Multinational Monitor

MAY 2002
VOL 23 No. 5


East Meets West: European Union Expansion and the Troubled Former Communist Countries
by Tony Wesolowsky

Chernobyl Fallout: The Uncertain Future of Ukraine’s K2/R4 Nuclear Project
by Olexi Pasyuk

Pipeline Dreams: The World Bank, Oil Development and Environmental Protection in Georgia
by Manana Kochladze

Bank Accountability Redux: The Campaign for Compliance and Appeal Mechanisms at the European Development Banks
by Petr Hlobil

Fate of the Forests: Will the World Bank Replicate Amazonian Failures in Central and Eastern Europe?
by Jozsef Feiler


Countering the New Masters: Central and Eastern European Workers Struggle to Hold Their Ground in Hard Economic Times
an interview with
Jasna Petrovic


Behind the Lines

Restraints for the World Bank and IMF

The Front
Shredded: Justice for BAT - Enron Associates

The Lawrence Summers Memorial Award

Names In the News


Countering the New Masters: Central and Eastern European Workers Struggle to Hold Their Ground in Hard Economic Times

An Interview with Jasna Petrovic

Jasna Petrovic is editor in chief of the International Confederation of Free Trade Unionsí Central and Eastern Europe (ICFTUís CEE) Network Bulletin, and the regional coordinator of the ICFTU CEE Womenís Network. She is a trade union publicist and activist living in Croatia.

Multinational Monitor: What is the current level of union representation of workers in Central and Eastern Europe?

Jasna Petrovic: There is a very low level of trade union density in CEE countries today

In former Communist countries, all workers automatically became union members at the payment of their first wage, where their dues were checked off. The individual worker did not have a membership card or any idea of which branch federation he or she was actually a member.

Trade unions had a role as shock-absorber of potential social unrest, and membership dues were pumped into social support programs at the company level: purchase of cheap meat and other sorts of food with favorable arrangements of payment, crediting of purchases of clothes, electrical appliances, excursions several times a year, free or subsidized holidays on the coast, etc.

In the late 1980s, particularly after the fall of the Berlin Wall, when the new trade unions started emerging, the majority of workers were asked, for the first time in their life, if they wanted to be union members. Many workers used this feeling of freedom, this right to a choice, to refuse being members of any union.

However, due especially to two factors — first, inertia and automatic dues collection and, second, fear of liberal or even nationalist and right-wing parties — most chose to remain union members. The first phase of the democratization of trade unions was relatively painless for trade unions, and membership figures dropped to 60 percent to 70 percent of the total number of employed persons.

However, the economic transition and the disintegration of old industrial giants and agricultural and industrial conglomerates have led to sudden lay-offs of a large number of workers. The unemployment rate in the region is moving between 30 percent to 50 percent in Croatia, Serbia, Montenegro, Macedonia and Bosnia and Herzegovina.

According to current estimates, trade union density, if you take into consideration all unionized workers in any trade union, including the company-level unions, is now much lower. According to International Labor Organization data from 1997, trade union membership in ex-communist countries declined by approximately 50 percent over the decade prior. An October 2000 survey for the ICFTU CEE Network Bulletin confirmed that the decrease is continuing in all countries. Unions from Bulgaria and the Czech Republic reported a unionization rate of approximately 30 percent; Estonia, 15 percent; Latvia, 25 percent; and Croatia. 47 percent.

MM: How has the trade union movement institutionally experienced the transition from the communist period? Have new unions replaced the old unions? Are new leaders in place in old unions?

Petrovic: In the first months following the fall of the Berlin Wall, there was a kind of a division of the trade union scene in the region between the so-called new and old unions. New unions were perceived as unions that emerged independently, often in the political underground, towards the end of the Communist era. Leaders among them were Poland’s NSZZ Solidarnosc, Bulgaria’s Podkrepa, Hungary’s Liga and Romania’s Fratia. These trade unions received substantial support, particularly from American resources, as well as European trade unions and foundations. None of these trade unions grew to become the largest and the most representative trade union in their respective countries; instead, they remained relatively small.

Romania’s Fratia uniquely united with the CNSLR, the largest reformed trade union confederation, thus becoming the largest trade union in the country. Poland’s Solidarnosc, however, still refuses all contact with the reformed Communist trade union OPZZ.

By the mid-1990s, more tolerant relationships between the so-called old and new trade unions started developing, particularly as some new people appeared at the head of the so-called old reformed trade unions.

However, in many trade unions, particularly those that call themselves reformed, there remain old trade union leaders, and old, Communist patterns of thinking and behaving. Older trade union cadres are to be found mainly at the level of branch federations, that suddenly declared autonomy and are behaving in a rather feudalist manner, refusing joint integration with other unions.

