In recent months, Tunisia’s government and the powerful Tunisian worker union UGTT (Union générale tunisienne du travail) have negotiated an agreement that aims to improve the socio-economic situation of the country. On 13 July, they finally reached a deal, confirming the participation of this powerful organisation in the government, and launching negotiations for further policy goals. While this new modus operandi perpetuates the political influence of an unelected institution and slows down the reform process, it also offers realistic chances to allow inclusive growth.
Pact of Carthage
After the country’s first free elections following Jasmine revolution, negotiations between Tunisia’s two biggest parties Ennahda and Nidaa Tunis were in a deadlock. Civil society stepped up and drafted an agreement called Carthage on 13th July 2016, which turned out pivotal to forming a government of national unity. The quartet of the country’s four biggest civil society organisations UGTT, UTICA, the Tunisian Human Rights League and the Tunisian Order of Lawyers won the Nobel Peace Prize in 2015 for their engagement.
The process leading to this government agreement solidified the impact on Tunisian politics from the young civil society, which stood up again in 2016 to save the elected government from breaking apart. The pact of Carthage defines goals all parties could agree on such as strengthening counter-terrorism efforts and the security apparatus, deepening relations to neighbouring countries and fighting corruption. However, concrete details of how to improve investment climate, lower public deficit and promote private investments were left conspicuously imprecise.
The art of the deal
When negotiations for a new deal took off in 2018, civil society realised its privileged position more and began to enter the talks with demanding conditions. In particular the UGTT can exercise considerable influence through its sheer size of about 560,000 members in a country of 11 million inhabitants. As a result, it has been occasionally threatening the Tunisian government with public sector or general strikes when its demands were not met. Power games between the government and UGTT escalated when the union openly asked prime minister Youssef Chahed and three other ministers to step down. On 13th July 2018, symbolically two years after the first Pact of Carthage, the agreement between the government and the union was signed and became known as the second Pact of Carthage.
IMF demands
Timing for a vague deal couldn’t have been better. On 6th July, the IMF approved to pay the next 250 million tranche of the 2.8 billion USD loan agreed on in 2016, buying the government and civil society time until talks on the next tranche begin. During the negotiations, the IMF demanded from Tunisia to decrease its public sector spending, stem inflation and create incentives for private investments.
In June, just at the right time, the Tunisian central bank raised the key interest rate by 100 points from 5.75% to 6.75%, hoping that this would help to control rising inflation levels, which hit their highest levels since 1990. Employer organisations such as UTICA and Connect immediately raised their concerns, stating that higher interest rates would do nothing but stifle investments further. Authorities however, being well-aware of the catch-22 they are in, insisted that it was necessary to appease international investors.
On 10th July, only four days after the IMF signalled its green light, government and UGTT had a breakthrough in their most disputed issue, public salaries, by agreeing to raise them by 6%. Following this breakthrough, the way was paved for the rest, and the UGTT softened its demand of prime minister Chahed to resign. Three days later, on 13th July, the whole deal was ready to be signed. This is the best outcome the Tunisian administration could have hoped for: the IMF paid out the next trench whereas the government avoided committing to any unpopular reforms that might have stirred the anger of the UGTT.
The UGTT – troublemaker or savior?
While the UGTT’s influence on political decision-making slows down the economic reform process, it does ensure that the reforms include social welfare policies and worker protection. Although the Tunisian economic situation is dire with the depreciating currency and slow investment recovery, the UGTT’s high demands could help to offset the social costs of reforms which many other countries faced when they followed the Washington Consensus. For example, Thailand, Mexico and Greece followed neoliberal recommendations and opened up their markets, brutally cut public services and welcomed foreign investors. Consequently, foreign capital sooner or later rushed into their countries and restored economic growth. Nevertheless, this growth has not necessarily contributed to the living standard of the common people, and increased inequality has come along instead.
Besides pusing for an inclusive economic growth, the UGTT acts as a stabilising force. If, for instance, the Islamist party Ennahda wins the coming elections with the necessary majority to govern, the UGTT is likely to decelerate any kind of Islamisation process of Tunisian politics and can even step up to facilitate a national dialogue as it did before.
Political and economic outlook
A further increase in public salaries constitutes another strong drain in public finances. Tunisia’s economy suffers from an inflated public sector which not only works inefficiently and hinders investment, but also consumes vast amounts of resources. Yet, strong and uncompromising cuts would provoke the union, whose potential disruptive power through strikes is enormous.
It is likely that a new modus operandi of Tunisian politics is currently emerging, one that allows civil society to play a direct and strong role in shaping political agenda. The UGTT has seen its power growing steadily from one round of negotiations to the next. Asking a prime minister to step down in exchange for salary increases was probably a test to scale up their game. In the next round of negotiations, which is likely to take place after the country’s next presidential election in December 2019, it can be expected that the UGTT will ratchet its demands further. They don’t have much to lose after all, as an unelected body representing tangible social interests of millions of Tunisians.
Tunisia is neither likely to implement an austerity-focused neoliberal agenda nor refuse the IMF’s recommendations and follow the recovery model of Portugal or Spain. It is more probable that Tunisia will have a slow economic recovery, in which the country’s civil society will play a strong role and in which no sides – the IMF, the Tunisian government and the civil society – will be fully satisfied. One might say that’s the art of the deal, and it remains to be seen whether the mean is truly golden.
