1 17-19 May 2012 Proceedings Edited by Aristidis Bitzenis Vasileios A. Vlachos Εκδόσεις ΠΑΡΑΤΗΡΗΤΗΣ της Θράκης
2 International Conference on International Business (www.icib.eu) Thessaloniki, May 2012 Proceedings edited by Aristidis Bitzenis and Vasileios A. Vlachos Organizers Department of International and European Studies, University of Macedonia (Thessaloniki, Greece). International Relations and European Integration Laboratory, University of Macedonia (Thessaloniki, Greece). Department of International and European Studies, University of Piraeus (Piraeus, Greece). European Centre for the Development of Vocational Training (Thessaloniki, Greece). Faculty of Political Science, University of Messina (Messina, Italy). UMR LADYSS, University Paris Diderot (Paris, France). School of Business and Economics, Winston-Salem State University (Winston- Salem, North Carolina, USA).
3 2013 EKΔOΣEIΣ EΠIKOINΩNIA Τ.Θ. 48 Όπισθεν Οικισμού Ηφαίστου - Έναντι Πανεπιστημιούπολης Κομοτηνή Τμήμα Διεθνών και Ευρωπαϊκών Σπουδών Τηλ Fax: Μπιτζένης Π. Αριστείδης, Ph.D. ISBN to be inserted here Απαγορεύεται η με οποιονδήποτε τρόπο αναπαραγωγή του συνόλου ή μέρους του παρόντος με οποιοδήποτε μέσο, μηχανικό, ηλεκτρονικό, φωτοτυπικό, ή άλλο, χωρίς την γραπτή άδεια του συγγραφέα, σύμφωνα με τον Νόμο 2121/1993 και τους κανόνες του Διεθνούς Δικαίου που ισχύουν στην Ελλάδα.
4 International Conference on International Business Chair Dr. Aristidis Bitzenis, University of Macedonia (Thessaloniki, Greece). Heads of Scientific Committee Dr. Aristidis Bitzenis, University of Macedonia (Thessaloniki, Greece). Dr. John Marangos, University of Crete (Rethymno, Greece). Head of Organizing Committee Dr. Aristidis Bitzenis, University of Macedonia (Thessaloniki, Greece). Members of Organizing Committee Mr. Charisios Kafteranis, University of Macedonia (Thessaloniki, Greece). Dr. John Marangos, University of Crete (Rethymno, Greece). Mr. Vasileios A. Vlachos, University of Macedonia (Thessaloniki, Greece). Scientific Committee Members Dr. Evaghoras L. Evaghorou, University of Piraeus (Piraeus, Greece). Dr. Konstantinos Hazakis, Democritus University of Thrace (Komotini, Greece). Dr. Petia Koleva, University Paris Diderot (Paris, France). Dr. Ilias Kouskouvelis, University of Macedonia (Thessaloniki, Greece). Dr. Eric Magnin, University Paris Diderot (Paris, France). Dr. Ioannis Papadopoulos, University of Macedonia (Thessaloniki, Greece). Dr. Georgios Rizopoulos, University Paris Diderot (Paris, France). Dr. Bruno Sergi, University of Messina (Messina, Italy). Dr. Ioannis Tampakoudis, University of Macedonia (Thessaloniki, Greece). Associated members Dr. Achilleas Anagnostopoulos, Technological Education Institute of Larissa (Larissa, Greece). Dr. Nikolaos Konstantopoulos, University of the Aegean (Chios, Greece). Ms. Christina Sakali, University of Macedonia (Thessaloniki, Greece). Mr. Vasileios A.Vlachos, University of Macedonia (Thessaloniki, Greece).
5 Contents page Preface 1 SESSION 1: POLICY IN THE EUROPEAN UNION How dirty can the PIGS get? Formatting a contemporary social welfare state under economic crisis. 3 Examining the linkages between growth and sustainable development in the eurozone. 21 Reinforcing EU law: The opportunity of a unique European tax. 22 SESSION 2: INTERNATIONAL RELATIONS THEORY Intelligence and IR theory: The cases of covert action and economic espionage 26 Ahmet Davutoğlu's strategic depth in the light of international relations theory. 36 Energy diplomacy as a tool of foreign policy: A theoretical approach. 41 SESSION 3: CAPITALISM Capitalism in transition Old and new issues. 46 Determinants and types of capital movements in the global economic crisis 53 Emigrants remittances and economic growth in small transition economies: The cases of Moldova and Albania. 66 The development ethics alternative to neoliberal capitalism. 67 SESSION 4: INTERNATIONAL RELATIONS THEORY & METHODOLOGY Studying international relations at the systemic level. 75 Βαλκανικά επιστημονικά μονοπάτια; Δύο παραδείγματα της διεθνολογίας της περιφέρειας. 82 Here and there in international relations theory. 87 O πολιτικός χαρακτήρας της επιβίωσης και ορισμένες επιστημολογικές συνέπειες. 95 SESSION 5: EUROPEAN UNION Is the European Union moving towards a fiscal union? 96 E-commerce in international and European Union law: The policy of the European Union on digital agenda and strategy Applying a comprehensive approach to international crisis management: the case of EEAS. 120 Regulatory governance of public finances: The Greek case in the EU context. 121 i
6 SESSION 6: NEW TECHNOLOGY Δελφική ιεραρχική προσέγγιση: Μία μεθοδολογία για την επίλυση των προβλημάτων αξιολόγησης της ποιότητας της εταιρικής διακυβέρνησης. Ηλεκτρονικό εμπόριο στην παγκόσμια οικονομία. 123 Ηλεκτρονική διακυβέρνηση κοινωνικών υπηρεσιών: Η περίπτωση των γραφείων κοινωνικής εξυπηρέτησης. Cosmetics companies, e-commerce and social media in Greece SESSION 7: FDI & ENTREPRENEURSHIP Gearing entrepreneurial ventures for success: The hybrid model of a Finnish startup accelerator. 138 An exploration of FDI determinants in central and eastern Europe during the global economic crisis. 139 Do FDIs enhance growth in central eastern European economies? Evidence from panel cointegration analysis. 153 Bulgaria s inward FDI and EU accession. 154 SESSION 8: INTERNATIONAL POLITICAL ECONOMY Η διεθνής πολιτική οικονομία της ελληνικής οικονομικής κρίσης: Ο μηχανισμός πρόκλησης της κρίσης. 155 Η πολιτική και θεσμική ανάπτυξη στην Ελλάδα και η ελληνική κρίση. 170 Διεθνής πολιτική οικονομία της τεχνητής νοημοσύνης ρομποτικής. 171 Εκπαίδευση και μισθολογικές ανισότητες στην Ελλάδα. 176 Ο ρόλος των BRICs στους διεθνείς οικονομικούς οργανισμούς 177 SESSION 9: ENTREPRENEURSHIP & ECONOMIC GROWTH Establishing sustainable entrepreneurial learning networks: A longitudinal study. 192 Operational barriers and corruptibility of Greek firms: Evidence at the sub-sectoral level. 193 Modeling economic growth policy interaction with local government reform: Evidence from eastern Macedonia and Thrace. 194 The impact of local government institutional reform on regional economic development: Α normative game approach. 208 Entrepreneurship in Greece: a way out of the crisis or a dive in? 214 SESSION 10: INTERNATIONAL BUSINESS AND SUSTAINABLE DEVELOPMENT How can CSR contribute to sustainable development? A mesoeconomic perspective. 215 The institutional determinants of MNCs corruption practices. 216 Diversity of capitalism and sustainable development: from institutional arrangements to business models. 217 Corporate social responsibility in central and eastern Europe: between imported and local models. 218 ii