Many things are indeed changing, however. Recently, for example, in the area of former Yugoslavia, numerous charismatic trade union leaders that came to power during Communism lost their leading positions. Thus, in a democratic fight, a Bosnian and Herzegovinian trade union leader lost his position. In April, the Macedonian leader similarly lost a democratic contest, and just recently, the Kosovar leader withdrew from the electoral run at the last moment by resigning. Similar changes have been noted at the head of the Romanian CNSLR-Fratia and the Moldavian FGSRM.

MM: To what degree are labor rights respected in Central and Eastern Europe?

Petrovic: Labor rights are under attack in all countries in the region.

There are still some countries in the region in which labor legislation has actually not been changed since the Communist era; however, in the majority of countries at least one major change in labor law occurred in the mid-1990s.

However, a real campaign of the World Bank and the International Monetary Fund is currently under way in almost all countries of the region, aiming at urgent new revisions in labor laws in all of the countries in order to ensure the liberalization of the labor market, flexibilization of labor relations and reduction of workers rights. This is an attempt to attack trade unions, and motivated by a desire to reduce their influence.

Overall, workers rights are least observed in countries with a more intensive entry of international and foreign capital, that is, in Baltic and Central European countries.

MM: What are some of the common problems in the region related to respect for labor rights?

Petrovic: The basic problem in the region is the growing poverty, disastrous unemployment levels and massive non-payments of wages due to business’s lack of liquidity. Add to this mass redundancies in the state sector (military, police, education) and the public sector in general, as well as hundreds of thousands of companies undergoing bankruptcy and liquidation procedures; plus delays in payment of pensions and state employees’ salaries, as well as the limitation of wage growth in the public sector. It is clear that there is an incredibly large number of problems.

Laws are still relatively pro-worker and socially sensitive, but the reality is not. A large number of workers are in the street and have no prospect of finding a new job. Many find themselves in court demanding unpaid severance pay or unpaid wages, or are in labor disputes over the issue of their return to work.

Courts in the entire region have not been transformed, and an average court case lasts between three and ten years. This is a major problem in the region, because employers have an advantage at the very start due to the inefficient and slow judiciary.

Lately, a major problem has been the instability of employment contracts. Private employers are increasingly employing workers with fixed-term agreements or hiring them illegally. It is estimated that the informal economy involves 50 percent more workers than the official figures show, and these are unprotected workers, even if they are registered as employed, receiving minimum wages and having no rights. Collective bargaining agreements most often do not cover them.

The informal economy in the region is estimated at an average of 40 percent to 50 percent of the gross national income, much less in industry, and much more in trade.

This problem is also related to corruption, weapons, cars and drug trafficking, which are also considerable problems of this, until recently, a war region.

MM: How well represented are women in Central and Eastern European trade unions?

Petrovic: Socialism was a gender-neutral hell. Women had their quota even in trade unions.

Reality was much drearier. Women groaned under the “triple burden” of work, marital expectations plus childbearing chores, and party activism. They succumbed to the demands of the (stressful and boastful) image of the Communist “super-woman” or “mother-hero.” Yet, the Communist-inspired workplace revolution was not complemented by a domestic one. Women’s traditional roles — as “kitchen, children and church” — survived the modernizing onslaught of scientific Marxism.

However, the burden of the transition to the market economy also weighs more heavily on women than on men, particularly because of the decline of social and public services and growing unemployment and inflation, both of which adversely affect the financial situation of families.

The proportion of unionized women (44.8 percent) is higher than the proportion of women in full-time employment (43.6 percent), which shows their strong interest in organization and active involvement in trade unions. Despite that, women are discriminated against in their own trade unions. They are barely or insufficiently represented in decision-making bodies and in high positions in the trade union. At the top of the trade union they are, as a rule, invisible.

Although women make one half of the trade union membership, there are only 27.8 percent of them at congresses of trade union confederations. There are considerable differences between countries, thus at trade union congresses in Baltic countries women are as much as 41.7 percent, while in the Balkans countries there is 19.3 percent on average. Among delegates to the latest congress of Poland’s Solidarnosc, women were less than 10 percent.

MM: How have women organized to remedy these problems with the union hierarchy?

Petrovic: Women trade unionists from Central and Eastern Europe started requesting early on in Bucharest in May of 1994 and later in Budapest in November 1996, that a women’s network for Central and Eastern Europe be established. Although the recommendations, initiatives and demands were given the utmost attention in Brussels [where the ICFTU is based] the response was silence. The ICFTU maintained that it does not have the necessary finances to enter into such a demanding project.

