The European Union is using the financial crisis to impose a ‘competitiveness pact’ to drive down wages, attack collective bargaining rights, hike up retirement ages and harmonise taxation. For the EU this is an opportunity for Wisconsin-style attacks on collective bargaining and to dismantle institutions and measures that protect wage levels across Europe.

In return for last year’s bail-outs of Greece, Ireland and Romania – in reality bail-outs of French, German and British banks – the EU is demanding huge cuts of in both the minimum wage and public sector pay, removal of collective bargaining rights, public spending cuts and privatisation. Meanwhile MEPs have awarded themselves a £1,278 increase to their monthly office allowance, bringing it to over £5,000, on top of an annual pay packet of around £100,000. Yet Commission spokesman Marco Buti echoes the old Tory mantra that driving wages for everyone else would bring “price stability”.

"When wages in the public sector damage competitiveness and price stability then the country will be requested to change this policy. “And the wage development in the public sector does of course have a great influence on the private economy," he said. However EU policies are creating conditions for a race to the bottom, as low-wage labour displaces union jobs through ‘outsourcing’ and ‘social dumping’ in all sectors of the economy.

Social dumping – a euphemism for pushing down wage costs by replacing workers with low paid, unorganised imported labour – is encouraged by EU rules for ‘free movement’ of capital, labour, goods and services within the single European market. EU finance ministers have also agreed to tighten budgetary surveillance particularly in the eurozone.

Under the proposed rules, if a eurozone country fails to close the gap between its debt level and the EU limit of 60 per cent of GDP, by five per cent per year, it will be subject to an automatic fine of 0.2 per cent of its GDP – a huge amount of money. Rather than make the EU ‘competitive’, the pact aims to maintain Franco-German dominance in Europe with no possibility for other member states to increase growth rates while borrowing and other fiscal policy instruments would be effectively illegal.

The Lisbon Treaty, imposed undemocratically in 2009, gives the European Commission the power to lock EU members into a deflationary straitjacket, especially inside the Eurozone countries. The Lisbon Treaty gives the EU powers to unleash a free-fire zone for finance capital, threatening jobs, public services and living standards. The EU is the executive committee of neo-liberalism in Europe. The Lisbon Treaty is their mechanism for ‘structural adjustment’.