7 SESSION 11: INDONESIA Managerial decisions in the garment industry. 219 The relationship between customer satisfaction and company profitability in Indonesian minimarket. Adoption of environmental strategy: Case of big hotels in west Sumatra, Indonesia. The form of entrepreneurial orientation and innovation: A case study of Indonesian SMEs SESSION 12: INTERNATIONAL BUSINESS Revisiting trust at the later stages of international joint ventures: The role of longevity, interdependence and risk of opportunism. 262 Predicting seaweed selling price with data mining. 263 The changing of consumer shopping pattern in Indonesian retail. 265 Greek direct investments in Turkey: a questionnaire survey of the incentives and entry barriers. 266 SESSION 13: BANKING INSTITUTIONS AND EMPLOYMENT A decision-tree induction approach to assessing comparatively the performance of non-banking financial institutions in Romania 270 Corporate environmental responsibility. The business case for the banking sector. 278 The public expenditures on labour market programmes in a pre-crisis period. 279 Quality of institutions and integration in the world economy: Applied study on Egypt. 286 The applicability of the high performance organisation framework in Africa: the case of financial institutions in Uganda. 287 SESSION 14: EDUCATION Η πανεπιστημιακή έρευνα ως «εφαλτήριο» ανάπτυξης των μικρομεσαίων επιχειρήσεων. 300 Training university students on entrepreneurship via virtual platforms: The case of technical university of Crete. 311 Languages for business and employability. 312 Internationalization of higher education: challenges and opportunities for Greek higher education in a time of crisis. 313 Ο θεσμός της χρηματοδοτικής μίσθωση (leasing) στην ελληνική οικονομία: Ζητήματα που προκύπτουν κατά την εφαρμογή του. 327 Ιχνηλατώντας τις θεωρητικές προσεγγίσεις της ετερόδοξης πολιτικής οικονομίας στην ανάλυση του φαινομένου των παραγώγων χρηματοοικονομικών προϊόντων. 332 TELECONFERENCE SESSION 1 School to work transition in Saudi Arabia: a case study of youth cohorts. 333 iii
8 Theoretical perspective of social entrepreneurship: A study of determinants of social entrepreneurship in the context of Saudi Arabia. Testing the viability of bankruptcy in petro-chemical industries in Saudi Arabia. 355 The predictability patterns in Saudi stock market. 362 The financial globalisation and its after effects TELECONFERENCE SESSION 2 Comparative study of the main determinants of domestic migration in Romania and Spain. 375 Should corporate tax in Europe be treated as shelter or as liability? 393 Management practices in small tourism enterprises. 394 Organizational changes in small enterprises and the key role of strategic choices: The Greek case. 401 The use of e-commerce in Greek tourism enterprises. 402 Intra-organizational development strategies of SMEs. 409 iv
9 Preface by Aristidis Bitzenis and Vasileios A. Vlachos The International Conference on International Business (ICIB) aims to bring together academics and practitioners in order to share ideas and methods for the exploration of foreign direct investment (FDI), the role of multinational corporations (MNCs) and the complexity of the globalized business environment. ICIB 2012 took place on May 2012 and was organized in parallel sessions of English and Greek. The conference focused on but not limited to empirical research in the following fields: Entrepreneurship & international business environment European Union enlargement Financial management Global budgetary crisis management by the European Union institutions Globalization, MNCs, competitiveness and development International political economy and business e-business Sustainable business Social entrepreneurship Labour economics and industrial relations MNCs and political strategies Mergers & Acquisitions Impact and determinants of FDI FDI and European economic integration FDI, trade and regional integration FDI and transition Tourism enterprise and industry Shadow economy and corruption ICIB is supported by a number of participating journals and follows a specific publication procedure (for details the reader should refer to The papers included in the proceedings were presented at ICIB 2012 and have completed the final stage of the publication procedure. The papers are grouped according to the general themes of ICIB 2012 sessions. The pluralism of ICIB 2012 is reflected in the volume at hand, which covers major interlinked issues of international business through fourteen sessions and two teleconference sessions where over 70 papers were presented. The key issues considered were global recession, EU budgetary crisis, EU membership, market and sector analysis, human resources, FDI, international trade, economic development, transition, entrepreneurship, etc. Some papers do not appear in full text as their full versions (copyrights) are property of participating journals or edited volumes committed to ICIB. The organizing committee of ICIB 2012 would like to thank all participants organizers, members of the scientific committee, presenters, keynote speakers, sponsors, etc. and aims for an even more successful and stimulating ICIB
11 SESSION 1: POLICY IN THE EUROPEAN UNION How dirty can the PIGS get? Formatting a contemporary social welfare state under economic crisis Dr. G. M. Aspridis, Assistant Professor, Department of Project Management, Technological Educational Institute (T.E.I.) of Larissa, tel.: , mob.: D. Kyriakou, BSc, MBA, MSc, Dodekanisou 76, Petroupolis, , Greece, mob.: Dr. M. Petrelli, Research Associate, Institute of European Integration and Policy (IEIP), University of Athens, tel.: , mob.: ABSTRACT In recent years the world economy is experiencing its worst crisis ever and this is due to globalization of markets.the aim of this paper is to investigate the reasons and the results of the most recently economic crisis in the European countries around the Mediterranean Sea (Portugal, Italy, Greece, Spain,). During this research path we had to compare the social models of each country, as this affected via the economy, the history, the bureaucratic structure, the globalization, civil society, social unrest. The proposed study is an attempt to identify the social impact of the global economic crisis we are experiencing all these years and especially the last two. Through the literature review and presentation of studies of both the European Union and the country-members, a comparative reference to certain countries of the European region and particularly Portugal, Italy, Greece and Spain will be realized. The study will present the social, psychological, employment and political effects of economic crisis in these countries. It will also illustrate how citizens perceive the crisis in order to ascertain whether the welfare state is affected and how a new welfare state is formed based on the principles of globalization and European integration. From the beginning till the end this survey, we hope to find the common factors that affect those four countries in this financial distress and how to cope with this crisis through the assistance of the European Union and manage with the social problems as another wake of the economy crisis. Ultimately, what is the model of the modern welfare state that tends to be established in the countries of the European periphery, what are the characteristics of this and what are the prospects? What will be the role of individuals in developing this rule? The findings are particularly important and any recovery will contribute substantially to the understanding of the new model of the welfare state. Keywords: Economic Crisis, Globalization, Market Economics, Capitalism, Social Welfare State 1. Introduction The new financial crisis resulted in the debate on future development of the EU. Developed in a common market with a partly common currency, within an economic zone continental dimension with a huge population. However, they weren't created strong institutions at European level to ensure reasonable, effective cooperation of Member States end common economic policies. The downturn in the Spanish property