Unsatisfied with slow pace of ICFTU’s political structures and administration, women representing several countries from Central and Eastern Europe first met on November 6-7, 1997, at a pre-session in Zagreb where the International Women’s Conference was held due to the initiative of the Women’s Section of the Union of Autonomous Trade Unions of Croatia, in cooperation with the Solidarity Center (of the AFL-CIO) situated there. On November 14-15, 1997, in the city of Gdansk, the Women’s Committee of the NSZZ Solidarnosc hosted numerous women trade union representatives from the region, sponsored by LO from Sweden and FGTB from Belgium. There were 16 participants representing 12 organizations from nine countries. They agreed to put a women’s trade union network in place.

As of January 2002, 29 women’s interest groups have been established and are active in 29 separate trade union confederations in 19 countries. In a little over four years of existence, the ICFTU CEE Women’s Network has increased by a 142 percent. Things are starting to move.

MM: How has privatization affected workers and labor rights?

Petrovic: Privatization has led, first, to mass redundancies. However, we have to admit that, in socialism, with so-called full employment, there was a considerable number of redundant workers, as well as the phenomenon of underemployment of employed workers.

Despite expectations, foreign capital has not entered the region in an intense manner. This is due to a range of factors, including extremely complicated and bureaucratized procedures, corruption and a relatively high labor cost.

However, privatization has definitely affected the level of workers rights because it has been conducted without a clear strategy or supervision. Workers’ shares in private enterprises were generally worth in nominal value up to 10 times more than the market value, except in the case of privatization of particularly valuable companies.

MM: Are there cases in CEE countries were control over privatized enterprises was transferred to workers?

Petrovic: In several countries in the region, the model of privatization has been carried out according to which workers have the right to acquire a certain package of shares at discount prices, based on their years of service in the company. However, there are very few companies that have been taken over by workers. By contrast, in many cases, someone from the former management of the company bought the control package of shares and became the majority owner. There are also examples of public scandals in many countries around the privatization of valuable companies, in which political elites were involved.

MM: How has privatization affected previously existing collective bargaining agreements?

Petrovic: In the region, collective bargaining agreements are generally respected, except in the case of insolvent companies, and companies undergoing bankruptcy or liquidation. There have been cases of new owners’ refusal to observe existing collective agreements, but this has not become a mass phenomenon in the majority of the countries in the region.

The more frequent phenomenon in the region is that, after the expiration of the enforced collective agreement, the new private owners refuse to engage in collective bargaining, or intimidate workers who declare themselves union members.

MM: How significant is the influence of the International Monetary Fund (IMF) and World Bank in CEE countries? How are the policies they are promoting affecting workers?

Petrovic: The IMF and the World Bank have been the subject of criticism of the civil society, including the trade union movement, for many years. Today these global masters are no longer puppeteers that pull strings from the shadow. Still, even ordinary people have the impression that these arrogant and loud dictators make decisions heavily impacting their lives.

In countries in Central and Eastern Europe, they are selling their “door-to-door” product, in a standardized and uniform way, just as they have been in other developing countries for the past 20 years.

The model of development that they are promoting is anti-worker and anti-unionist, focused on privatization, deregulation and trade and financial liberalization. These are socially insensitive models that are increasing world poverty and lowering living standards of workers and are increasing the gaps between rich and poor, between and within countries.

In Central and Eastern Europe, the World Bank has recently been advising several countries to carry out revisions to national labor codes which would restrict collective bargaining rights, eliminate open-end employment contracts, reduce wages, lead to mass redundancies in former state-owned companies and the public sector, cut down on severance pay and flexibilize dismissal. This is currently taking place in Montenegro, Poland, Croatia, Macedonia, Lithuania and numerous other countries in the region.

World Bank and International Monetary Fund workshops even elaborate public campaigns for the adoption of such restrictive labor laws. Thus it is a fashionable trend in the region to explain to journalists and the public that the labor laws are not amended in order to make them more beneficial for employers and international capital, but to harmonize them with the European Union regulations and ILO standards!

At the same time, they have already managed to impose on all countries in the region, apart from Slovenia, the Chilean model of pension reform with private funds that autonomously manage capitalized pension savings, without any control exerted by the workers whose money is paid from their gross wages. They continue insisting on reductions or even annulment of the pay-as-you-go scheme. They insist on the privatization of health care, education, public transport, all banks, and soon, perhaps, even distribution companies for water and electricity.

It is all the sadder that actually nothing changes in the region that used to live under a centralized dictatorship and according to centralized models. These are merely some new masters.

