|SocialismToday Socialist Party magazine|
The European Union’s spiral of crisis
Despite huge bail-out plans, world financial markets continue to hammer the EU. The very existence of the eurozone is in question. Although the Greek working class is in the frontline, deep cuts are being implemented internationally. ROBERT BECHERT reports on this continental crisis.
THE EUROPEAN UNION and especially the euro have been brutally battered and undermined. In a year that has seen EU crisis meetings become normal, May was particularly frantic and is ending in more turmoil. The strains were shown in personal tensions between different eurozone leaders, especially Nicolas Sarkozy’s threat to pull France out of the euro. Desperate attempts were made, not only to prevent Greece defaulting on its debts, but to shore up the euro itself. For the first time since its 1999 launch, there has been open discussion of whether countries could be expelled from the eurozone and over the euro’s own survival.
May’s crisis focused on Greece and the fear of it defaulting on its debts, reported to be over $350 billion. But the issue was not simply whether it could afford to pay this debt but, more importantly, whether the mounting anger in Greece would block the government’s attempt to impose savage austerity and open the door to revolutionary developments.
The fear of contagion from a Greek default was not just that it would be a Lehmann-style financial collapse that could trigger a new economic downturn. The ruling classes also fear a ‘class-struggle contagion’: that a revolt in Greece, or another country, could unleash a wave of protest and struggle that could sweep over many countries. This is one reason why there is a disgusting international propaganda campaign against ‘lazy’ Greeks, and praising workers in other countries who, so far, have staged only limited protests.
The ruling classes’ fears are justified. The crisis that started in 2007 is far from over. Economically, the situation is still fragile despite a weak revival in many countries. The capitalists have no confidence in the recovery which, in any case, will be generally slow and will not create many jobs.
Because of the credit-fuelled character of the economic growth before this crisis, the huge bailouts and governments’ attempts to put a floor under the recession, debt has become a major issue. As predicted, the banking and financial meltdown set the scene for a sovereign debt crisis to be propelled onto centre stage. Essentially, this has been caused by doubts over whether governments can pay back the money they have borrowed, something that would inflict massive blows to the international finance system. Against this background, pressure is piling on governments to cut back spending and borrowing, despite growing fears that this could help provoke a double-dip recession.
At the same time, the financial sector is still shaky – the Spanish government had to take over the large CajaSur savings bank towards the end of May. All this has added to the turmoil in the eurozone and the euro’s fall in value in comparison with the US dollar – incidentally, something that not all European capitalists are unhappy with. Fears are increasing of another international financial collapse. The difference with 2007/08, however, is that now highly indebted states would be less able to bailout wrecked financial institutions, which poses the threat of a much deeper recession.
Austerity packages are being announced or openly planned in country after country. The ‘threat’ of Greek-style crises is being used to intimidate the broad population. Again and again, workers and the middle class are being told that the ‘market’ is demanding cuts. At the cutting edge of these demands are what the conservative Swedish finance minister accurately called the ‘wolf pack’ of financial speculators and dealers. They are making huge profits on the basis of trading shares and so-called ‘financial instruments’, helped by the flood of low-interest credit that governments have provided to try to prop up the financial system. But the attacks on living standards are not simply from finance capital. Ruling classes around the world are cutting the ‘share’ going to the working and middle classes because the recession has shrunk the economy.
The fading euro dream
MID-MAY’S €750 billion ($1,000bn) package may buy time for Greece and the euro, but for how long is not at all sure. One thing is clear, namely, that there is no stability. The Financial Times commented: "The eurozone’s crisis is so dynamic that its rescue is in danger of being overtaken by events".
The ‘euro dream’ has been fundamentally undermined in the crisis meetings and the statements of different leaders. But, as we explained in the run-up to the euro’s creation in 1999, it is being undermined by the realities of capitalism itself. On the one hand, capitalism – as Karl Marx and Friedrich Engels pointed out in the Communist Manifesto – created a world market, recently driven by globalisation to new heights of scale and integration. At the same time, capitalism remained rooted in the nation state, with individual ruling classes that would protect their own national interests, at the end of the day. Ultimately, this puts limits on or reverses the integration between EU states. A single European capitalist state, on the lines of the USA, was impossible. Furthermore, at a certain time, the euro would tend to break down, as has been the case with earlier currency unions between independent countries.