market has shown that the problem far exceeds the phishing of Greeks (Jeffries 2010). The policy of the EU to provide assistance to poorer Mediterranean regions of the Member States channeling funds into less developed areas of Spain, Southern Italy and Greece, did not stop the exodus from the countryside, neither resulted in a significant increase in industrial production. Such as, in large agricultural areas, subsidies may have discouraged the initiative (Abulafia 2004). The Finance Minister of Germany Wolfgang Soimple, in 2010 recommended the establishment of a European Monetary Fund (EMF) that could provide assistance to future financial crises (according to newspapers announcements). This is possible or desirable? Respectable political idea of EU is that the State is more than all of its citizens and that it maintains the organizational life of autonomously with its own raison d' être transcends morality of the person. On the other hand, basing on the criticism of democracy and the need for mechanical one man-one vote, in faith that man has the political and social existence only as part of the economy. In the European South, while the professional or economic groupings constituted officially the State structure, in practice functioned as instruments for the exercise of control by the parties or for the performance of the personal ambitions of their leaders (Siakadaris 2010). The aim of this paper is to investigate the reasons and the results of the most recently economic crisis in the European countries around the Mediterranean Sea (Portugal, Spain, Italy, Greece). During this research path we had to compare the social models of each country, as this affected via economy, history, bureaucratic structure, globalization, civil society, social unrest. From beginning to end this survey, we hope to find the common factors that affect those four countries in this financial distress and how to cope with this crisis through the assistance of the European Union (EU) and manage with the social problems as another wake of the economy crisis. 3
12 SESSION 1: POLICY IN THE EUROPEAN UNION 2. Literature review The welfare state, is a complex phenomenon and it is formatted with a series of events which related to historical development of capitalist economy and the outcome of the struggle of classes. The term welfare state, refer to all measures that designed to protect all the members of a society that cannot deal with their basic needs. The measures taken by the state, are mainly in the areas of education, health, housing, social security and based on the implementation of various programs of social protection (Aspridis 2006). In Europe we can recognize three types of models, the Liberal Model, located mainly in G. Britain characterized by the principal that the state intervenes in the market as little as possible so as not restrict the incentive to work and the individual choices, the Continental Model, located mostly in Holland, Belgium, France, Germany and Austria, characterized by the long-term capital financing, the strong business network developed by the companies, also the wider geographical coverage gives the ability to include the higher political blend concerning the economy and the work and the Mediterranean Model, which dominates in Spain, Portugal, Italy and Greece (André 2006). Lord W. Beveridge in 1942, before the implementation of the European Community, presented the status of the social security system as liberation of man from the needs, while ensuring a minimum income. This system is accompanied by a State social policy with three main objects: assistance to the family, improving public health and the organisation of employment in a free society. Main features of the system are universality, unique contribution, uniformity and centralization (Mardas 1998). The template Lord W. Beveridge inspired the excitant of Mediterranean Model. The institutional structure of social security systems in the countries of Southern Europe are characterised by fragmentation of occupational groups, certain categories of professions enjoy high levels of protection and pay. Unlike the Continental Model, which is prevalent in Central Europe, there is no efficient system of minimum social protection, as soon as the 1990 s Portugal has established the minimum guaranteed income and forms of social protection at the level of regions, is already established in Italy and in Spain but with significant weaknesses (Mardas 1998). The four countries of the Mediterranean have global national system of health services, which is defined on the basis of citizens rights, while a large proportion of public expenditure on the payment of their pensions. Collective bargaining is the primary means of determining the level of wages, pensions and facilitate early resulting in active part of the population not to offer. Finally, a special feature of this model is the relatively weak State's role in the management of social security systems, which allows the penetration of organized interests and political parties, resulting in unequal distribution of resources and benefits (.Matsaganis 1999). Recognizing the fact that, in their current form social member of Spain, Portugal, Italy and Greece, are a product of the political, social and economic modernization that followed the transition from authoritarianism to democracy. Democratic governments, in the end, joined the globalization of critical social programs, therefore, the enlargement of social citizenship during the 80's, which occurred a decade earlier in Italy (Abulafia 2004). 3. Resemblances The reasons why the welfare State in Southern Europe remained sparse are different. As mentioned before, the systems of social transfers are extremely generous with some occupational groups, while at the same time show obvious gaps in the protection afforded to others. These countries have mainly four similarities in governmental level. The Constitutional defined existence of the welfare state. Relative under-development of the social State and the poor shape character of actual achievements of unlike those prevailing now or even statutory. The importance and the durability of the family as a compensatory mechanism, for the welfare of its members, with significant effects on the social caste. A social culture that is rooted in an temperament solidarity, strongly influenced by the social doctrine of the Church (Mardas 1998). 4. South European Social State characteristics The term of South European Social State includes seven discrete traits. The first of these features is the prime importance of income transfers and in particular the internal polarization of income in replenishment systems. The financial benefits play an important role in those regions. To keep this fact is the extreme version of allowance model, which is typical of continental Europe (model Bismarck, the replenishment system is based on the income professional position). The existence of the contradictory pole nature protection provided. On the one hand provide profuse protection layers that form the core of the workforce, which are located within the institutionalized market, on the other hand, provide only modest subsidy to those located within the so-called informal or non-institutionalized market. They are the only Member States of the EU that do not operate on the basis of statutory national minimum income entitlement program for individuals and families with insufficient resources. However, the program at the regional level there is, and in Italy and in Spain, a pilot national program was introduced for the first time in Portugal in 1996, while in Greece remains as a concept in lodging for imposition settings in the Greek Parliament (Lyrintzis et al). 4