MM: Can you elaborate on how the IMF and World Bank are advising CEE countries on labor law reform?

Petrovic: The World Bank is currently in the process of finalizing changes in labor legislation in all CEE countries.

Although the World Bank claims that it does not interfere directly in internal issues, this can be very easily refuted. For example, in Bosnia and Herzegovina, the World Bank was directly involved in the team that elaborated the new law.

In Montenegro, the Bank joined at the moment when the new draft labor law was already in the Parliament for adoption, and it exerted pressure upon the government to withdraw it and announce its “flexibilization and standardization.”

To desperate people without a job or subsistence, such arguments often sound reasonable, because they believe that this would help them get to Europe faster, to the Eldorado that is just waiting to feed all tired and disappointed people.

In Russia, the Bank also produced an internal paper in which it gave clear-cut directives to the government on how to amend the law, and we have published this document.

In Croatia, the Bank is using an American democratic foundation and is financing an “expert” who has been “assigned to the Croatian Government for free” and is placed in the Office for Social Dialogue. One of the expert’s first jobs is to organize a meeting on amendments to labor legislation with arguments of “europization and standardization.”

The World Bank is clear on what needs to be done: deregulate workers’ rights, annul or considerably reduce severance pay, facilitate dismissals, introduce fixed-term contracts as a rule, extend probationary periods for new employees, shorten annual vacations, strengthen employers, weaken trade unions, legalize “equality” of small and large trade unions, bust collective bargaining at the national level.

In Croatia, the World Bank is trying to push through legislation that would allow the flexibilization of employment contracts in order to have fixed-time work, because, according to their interpretation, there are too many workers working under the so-called permanent contracts.

MM: What advice have the IMF and World Bank provided on cutting government spending? What impact does this have on workers?

Petrovic: In Croatia, for example, the IMF was dissatisfied with the plans for the construction of the Zagreb-Split highway, the crucial road that could revive a considerable proportion of the economically disadvantaged part of the country. The IMF is dissatisfied even when some funds are put in conglomerates with majority state ownership in order to restructure them prior to privatization. The IMF is dissatisfied with agricultural subsidies.

The question to be asked is, on whose behalf is IMF dissatisfied? It is certain that with such a model, transition countries in the CEE are not preparing for European integration, because the models of development that are being imposed and promoted do not comply with European requirements.

Or is it that the EU does not seriously intend to accelerate integration processes with the East, and, therefore, silently turns a blind eye to the detrimental modeling by the IMF and World Bank in this region?

MM: How are foreign multinationals treating workers in the region?

Petrovic: There is certainly a myriad of problems with multinationals in the region.

There are particularly problems with large hypermarkets in the entire region, that do not allow trade union organizing and recruitment of workers, employ workers only short term, and dismiss workers without observing the regulations of the national legislation.

When it comes to multinationals that establish their own local company, e.g. McDonald’s, workers’ rights are indeed restricted, and trade unions are almost banned from entering the company premises.

But multinationals (e.g. Siemens, Deutsche Telecom, a number of Italian, Austrian and German banks, etc.) that enter countries to buy off former state-owned companies, in general respect signed collective agreements and existing rights, observe laws and pay workers far more than the average.

MM: To what extent are foreign companies simply relying on Central and Eastern European countries as a cheap labor pool to make goods to export to Western Europe?

Petrovic: Former Communist countries are not so attractive to foreign capital because there are still considerable budgetary burdens on wages, which makes labor costs high, and there is a lot of red tape in procedures for starting businesses.

Of course, there are cases where small or medium-sized foreign entrepreneurs ruined a privatized company, pulled out valuable machines or ruined the company in another way.

But it would be difficult to argue that the basic objective of foreign capital is to obtain a cheap labor force in this region, because it is not that cheap, except in the black market.

Nevertheless, there are examples of companies, such as Ferrero, that entered Croatia seeking cheap labor, humiliated workers and quickly moved to Albania, and then further to the East.

By contrast, although the EU directives still do not formally extend to the non-member states, European multinationals even recently accepted the possibility of participation of representatives from parts of companies in non-member states in European works councils. This development is welcome.

MM: What do you expect EU expansion will mean for CEE workers?

Petrovic: Integration processes towards the European Union are really the best chance for the former Communist countries of Central and Eastern Europe.

We are dealing here with compatible social models based on similar cultures. The idea of a welfare state is really a very specific European product, and also very acceptable for the population of this region.

Processes of harmonization — by which countries come into compliance with EU standards — offer benefits for national legislation and practice, but these processes are very slow. It would certainly suit workers to have a unified Europe, built in the positive tradition of sustainable development, social sensitivity and worker-friendliness.


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