| Abstract: | South European labour markets have gone through a substantial level of downward adjustment in wages (internal devaluation) and liberalisation in the aftermath of the Eurozone crisis. Yet, there have been differences in the extent of change between Greece, Portugal, Spain and Italy. These differences cannot be explained by the size of the economic crisis alone. While existing analyses focus on the extent of external pressure or party ideologies, this article focuses on the pre-existing level of regulation by the state as opposed to regulation by social partners. It shows that devaluation and liberalisation were the most extensive in countries where governments possessed more tools to force down wages (statutory job protection, state regulations of collective bargaining, minimum wages), sometimes even against the will of employers. In contrast, countries with a higher level of autonomy for social partners (and fewer policy instruments available to governments to influence wages) devalued less. In some cases, the crisis led to more power to the state, rather than less. The article shows that state intervention can be a facilitator rather than a barrier to wage adjustment. |