13 SESSION 1: POLICY IN THE EUROPEAN UNION The second distinctive feature is an unequal distribution of expenses at full range of standard hazards, and generally between different functions of social policy. This is identified by three elements. Firstly, the overprotection to the risk of old age and the elderly as a social group. The largest share of which occupy the pension expenditure when compared with other expenditure, in particular in Italy and in Greece. Criterion for the apportionment of total social expenditure by category of beneficiary is defined between the elderly and the non-elderly. Secondly, the underdevelopment of benefits and services for the family. According to estimates by Eurostat, in 1993 the family benefits in cash and kind, amounted on average to 3.5% of the GDP, at 0.2% in Spain, 0.8% in Portugal, 0.8% in Italy and in Greece 0.1%, less than in the 12 Member States (Matsaganis 1999). Thirdly, the underdevelopment of public housing policy and housing benefits, coupled with a very strict regulation of private market rents. Partly as a result, these countries have high rates of owner-occupied dwellings in relation to the rest of Europe, which classifies almost certainly of retired owners of real estate advancing unlike the Organisation for Economic Co-operation and Development (OECD) instructions says : or home ownership or retirement that applies almost in other countries. By summing the three items mentioned, we are complicit in creating a potential demographic bias in social countries of southern Europe, which has serious repercussions on the overall performance and stability (Matsaganis 1999). The third characteristic is the universality of health care who has adopted national health legislation, inspired by the British model (Matsaganis 1999). However, low penetration of the state in a privileged sphere of existence and nongovernmental organisations and institutions with strong cross-cutting nature consist of the fourth and most characteristic trait. Coexistence of public private institution evolved differently in relation to Britain and Scandinavia. The establishment of a national health system is not promoted the strengthening of public sphere and the displacement of private provision, but rather a unique interrelation of public-private entity, often with great benefit to the final (Matsaganis 1999). Following the fourth attribute, it relates to the formation of a fifth quite complex mechanisms for distribution of financial subsidies. Mediterranean social States distinguished from a low degree of governmental authority, government institutions are particularly vulnerable to indulging in favoritism and party pressure, i.e. biased manipulation of certain sectors of social State (Matsaganis 1999). The sixth characteristic is its low efficiency of State services. Research shows that south European social services users indicate higher rates of dissatisfaction regarding the operation of these services, especially low productivity of civil servants, which perhaps we can compare it with the incomplete degree of professionalism, as well as the prevailing methods of recruitment and organization of work of the administrative mechanism (Matsaganis 1999). The last characteristic, as we said before, is financing of welfare state. In other words, the very non-uniform distribution of the burden in various occupational groups, due to the lack of institutional framework, but especially because of extensive underground economy and hence widespread tax evasion (Matsaganis 1999). 5. An insight into the evolution of the Welfare State in the Mediterranean Countries 5.1 Portugal After the Carnation Revolution in 1974 and the fall of dictatorship (1926), political parties had to face difficult organizational problems. Lacked experience of how people work and knowledge of the importance of a party. Lack of a democratic tradition was an obstacle to building a free society. From April 1974 to November 1975, an explosive invasion of freedom and a radical questioning of all political, economic, social and cultural structures (Raske and Katsoulis 1985). By winter of 1975/1976 there was a rapid reduction of small leftist parties. The new Constitution adopted in April 1976 and the seizure of power by the first constitutional Government, which restored stability in political life. The Constitution specifies that the military will surrender control of political development (Braudel 2002). The delayed and weak development of the welfare State, in conjunction with these events and the interim financial crises has led civil society to self-organisation to compensate for the shortcomings of the welfare State in the production sector (Matsaganis 1999). This system connects with the traditional model of solidarity linked to affinity and neighborly relations, which have survived in spite of the profound changes that have taken place in Portuguese society over the last few decades. In 1982, the phase of budgetary restraint prevented the country closer to the model welfare state that has characterized most European countries. The deepening of the social division of labour led to the growth and diversification of the social chapter which nourishes social self-help networks. There has been a slow but steady progress by nepotism to a regionalism which will be composed of identities that regenerates the increased mobility of the population (Matsaganis 1999). However, the economic crisis of the State at the beginning of the 1980s, most vulnerable segments of the population in poverty in a situation of dependence on more informal social protection measures, derived from the context of civil society (charity, non-governmental organizations networks, mutual assistance). In Portugal the transition part of responsibility to the citizens of the State, shows more viable, since people still remember the time when public 5
14 SESSION 1: POLICY IN THE EUROPEAN UNION welfare was practically non-existent and people could rely only on primary solidarity. Values and behaviour studies indicate that the majority of the population considers the people rather than the State responsible for the survival of citizens and the quality of life. In addition, they show very little confidence in public institutions. The dominant political culture has yet to consolidate a culture of social citizenship ((Matsaganis 1999; Braudel 2002). 5.2 Spain Two main reasons contributed to the development of Spanish society, the first is the civil war of by another civil war inside the existing one in May 1973 and the second a long period of dictatorship that followed and ended abruptly with the death of the dictator Franco (November 20, 1975) (Joll 2006). Shortly before his death, the representatives of the banking system and industry disassociated themselves from dictatorship (Raske and Katsoulis 1985). These modern capitalist circles wanted to ensure a democratic legitimacy for the future. After the collapse of the dictatorship, with his successor King Juan Carlos, followed by a slow and measured opening towards democracy, a gradual transition to a parliamentary democracy using existing legislation, which is unique to the European reality any achieved in late A consequence of this was during civil war, an entire generation of artists and intellectuals have been decimated by death or exile. There where rural underemployment, particularly in the industrial estates in the South, underdevelopment, tensions on the political status and autonomy of Catalonia and the Basque provinces, which led to the fascist regime, which in turn caused by invasive tendencies of colonization, created economic hemorrhage and diplomatic problems with other European countries (Braudel 2002). 