While the euro has lasted longer than we expected when it was launched, the ongoing storms in the eurozone have fully confirmed our underlying Marxist analysis.
May’s upheavals are symptoms of the turmoil which the global economic crisis has unleashed and ruthlessly expose the fundamental flaws in the euro. Obviously, this crisis is not just in the financial markets and committee rooms. It poses a direct threat to working people, and requires concrete answers from the workers’ movement internationally. The crisis also extends outside the eurozone and EU. While much of May’s attention has focused on Greece, in Romania, a fellow EU member, the government is battling opposition in order to impose a 25% cut in wages and a 15% cut in pensions and social benefits from 1 June.
So far, none of the regular EU crisis meetings have failed, officially. They have duly produced a new plan, despite the growing strains between governments and personal tensions between the leaders. But, while deal after deal has been announced to great fanfare, rapidly they are seen, at best, as partial and temporary ways out. In the current situation, more turmoil is to be expected as national leaders fear damage to their own capitalist class’s interests, the spectre of internal revolt and their own careers.
Properly organised insolvency
THE EUROZONE 7-10 May summit marked a new high point in tensions and low point in relations as leaders met to thrash out a way of overcoming yet another emergency. The clash of different national interests was open with the German government, especially, striving to limit any new burdens placed on it. Sarkozy’s reported threat to pull France out of the euro and Barak Obama’s direct telephone intervention into the meeting openly piled pressure onto Angela Merkel to force the German government to agree to the ‘rescue’ package. This was accompanied by the eurozone rule book being suddenly torn up. The European Central Bank was forced to do an abrupt u-turn, buying eurozone government bonds – in effect, lending money to governments that may not pay it back.
Despite Merkel’s statement, a week earlier, that "without us or against us, there will be no decision", she was forced to back down. This was seen as a ‘victory’ for Sarkozy and a defeat for Germany which has to make the biggest contribution to the bailout. But German imperialism remains the dominant power in the EU and has benefited most, so far, from the euro. Repeating the now common comment on the eurozone’s ‘existential crisis’, the Financial Times argued that this deal, far from being a solution, raised "economic and political risks to new heights" (11 May). However, given the huge scale of this deal, it could postpone the next crisis for a period.
Just over a week later, the Merkel government, under domestic pressure, struck back with a ban on one particular market strategy, so-called ‘naked short-selling’, speculative financial gambles. Merkel told the German parliament that it was necessary to assert the "primacy of politics" over the markets and to "ensure that banks cannot extort the state anymore". However, this sort of attempt to restrain traders by regulations, rules, etc, will fail as the market will always find a way around them. The only way to stop speculation and gambling on the financial market’s casinos is to nationalise all finance institutions and impose a democratically controlled state monopoly of foreign trade. But Merkel had to do something to show that she still had the initiative, at least against her rivals and enemies at home.
Merkel was not simply acting to limit some forms of profiteering or place some controls over finance capital in the interests of capitalism as a whole. Merkel was also setting out new limits for aid to financially stricken eurozone countries which could, in future, provide a basis for demands that countries leave the common currency. Already in March, Merkel said: "We need to have an agreement under which, as a last resort, it’s possible to exclude a country from the eurozone".
Under the heading, Tough Penalties for Notorious Deficit States if Necessary, the German government website summarised Merkel’s statement: "At European level, the chancellor qualified the watering down of the 2004 stability and growth pact as a ‘major mistake’. This must now be remedied. She made a number of proposals in order to guarantee savings and consolidation measures in the eurozone states. If necessary, she stated, it ought to be possible to impose penalties on states that fail to tackle their budget deficit. These could mean that the states lose their voting rights in Europe for a period of time. Properly organised insolvency proceedings for states should also be an option".
