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A debate over how public procurement rules should be reformed and whether they should include social conditionalities such as mandatory collective agreements clauses seems poised to move from Berlin to Brussels in the upcoming months.
After the German SPD—the oldest workers’ party in Europe—recently lost two of three regional elections, its Secretary General, Kevin Kühnert, said the group needs to become more visible in the government coalition. It has often been squeezed between its more outspoken partners, the Greens and the pro-market liberal party FDP.
Alongside a promised stabilisation of public pension levels and retirement ages, for the SPD, this would mean finally get one of its remaining pet projects from the coalition treaty over the finish line:
In 2021, Germany’s three ruling parties agreed to strengthen the position of trade unions by encouraging more firms to conclude collective agreements. More specifically, they looked at public procurement rules as a route to achieve that.
For companies to participate in public tenders at the federal level, the coalition agreed to make it mandatory to pay their workers’ wages bases on existing collective agreements.
Three years on, however, the rules haven’t been implemented yet, and several deadlines have been missed when the responsible Labour Minister, Hubertus Heil (SPD, S&D), wanted to adopt the draft law.
While the federal level only accounts for 12% of public procurement in Germany – more specifically, 22% of public construction projects – multiple German Länder (states) already have similar laws.
As the European Commission is considering revising its own public procurement rules—which the director of the EU executive’s internal market unit, DG Grow, said will be one of her key upcoming tasks—it would be well advised to note the sticking points within the Berlin debate.
Despite the law having been years in the making, Finance Minister Christian Lindner (FDP, Renew)—who’s currently under increased political pressure as his party missed the 5% parliamentary threshold in all three regional elections—said last week that the law was “simply not ready” to even be sent to stakeholders for consultation.
Despite Lindner being “just the cashier”, as German trade union federation DGB’s Stefan Körzell recently dubbed him, Lindner holds a de facto veto power in the coalition as his FDP could walk out of the coalition anytime, leaving SPD Chancellor Olaf Scholz without a majority.
A Finance Ministry source told Euractiv on Tuesday (24 September) that the ministry wanted to ensure that “bureaucratic hurdles are not increased overall”, in particular “given the [country’s] challenging economic situation.”
But at a time when Brussels and Berlin are looking into how to cut red tape and paperwork for companies, the law could bring new reporting and documentation obligations, according to industry representatives.
“In principle, we are interested in a law that ensures compliance with collective agreements for public contracts,” Tim-Oliver Müller, managing director of the main association of the German construction industry, told Euractiv.
Given that the members of his association already have collective agreements in place and compete with companies that pay lower wages, “their competitive position would be improved” if collective agreements were mandatory for all.
However, Müller said that “although the goal of fair competition is the right one,” he fears that the new bureaucratic burdens could outweigh the benefits.
“After all, such a law only works if it is closely monitored,” he said. “The resulting bureaucracy also affects the ‘good’ companies that already pay according to collective agreements. This is where the current proposal overshoots the mark.”
European trade unions, meanwhile, “are looking closely at what is happening in Germany,” Oliver Roethig, Regional Secretary of UNI Europa, the European federation of services unions, told Euractiv.
At a demonstration in Brussels next week, UNI Europa wants to bring 1,000 workers from cleaning, security, and catering services to Brussels to call for social conditionality clauses – like in Germany – to be made mandatory in the upcoming revision of the EU rules.
“At regional and local level, we have seen that laws requiring collective agreements for public contracts do not lead to more, but less bureaucracy,” Roethig said. This was because they “simplified existing rules,” he argued, given that companies with collective agreements can easily prove the working conditions they fulfil.
Thus, Brussels can learn two lessons: First, it should make it easy for companies to prove compliance with whatever objective it wants to include in its new rules—such as “preference” for EU-made products and green products, as outlined in Ursula von der Leyen’s political guidelines.
And second, to prepare for a long political battle.
Chart of the Week
Collective bargaining traditions vary enormously across EU countries.
In Germany, coverage stands at 54%, below the EU average, and 14% lower than in 2000, according to the European Trade Union Confederation (ETUC).
According to the EU Minimum Wage Directive, EU countries with a coverage of below 80% need to present a plan to increase coverage—one reason Germany wants to strengthen its public procurement rules.
Economic News Roundup
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Nearly two-thirds of foreign-made components in Russian weapons are produced in or re-exported from China, Ukraine says. Vladyslav Vlasiuk, an advisor on sanctions policy to President Volodymyr Zelenskyy, told reporters in Brussels on Tuesday (24 September) that roughly 60% of foreign-made microchips, circuit boards and other critical components used in Russia’s military apparatus, including drones and missiles, are manufactured or re-sold by Chinese firms. Vlasiuk also warned that EU and US sanctions on Moscow have failed to prevent “a lot” of these components – many of which he said were originally intended for civilian use – from being sourced from Western companies. Read more.
The head of the EU financial markets supervisor threw her weight behind calls to cut requirements on the bloc’s securitisation market on Monday (23 September), signalling that policymakers will propose to loosen current rules “in the coming weeks.” “It’s clear the regulatory framework has not produced the expected results,” Verena Ross, Chair of the European Securities and Markets Authority (ESMA), said at an industry conference in London this morning – pointing to the hefty decline seen in Europe’s securitisation markets compared to the pre-2008 financial crisis era. “Therefore, we need to look at this again [and] improve the regulatory incentives for markets participants” she said. Read more.
Germany’s Lindner curbs hopes for EU bias in CMU retail investment plans. While EU policymakers make efforts to convince Europeans to invest more of their savings into European assets rather than abroad, German Finance Minister Christian Lindner said on Tuesday (24 September) that citizens would be well-advised to invest globally. “Financial literacy means that if you invest in capital markets, it makes sense to do so in a globally diversified manner in different asset classes and different currency areas,” Lindner said while presenting the results of an OECD report commissioned by his ministry on strengthening the financial literacy of German citizens. Read more.
Scholz shuts door to UniCredit after ‘unfriendly attack’ on Commerzbank. German Chancellor Olaf Scholz slammed as “an unfriendly attack” UniCredit’s move to become the biggest investor in rival Commerzbank with a potential 21% stake, marking growing hostility towards the Italian bank. Read more.
German Economy Minister Robert Habeck (Greens) had little time on Monday (23 September) to digest the results of the third round of regional elections as he held talks with car sector leaders on getting the country’s largest industry back on track. Habeck met with the heads of industry association VDA, trade union IG Metall, large producers and suppliers at a virtual meeting in reaction to the recent batch of job cuts and downsizing announcements by several car industry heavyweights – including Europe’s largest producer, Volkswagen. “The automotive industry is facing major challenges and is undergoing a major transition and restructuring,” a ministry spokesperson told journalists on Friday (20 September). Read more.
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