5.3 Italy Basic principle for the new Italian Republic was during the period , with the dissolution of the antifascist front and the restoration of capitalism. The Italian economic miracle (miracolo economico) at the end of the 50s was based on three factors : the existence of a stock of cheap labour forces in the South, industry exports benefited from an international market capable to absorb products and industrialization promoted by the State. In the Decade about eight million Italians left their place of residence temporary or forever and transported by the traditionally conservative South in the industrial North, from village or town in large conurbations and in removal from ecclesiastical influence in trade unions (Matsaganis 1999). The growth followed by a strong recession, when the increased pressure from the unions fees has soared, the industry was geared towards foreign economy depended increasingly on the international economic fluctuations and managed the State's economic policy under the influence of individual interests. Fifteen years later the Italian economy is in a deep crisis characterized by unemployment, underdevelopment of the rural economy, North-South gap and insufficient State management (Matsaganis 1999). Cities appear as a mosaic of homogeneous groups which do not communicate with each other. The unstable balance that takes place on various living isolated. High rates of crime have resulted in loss of confidence: ownership in the vicinity, the hierarchical structure of the State and culture and is now regarded as given. In the North Central Italy a situation of full employment for adult men and especially for the family protectors. Unemployment is concentrated among young people, women and residents of southern Italy. The duality of the Italian labour market is partly a result of labour legislation which was developed after the war and in the (Joll 2006), which was intended to protect workers from labour force under conditions of political and trade unionist. Efforts to correct the interference of injustices and the elimination of inequality lead to continuation of the existing situations and inelastic restrictive regulation of labour relations in the public sector and large companies, resulting in the extended network economy and black market labour (Joll 2006). 5.4 Greece Greece became a republic and granted privileges from Western Europe, which wished to ensure stability in the Eastern Mediterranean. In 1981, Greece acceded to the European Economic Community (EEC), although it was quite backward compared to other States of the EEC in terms of economic performance. In the coming years, was able to bridge the gap up to a certain extent, at a relatively high inflation, became a member of the eurozone and adopted the euro as currency in January 2002 (although the EU had to bend the rules to allow Greece to accede to the euro) (Abulafia D. 2004; Tsoukalas 1981; Mouzelis (1978). In 2011, the economic situation of the country at risk of insolvency and the large financial investment vehicles to challenge the rating ability. The country is under the supervision of European Central Bank (ECB) and the International Monetary Fund (IMF) for the loans received for payment of government s bonds and for outstanding payments. Characteristics of the crisis in Greece is the rise in interest rates, rising debt, canons for businesses, property market slump, rising unemployment, declining state and privatisation, reducing the purchasing power of citizens and if immediate measures are not taken, recession (according to newspapers announcements). After the revision of 2001, the Greek Constitution is considered to be one of the most comprehensive in the issues pertaining to the welfare state. Article 25 covers the entire range of civil and social rights of citizens. 6
15 SESSION 1: POLICY IN THE EUROPEAN UNION Enshrined in constitutional terms, the right to work, to free education, the protection of the strike, the family and freedom. Health is a social commodity and as such is protected by the Constitution, in article 5, 1 and article 21, 3. The family was and remains the main factor of integration and body exercise social policy and for this reason the Constitution protects in article 21, 1 and 2. Through education (art. 16) cannot be configured values for the creation of a welfare State which will contribute to the solution of many problems (Aspidis 2006). 6. Analysis Southern welfare states can be described as a via media with respect to other systems of social protection, as they encompass elements of both Bismarckian and Beveridgian traditions (Almeda and Sarasa, 1996; Moreno, 1997). In terms of social protection expenditure as per cent of GDP, all Southern European countries are well below the EU average. While in 1996 the EU average was 28.7%, the figures for Greece, Spain, Italy, and Portugal were 23.3%, 22.4%, 24.8%, and 21.6%, respectively. In the same year, social protection expenditure per capita for these four countries was also below the average. On the other hand, the analysis of the structure of expenditure on social protection benefits by function shows important contrasts not only between Southern countries and the EU average but also among them. Thus, whereas in 1995 the average for expenditure on family and children was 8%, Spain only spent 1%, Italy 4%, and Portugal 6%. Regarding further areas of social protection other peculiarities for Southern countries were apparent. Both Spain and Portugal spent more on sickness and health care, Italy and Greece spent a lot on old age and survivors pensions, and Spain s expenditure on unemployment benefits was exceptionally high, as much as two times the average. One of the reported characteristics of social security in Southern European countries is its high degree of fragmentation along occupational lines (Ferrera, 1997). This is particularly true in the Greek case. In Greece the system is characterized by a mosaic of insurance funds (236 in 1995), in which eligibility and benefits differ greatly (Symeonidou, 1997; Papadopoulos, 1997). The Italian and Spanish welfare systems also show a considerable measure of fragmentation, while Portugal has the least (Trifiletti, 1998; Guillén, 1997; Ferrera, 1996). The mix of universalist health-care systems with professional pension schemes is common to all Southern European countries (Guillén, 1997). For some analysts, the Southern type can be treated as a model in so far as it presents an original blend of occupationalism (maintenance system) and universalism (health service) that is not found in other parts of Europe (Ferrera, 1996). In 1978 a national health service was created in Italy, thereby rendering health care a right for all citizens (Saraceno, 1998). In 1979 a similar system was set up in Portugal, but private medicine continued to develop in parallel with the public service (Guibentif, 1997). Finally, a national health service was instituted in Greece in 1983 and in Spain in 1986 with production and provision of health services based on a public-/private-sector mix (Symeonidou, 1997; Almeda and Sarasa, 1996). Another characteristic of Southern welfare states is that no national statutory minimum income scheme is guaranteed for individuals and families. There is no national last-resort safety net, although in Spain and Italy, where social assistance is under the exclusive control of regional authorities, some local schemes have been developed with very irregular levels of provision (Trifiletti, 1998; Symeonidou, 1997). 