In the Guardian (London), Dan Roberts explained: "Merkel called on Europe to ‘develop a process for an orderly state insolvency’ – in other words, work out how to let countries such as Greece, Spain and Portugal simply refuse to repay their debts. It might sound obvious to those on the outside, but this flies in the face of everything Europe has been trying to do and would set in train colossal losses for banks, pension funds and investors everywhere. There is no guarantee it would make life any easier for the Greeks either. Instead of having to bring public spending in line with tax revenues slowly, a decision to effectively turn its back on the financial markets would mean having to balance the books overnight – a huge wrench for a country already in the grips of a deep recession.
"But Merkel's comments do at last begin to acknowledge what many observers have been saying for weeks now: lending yet more money to Greece and other over-indebted nations can only ever be a temporary sticking plaster. The IMF and EU austerity plan already envisages such sharp falls in Greek GDP that an extreme solution may no longer look so intolerable. It would also explain some of the appetite for the ban on short-selling shares in German banks. If Merkel really is preparing to hit the market with a Lehman Brothers style default that would rock banks across Europe, the last thing she wants is for lots of speculators to get rich in the process". (20 May)
The weakest links
IN 1999 WE asked: "Will this newly formed holy alliance in support of the euro hold together when conditions diverge in the eurozone, both in political and economic terms?" We answered: "It will, in our view, be impossible to maintain a ‘one-size-fits-all’ monetary policy when the conditions become more and more intolerable and when countries are forced to find their own ways of adjusting to the crisis". (No to the Bosses’ Euro/EMU – CWI statement, 14 January 1999)
Now we are seeing this prognosis begin to come to life. While there are no imminent signs of either the eurozone breaking up or individual countries leaving or being expelled, these issues are being discussed. Given the depth of the crisis it cannot be ruled out that one or more of these developments could come to pass sooner rather than later. As mentioned earlier, Merkel has threatened to throw countries out.
It is also possible that German capitalism could decide that the costs of bailing out other countries outweigh the trade advantages it has won in the eurozone. In such a situation it is possible that Germany could leave the existing eurozone and try to create a sort of ‘euro II’ with fewer countries, or even return to the Deutschmark. Interestingly, Austria, Finland and the Netherlands, some of the members of the old informal ‘Deutschmark zone’, have been Merkel’s strongest supporters in her battles with Sarkozy.
These clashes are not ones of personality, although that makes them more colourful. At root, they reflect the conflicting long- and short-term interests of the different ruling classes and governments. Clearly, Merkel’s attempt to delay reaching an agreement on a deal to help Greece was determined by the date of the North Rhine Westphalia federal state election. Having lost that election and been forced to agree to contribute a large sum to the Greek bailout, possibly up to €148 billion, she has been further weakened.
However, the underlying issues are the conflicting interests of each capitalist class. In the ‘good’ times, the national capitalist classes could work together. Now, in this crisis, they rapidly alternate between clinging together in the storm and trading blows to defend their own position.
Increasingly, questions are being asked by the different European ruling classes on whether it is possible, or even desirable, to avoid a country like Greece defaulting. This is not being debated out of concern for the Greek working and middle classes, but only from the point of view of the other European capitalists. They fear throwing money away by attempting to thwart the markets, and domestic opposition to what is seen as a bailout to Greece at a time of increasing austerity measures in practically every European country. This is the significance of Merkel’s call for the eurozone to have the option for "properly organised insolvency proceedings for states".
The chain is tending to snap at its weakest links. During May, Greece was in the front row, with Portugal and Spain not far behind. But this order can change. None of these countries are isolated. The markets are gripped by the fear of contagion, hence Obama’s repeated phone calls putting direct pressure on EU leaders to try, at least, to prevent a new international financial crisis. Yet, the renewed stock and currency market turmoil at the end of May showed that these fears were rising once again.
