforms, the extent to which the macroeconomic adjustment has been seen to be stalling, and the degree to which a given policy area is directly relevant to the adjustment in question. The effects of the reforms induced by the MoUs have sometimes been intended as moves in the direction of a necessary modernisation. However, the pressing demand to cut public expenditure and substantially improve competitiveness, combined with the increase in demand for social and labour market support due to mounting unemployment rates, have weighed heavily on such attempts.