6.1 The crisis effects in South Europe The financial crisis severely hit all four SE countries. It exacerbated their problems of high public indebtedness (particularly in Greece the public deficit shot up to 15.4% and the public debt to 128% of GDP in 2009) and brought to the fore structural problems in the economy. Escalating borrowing costs thrust public finances into severe crisis, necessitating significant cuts in public spending. Surely, in all four countries fiscal discipline measures and domestic austerity put the brake on any trends of welfare state expansion, and prospects for widening the scope of institutionalized social rights (for instance, to provide entitlement to a universal minimum guaranteed income, to universal care services for the frail and dependent persons etc.) were severely curtailed, even though the crisis exacerbated social needs. Any initiatives towards expanding social rights, recorded in the pre-crisis period, are in serious jeopardy under the drastic austerity measures (as is the case, for instance, with the newly introduced system of social care provision in Spain, planned to be co-funded by the state, the autonomous regions and the beneficiaries). Similarly contraction of public health spending increases privatization, striking a blow to the relatively new NHS structures in SE countries (private spending was about 40% of total health expenditure in Greece and close to 30% in Spain and Portugal in 2008). Across the board reductions in pensions greatly increase the risk, for elderly people, of falling deeper into poverty and becoming highly vulnerable to its effects (the more so as poverty among the elderly was considerably high in these countries even before the onset of the crisis; in both Greece and Spain the poverty rate for the population over 65 years of age was 22% and 28% respectively, while for those over 75 years the corresponding rates stood at 28% and 33%, being even higher among elderly women). Also, rapidly rising unemployment (23% in Spain and 20%, officially, in Greece but, unofficially set close to 21% even by government authorities), and progressive 7
16 SESSION 1: POLICY IN THE EUROPEAN UNION undermining of labour rights do not augur well for the future of social protection. The point at issue is whether shrinking social protection instigated by austerity is irreversible. Although it is too early to pass verdict on this, some evidence from Greece so far gives an indication of where the crisis-induced reforms are heading at. (Busch, 2010) 6.2 Recent developments at a European and Member State level The crisis in the eurozone and the austerity measures, as announced by most European countries, will crush the social model implemented after the Second World War, which should now move ahead with reforms in order to survive, European economists say. "This welfare state built after the war, which covered many needs, especially for the diseases, it will disappear," they warn, pointing out that already in weak countries (like Greece) "the welfare system is almost bankrupt and countries are being directed to more liberal systems without a safety net, where of course the most vulnerable groups are liable to find themselves without coverage." The pension reforms, the reduction of welfare allowances, a freeze on pensions, cutting benefits in case of illness - all these austerity measures announced over a year from the eurozone countries, took over from a traditional spending European welfare state. "This welfare state built after the war, which covered many needs, especially for the diseases, will disappear," predicted Nicolas Bouzou, director of Aster's, an economic studies company. "At that time, there was a context of strong growth and full employment and the population was relatively young. Today, unemployment is rising, there is no growth and the population ages, so the financial pressures become more unbearable", he added. "It is clear that with the crisis, the pressure that already existed in the European social model because of the demographic problem and weak growth, intensified", agreed and the Director of European Institute Bruegel Jean-Pisani-Ferry. However, not all countries have problems in the same way. In France, apart from the pension reform, the government has announced the adjustment of family allowances in In Ireland, benefits of sickness and rent have fallen. In Portugal, there was a 25% cut in family allowances. In Italy, the privileged aids have dropped and Spain abolished the birth grant, as noted by Anri Sterntiniak, economist of French economic circumstances Observatory (OFCE). The new prime minister of Spain, the conservative Mariano Rachoi is expected to take new measures and intends to promote, by early next year, a "modernizing labor law" to tackle unemployment, which has reached record levels. In Italy, the government of Mario Monti also plans to reform its labor market to promote the so-called "flexicurity" based on the model of Denmark. For Michael Bourntas, economist at Humboldt University of Berlin, many European countries should be inspired by the Scandinavian model. "It works well because it combines elements of a welfare state liberalism," he said. In many European countries, social welfare systems will disappear and will now focus only on those who are most in need, provided by Nicolas Bouzou. For example in France, the family allowance which is granted without any condition on income will be waived. But for countries most affected by the crisis, the dismantling of social welfare would be much steeper. In Greece and Portugal, ' the welfare systems have almost bankrupted the country and are directed to more liberal systems without a safety net, where of course the most vulnerable groups are liable to find themselves without coverage", said Bouzou. "At the moment we do not monitor the end of the welfare state, but its depravity. And when we reduce the childbirth allowance in Spain, a country that has huge low birthrate problem, it's like being self-shot "noted Anri Sterntiniak. For the French economist, social protection is one of Europe's identity and there is no reason for anyone to deny it. "However, we should take steps to keep it funded", he said. The ongoing financial crisis beyond the obvious deficits, the attack on social and work achievements, and hike also has its invisible from the institutions collateral damage. The general socio-political climate and economic downturn leads to more misery populations: poor, immigrants, addicts and new-poor homeless' compose the new neglected human potential that is left to its chance alone without