Promising change for the worst
IN PRACTICALLY EVERY European country government finances are groaning under the combined impact of the cost of massive bank bailouts, falling tax income as the recession hits, money spent trying to prevent the crisis turning into a 1930s-style depression and, in some cases, the need to refinance past borrowing. These, alongside the smaller economic ‘cake’ due to the recession, are the driving forces behind the governmental and bosses’ offensives to cut living standards and public services.
This particular world crisis has its immediate roots in the debt which was used to fuel the last period of economic growth. That means that the recovery will be generally weak and not sufficient to significantly restore or raise living standards. Fundamentally, there is no way out on a capitalist basis, which is the reason that, around the world, hardly any capitalist politicians are speaking of a better tomorrow. Instead, their language is of change... for the worst!
This is why, alongside eurozone tensions, many governments are facing mounting problems at home with severe election defeats in France and Germany, the collapse of governments and early elections in Belgium and the Netherlands, and sharp slumps in popularity in Ireland, Spain and now Italy, where Silvio Berlusconi’s government is also in the grip of sharp infighting. The new coalition in Britain faces an uncertain future as it moves to implement cuts – one reason for its proposed measures to make the holding of early elections more difficult. Most European governments are unstable or unsure of their chances of re-election.
This is at the same time as a new wave of workers’ movements has started to challenge the ruling classes’ attempts to unload the costs of this crisis onto the working class and sections of the middle class. In the eurozone, unable to indirectly cut living standards by devaluation, governments are attempting an ‘internal devaluation’ instead. In country after country living standards are falling through job losses, wage cuts in the private and state sectors, and widespread price rises, especially in charges for utilities and services.
Reluctant workers’ leaders
SO FAR, GREECE has led the way on this as well as with mass protests against the series of austerity packages the Pasok government has introduced. These protests have encouraged movements in other countries. Portugal and Spain are seeing the rise of mass opposition, demonstrations and strikes against the cuts measures being introduced, as in Greece, by so-called ‘socialist’ governments. Spontaneous demonstrations met the Italian government’s announcement of a €24 billion cuts package. In France, mass protests are taking place against Sarkozy’s attempt to raise the retirement age. In Germany, anti-cuts protests will take place in mid-June.
Significantly, many of these protests have developed from below in the sense that the main trade union leaders did not initiate activity, or responded to demands from below. Indeed, the trade union leaders have mostly only organised token protests, rather than serious struggles to defend living standards. In Greece, Portugal and Spain the question of the role of general strikes has come back onto the agenda, something that will spread to other countries. A general strike can be an extremely important focus for mobilisation and a powerful demonstration of the strength of the workers’ movement. But the question is whether they are called as part of a plan to advance struggle or simply used as a safety valve to express anger and not channelled into building a combative movement.
Many trade union leaders’ reluctance to struggle reflects the way they have become integrated into capitalism and, in reality, see no alternative to it. In an extreme case, in Ireland, most of the trade union leaders are striving to work with the government as it carries out cuts. Even where policy alternatives are put forward by the trade union leaders, they stay within the confines of capitalism.
This partly reflects the effects of the last two decades’ weakening of socialist consciousness after the collapse of the former Stalinist states and the sharp right turn at the top of the labour movement. Unfortunately, this failure to challenge capitalism is seen even where radical formations formally state that they stand for socialism – like Die Linke in Germany or, in the case of the NPA in France, for ‘anti-capitalism’. A result of this is that, at this moment, there are no large workers’ organisations or movements arguing and campaigning against capitalism itself.
An exception was the Francophone socialist trade union federation (FGTB) in Belgium which recently had a campaign that "capitalism is bad for your health". But this was abstract as the FGTB leaders combined this campaign with supporting the Francophone ‘Socialist’ Party that sat in government coalition with capitalist parties. In this year’s British general election one thing that all the major parties agreed on was that cuts would have to be made, a position that the leaders of the big unions kept quiet about as they campaigned for New Labour.
The world economic crisis has thrown down stark challenges for the workers’ movement. Firstly, there is the duty to defend existing living standards, something that can only be done by determined struggle. But, such is the depth and seriousness of this crisis, that governments and bosses will immediately seek to undermine and reverse any successes that workers win. This is why, alongside and as part of current issues, the workers’ movement has to put forward the idea of ending the dictatorship and chaos of the market and argue the case for a socialist transformation of society.