any social care, health care or any rehabilitation strategy. This reality affects all age groups with the number of homeless to have increased by 20%. The humanitarian crisis in Athens and especially at the center is not only serious but has an "epidemic" nature. Pensioners who cannot afford their medicines, people with no work stamps or insurance fund are no longer able to access the "National" but not social health system. Getting in depth, Eurostat estimates that million men and women in the EU-27, of whom million were in the euro area (EA-17), were unemployed in February Compared with January 2012, the number of persons unemployed increased by in the EU-27 and by in the euro area. Compared with February 2011, unemployment increased by in the EU-27 and by in the euro area. The euro area seasonally-adjusted unemployment rate was 10.8 % in February 2012, compared with 10.7 % in January; It was 10.0 % in February The EU-27 unemployment rate was 10.2 % in February 2012, compared with 10.1 % in January; it was 9.5 % in February Among the Member States, the lowest unemployment rates were recorded in Austria (4.2 %), the Netherlands (4.9 %), Luxembourg (5.2 %) and Germany (5.7 %), and the highest rates in Spain (23.6 %) and Greece (21.0 % in December). Compared to a year ago, the unemployment rate fell in eight Member States, increased in eighteen and remained stable in Romania. The largest falls were observed in Lithuania (17.5 % to 14.3 % between the fourth quarters of
17 SESSION 1: POLICY IN THE EUROPEAN UNION and 2011), Latvia (17.0 % to 14.6 % between the fourth quarters of 2010 and 2011), and Estonia (13.9 % to 11.7 % between the fourth quarters of 2010 and 2011). The highest increases were registered in Greece (14.3 % to 21.0 % between December 2010 and December 2011), Spain (20.6 % to 23.6 %) and Cyprus (6.7 % to 9.7 %). Between February 2011 and February 2012, the unemployment rate for males increased from 9.7 % to 10.7 % in the euro area and from 9.4 % to 10.1 % in the EU-27. The female unemployment rate increased from 10.3 % to 11.0 % in the euro area and increased from 9.6 % to 10.2 % in the EU-27. In February 2012, million young people (under 25) were unemployed in the EU-27, of whom in the euro area. Compared with February 2012, youth unemployment increased by in the EU-27 and by in the euro area. In February 2012, the youth unemployment rate was 22.4 % in the EU-27 and 21.6 % in the euro area. In February 2011 it was 21.0 % and 20.5 % respectively. The lowest rates were observed in Germany (8.2 %), Austria (8.3 %) and the Netherlands (9.4 %) and the highest in Spain (50.5 %) and Greece (50.4 % in December). In February 2012, the unemployment rate was 8.3 % in the USA. In January 2012 it was 4.7 % in Japan Employment - Unemployment trends Studying Figure 1 and 2, in early 2000, just less than 20 million persons were unemployed in the EU-27, slightly below 9 % of the total labour force. This figure fell to around 19 million (or 8.5 %) in early 2001 before rising back to around 21 million persons by the middle of 2002, where it remained through until the middle of From mid-2005 there was a period of several years of steadily declining unemployment within the EU-27. By the first quarter of 2008, EU-27 unemployment hit a low of 16 million persons (equivalent to a rate of 6.7 %) before rising sharply in the wake of the economic crisis. The unemployment rate in the euro area (EA-16) followed roughly the same trend as in the EU-27. However, between 2000 and the middle of 2004 the unemployment rate in the euro area was below that recorded in the EU-27. This pattern was subsequently reversed as unemployment declined more rapidly in the Member States which do not yet have the euro between 2005 and In 2000, the unemployment rate in the United States was around 4 %, considerably lower than in the EU. It remained much lower until early 2008, when unemployment started to increase rapidly. By mid- 2009, the unemployment rate in the United States had reached the same level as in the EU. Unemployment rates in Japan were much lower than in the EU, and this was the case throughout the last ten years for which data are available. On the other hand, studying Figure 3 and Table 1, youth unemployment rates are generally much higher than unemployment rates for all ages. High youth unemployment rates do reflect the difficulties faced by young people in finding jobs. However, this does not necessarily mean that the group of unemployed persons aged between 15 and 24 is large because many young people are studying full-time and are therefore neither working nor looking for a job (so they are not part of the labour force which is used as the denominator for calculating the unemployment rate). For this reason, youth unemployment ratios use a slightly different concept: the unemployment ratio calculates the share of unemployed for the whole population. Figure 3 shows that youth unemployment ratios in the EU are much lower than youth unemployment rates; they have however also risen since 2008 due to the effects of the recent crisis on the labour market. The youth unemployment rate in the EU- 27 was around twice as high as the rate for the total population throughout the last decade. The EU-27 youth unemployment rate was systematically higher than in the euro area between 2000 and early 2008; since this date, these two rates were almost identical. Historically, to place another concept into our discussion through Figure 4 and Table 3, women have been more affected by unemployment than men. In 2000, the unemployment rate for women in the EU-27 was around 10 %, while the rate for men was around 8 %. By the end of 2002, this gender gap had narrowed to around 1.3 percentage points and between 2002 and early 2007 this gap remained more or less constant. In recent years, most markedly since the first quarter of 2008, male and female unemployment rates in the EU-27 have converged and by the second quarter of 2009 the male unemployment rate was higher. 9
18 SESSION 1: POLICY IN THE EUROPEAN UNION Table 1 Youth unemployment rate in Euro member-countries Source: Eurostat Table 2 Evolution of Unemployment in EU and Third countries Beginning with our analysis and getting a grip over Portugal, one of the countries that are facing great economic problems and recently joined the IMF-EU scheme for economic rehabilitation, during the period Employment rate in population aged diminished from 38.5% to 28.5% while Employment rate in population aged decreased from 80.9% to 79.2%. For the Employment rate in population aged there has been a drop in percentages from 51.6% in 2003 to 49.2% in Getting in depth to the above introduction, as it was implied before, the most important issue, though, is the struggle to cope with high unemployment which in Portugal's part Unemployment rate: total civilian labour force exploded from 7.1% in 2003 to 15% in February 2012, according to Eurostat's recent data, with a potential increase in the nearby future according to professionals over the subject. Specifically, the Unemployment rate in male civilian labour force 10
19 SESSION 1: POLICY IN THE EUROPEAN UNION rose from 6.7% in 2003 to 11.8% in 2010 while the same for female civilian labour force went up from 7.7% to 12.3% in the same period, presenting with the difficulties of female personnel to find employment. An alarming issue, as we will see in the analysis that has to strike a bell in order to take action against, is the Long-term unemployment (Figure 5) in total unemployed which rose significantly from 35% in 2003 to 52.3% in Turning our page to Italian Employment rates, it can be commented that for Employment rate in population aged in 2003 was 26% while in 2010 fell to 20.5%, stating the general increase of youth not finding a job due to economic crisis. For the Employment rate in population aged the relevant percentage rose slightly from70.8% in 2003 to 71.1% in 2010 while for the same period Employment rate in population aged rose significantly from 30.5% in 2003 to 36.6% due to bonus schemes to promote late pension receivers as well as late leave workers plus a great number of people that in order to establish pension rights need to have some work stamps to be eligible for this latter. Moving along, this country needs to tackle down unemployment as well, following the general flow of the South European countries. As far for the Unemployment rate in total civilian labour force, in 2003 was 8.5% and although significantly decreased in the later years, now, according to Eurostat, in February 2012 reached to 9.3%. Specifically, Unemployment rate in male civilian labour force rose from 6.5% in 2003 to 7.5% in 2010 while on the other side Unemployment rate in female civilian labour force dropped from 11.4% in 2003 to 9.7% in 2010, although still high. Closing with the Italian unemployment a special mention should be made to Long-term unemployment (Figure 5) in total unemployed which fell significantly from 58.1% in 2003 to 48.5% in 2010 due to the elasticity of working conditions promoting 3 working days instead of 5 or part-time employment. As far for Greece, one record after another shatters unemployment showing that the country is experiencing a deep crisis because of the hardness of austerity measures and prolonged recession. Unemployment rate jumped in January to 21.8%, a rate twice that in the euro area, compared to 14.8% in the same month last year and 21.2% in December The unemployed people totaled 1,084,668, an annual increase of 46.6%, and within a month starting from December 2011 added 32,331 other unemployed. In the big victims of unemployment is youth, with the unemployment rate in the age group reaching 50.8% and women with the rate reaching 25.7% versus 18.7% for men. The highest unemployment rate 23.2% recorded in the Attica region, followed by regions of Macedonia-Thrace and Epirus-Western Macedonia with 22.6% and 22.5% respectively. According to the Greek Statistical Authority (ELSTAT) the number of employed in January 2012 was estimated at 3,880,120 people. The unemployed stood at 1,084,668 people, while the economically inactive population stood at 3,342,853 people. The number of employed decreased by 363,369 persons compared to January 2011 (8.6% decrease) and 25,953 persons compared to December 2011 (0.7% reduction). The unemployed increased by 344,913 persons compared to January 2011 (46.6% increase) and 32,331 persons compared to December 2011 (3.1%). The economically inactive, people who are not employed nor looking for work increased by 21,066 persons compared to January 2011 (0.6% increase) and decreased by 2,965 persons compared to December 2011 (reduction of 0.1 %). Table 3 Unemployment rates in Males and Females in Euro Member countries 11
20 SESSION 1: POLICY IN THE EUROPEAN UNION As mentioned before, the great plague of whole Eurozone is called unemployment. For Spain, Unemployment rate in total civilian labour force from 11.1% in 2003 rose up to 23.6% according to Eurostat in February 2012, presenting the highest rate in EU-27. Getting in depth of this latter, Unemployment rate in male civilian labour force from 8.2% rose to 19.8 in 2010, while women, who by tradition face more difficult conditions in finding and remaining in a job, their Unemployment rate, rose from 15.3% in 2003 to 20.5% in One interesting figure to analyse as well is Long-term unemployment (Figure 5) in total unemployed which was estimated in 39.8% in 2003 and rose up to 45.1% in 2010, demonstrating with a significant increase of people not finding a job for a long period of time. On the other side, as far employment is concerned, it can be commented that Employment rate in population aged from 36.8% in 2003 with an increase to 42.9% in 2007, dropped in 27.4% in 2010 following the general effect of the Eurozone crisis while Employment rate in population aged from 71.3% in 2003 fell to 69.6% in Continuing in the same page Employment rate in population aged from 40.8% in 2003 rose to 43.6% demonstrating a strange development in employment but also explained why EU has decided to insert bonuses for older people not to leave their employment even after their 65 years of age. Figure 1 Short and Long term Unemployment worldwide Ending, the crisis also affected those far removed from the labor market, both inactive persons and the long-term unemployed. Even beforehand, the uneducated and the inadequately educated, the handicapped and those with mental problems, and migrants especially women, enjoyed limited access to added training, professional improvement and other services. The efforts invested in increasing employment over the last few years might be undermined with the lack of jobs and amidst pressure for additional training and professional improvement (Batic, 2011) Public Health Expenditure In the European welfare states reform pressure arose over the past two decades from a combination of explanatory variables, including demographic change, employment crises, public debt and the system of «market states». The evolution of social security benefits since the mid-1990s illustrates that in many EU countries the dismantling of the welfare state is already discernible in macro-data. The main driver of these trends is the reforms of pension and health care systems, which account for 70 to 80 per cent of all welfare state expenditure. Finally, as a result of the unequal development of economic and social catch-up processes, social dumping may well emerge in the system of market states. While in Greece, Hungary and Portugal the economic catch-up process has gone hand in hand with both an absolute and a relative expansion of the welfare state, in Estonia, Ireland, Latvia, Lithuania, Slovakia and Spain the welfare state has been cut back in relative terms, despite economic advance (Batic, 2011). This shows that, without political intervention, the close link between economic and social progress, which existed in the EU until the mid-1990s, cannot be maintained. Belief in almost automatic interaction in the functionalist sense is not borne out by experience. Reforms of social security systems in the past two decades display a high degree of convergence. Similarities with regard to reform policy and system evolution are particularly marked in pension and labour market policy, in both Western and Eastern Europe. Change in these sectors has tended to be radical, with existing structures often being cast by the wayside (Baum-Ceisig et al, 2008). In pension policy, this finds expression in the introduction of the three-pillar model, in the transition from defined benefit schemes to defined contribution schemes, a relative cutback in services (recommodification) and a tendency towards mixed financing (taxes/contributions) (Busch, 2009 in Batic, 2011). 12