Nationalist dangers, divide-and-rule
IN EUROPE ESPECIALLY, failure to do this opens the door to the development of nationalism. In eurozone countries, right-wing populists and nationalists will inevitably exploit the natural question of workers and the middle class of ‘why should we pay’ for foreign bailouts when living standards are falling at home. In Germany, the mass circulation right-wing Bild paper has taken the lead in whipping up these sentiments with front-page headlines, like Greeks Want Our Money, and Once Again We Are the Idiots of Europe, after Merkel signed up to the €750 billion bailout, and Do We Need Our D-Mark Back? Anger is also mounting in Ireland, itself in the midst of a savage recession. It will be the second-highest per capita contributor to the bailout, paying €280 per head.
Throughout Europe there has been a hate campaign against so-called ‘lazy’ Greeks who retire ‘early’. This type of nationalist campaign is a typical divide-and-rule tactic also seen in many countries with hostility to migrant workers and where attempts are made to play-off private-sector workers against state workers. The capitalists will use anything to try to divert attention away from the fact that this crisis, born in a period of deregulation and a weakened socialist movement, is the result of the workings of capitalism itself. This also lies behind government appeals for ‘national unity’ and ‘joint sacrifice’, as if the crisis is the result of some natural disaster.
There can also be a different sort of nationalist reaction against this crisis. In Greece, and possibly tomorrow in other countries, there is widespread anger at what is happening, particularly at the role of the German government and IMF in enforcing austerity measures. Having won independence just 180 years ago, suffered a vicious Nazi occupation and then going through a brutal civil war – which an, initially, unpopular right-wing government won with British and US help – there is a deep groundswell of opposition to foreign control in Greek society.
Today, there is a feeling that the country is becoming an ‘IMF protectorate’. The Pasok government is attempting to exploit this and deflect anger away from its policies. One of the tasks facing the left in Greece is to take what is positive in the reaction to EU and IMF dictates and develop it in a class and socialist path that challenges both Greek and international capitalism.
The link to systemic change
IN STRIVING TOWARDS building a socialist and internationalist opposition, May’s call, by some left-wing members of the European parliament – for a Europe-wide week of protest and solidarity, alongside six policy proposals – can play an important role. There has, of course, been a number of calls for solidarity with the Greek population, but the difference in this appeal – originally drafted by CWI member, Joe Higgins, Socialist Party MEP for Dublin – is that it clearly raises, in direct language, class issues. This appeal is not a full programme but a basis on which united action could be built in a campaign that spelled out concrete steps to defend living standards and resist the ruling classes’ offensive.
Already, there have been solidarity actions in southern Europe as workers in different countries have sought to link together struggles and challenge the bosses’ divide-and-rule tactics. Urgently, these types of actions need to be extended and deepened so that they are not simply token or solidarity actions but mark a beginning of an international fight-back against the dictatorship of the market and the chaos of capitalism.
April’s joint statement from CWI organisations and members in Greece, Portugal, Spain and Germany explained: "The present situation represents a profound impasse for the capitalist EU. There is no stable solution for individual capitalist countries". Furthermore, this crisis is a result not just of the money market casino but of capitalism itself. The workers’ movement needs to clearly pose a vision of a socialist alternative to fight for.
This is why we link demands like those in the left-wing MEPs’ initiative to our wider programme. This calls for the revitalisation of the workers’ movement internationally so that it can "struggle for the nationalisation of the commanding heights of the economy, under workers’ control and management, to develop a socialist plan of production to end the crisis and to develop the economy, in the interests of workers, consistent with the needs of the environment. The present situation represents a profound impasse for the capitalist EU. There is no stable solution for individual capitalist countries. The CWI stands against the Europe of the bosses, and in favour of a democratic socialist federation of Europe, on an equal and voluntary basis, as the alternative to the capitalist EU".