The Eurozone
The eurozone countries in particular are caught in a vice. After the
binge comes the hang-over. The Common Market was set up to develop a
European-wide market as a means of overcoming the narrow constraints of the
nation state. It was an indication that the productive forces had completely
outgrown these national barriers. In the boom years, such European integration
was possible, even going so far as to establish a common currency. This went
much further than we expected. But this imposes enormous constraints on
national economies which come under pressure in periods of economic crisis, in
much the same way as the countries adhering to the Gold Standard in the 1930s.
In the past, weak countries could attempt to escape from their problems by
devaluating their currency and becoming more competitive, which the British
capitalists are attempting to do. This is now ruled out for the eurozone. The
European Treaty and the European Central Bank will not permit such
recklessness. The national interests of each capitalist class come into
conflict with the interests of the EU as a whole. Their problems, especially a
fiscal deficit, must now be resolved internally through savage cuts and tax
rises.
Each country is at the mercy of the international debt markets and the
speculators. The weakest are the most vulnerable. Greece, Spain, Portugal and
Ireland are especially targeted given their colossal fiscal deficits. This has
led to a crisis of the eurozone with the weaker members threatening to undermine
the whole union. The fear of contagion is widespread.
“There appears to be an accelerated and impending sense of doom about the
status of the euro”, stated Andrew Wilkinson, senior analyst at Interactive
Brokers. “The single currency is sitting on the edge of a precipice.”
Of course, the European capitalists will do all in their power to
prevent such a catastrophe, despite the extra burden this imposes on them. This
has opened up a clash between the separate states, who fear for their
national interests. The Germans are the least cooperative, but have been under
pressure from the French and Italians bourgeoisie. After months of squabbling,
they have managed to come to a paper agreement to assist the Greek government
get over their immediate fiscal crisis.
Crisis In Greece
The Greek crisis was spiralling out of control following a downgrade of
the country’s credit rating that pushed government borrowing costs to a 10-year
high. The EU was forced to intervene with a deal to provide loans of £26.5bn
below market rates. The German Chancellor Merkel was a very reluctant partner.
First of all there could be no “bail-out”, then the IMF needed to be kept at
arms length, then the Greeks needed to pay higher interest rates. The Germans
finally agreed to the package, with the unprecedented involvement of the IMF.
They still need to get parliamentary approval before the deal could be
implemented. But this will be a formality as a default in Greece would wreck
the eurozone, precipitating crises in Portugal, Spain, Ireland and others. They
would either have to hang separately or hang together. The markets must be
appeased at all costs. However, German elections in May threaten to undermine
Merkel’s majority in the Bundesrat, the upper house, as many Germans are
opposed to any such bail-out.
In an attempt to calm nerves and paper over the divisions, Jean-Claude
Trichet, president of the European Central Bank, made it clear that bail-outs
were not universal. “There is a high stakes poker game going on and Mr Trichet
played his hand the best he could,” said Julian Callow, European economist at
Barclays Capital.
Despite the deal, the Greek economy continues to spiral down. The
continuing crisis saw output fall by 2.9% in January and more than 10% compared
to a year ago. The economy will be further squeezed with the high costs of
servicing debt and the cuts that are planned. The other European economies
still remain in the doldrums. The biggest economies, including Germany, France,
Italy and Spain were either flat or suffered modest falls in output. Although
industrial production has risen, it still remains about 15% below pre-crisis
levels. However, in the coming months the picture looks uncertain with stimulus
measures, such as car scrappage schemes, being withdrawn.
The Financial Times recently
asked some uncomfortable questions. “Is the Greek austerity plan realistic?
Will Greece be able to pull through? What happens if Portugal gets into
difficulty? What about Spain? What about Italy?” These are unanswered
questions, but the implication is clear. The Greek crisis is not an isolated
case, it is part of a wider European crisis that is far from resolved.
Attacks on living standards have already begun. In March, the Greek
government had increased VAT and indirect taxes on fuel and tobacco. Public
sector workers have faced the brunt of these cuts. A seven percent cut in wages
and a 10% cut in allowances imposed by the PASOK government will mean real
hardship, and this is only the beginning. The EU leaders, including the IMF,
are demanding that the Greek government take further austerity measures to
tackle the budget deficit. The country will need to pay back some 22bn euros by
the end of May, forcing it to raise further borrowing at high interest rates.
“We will not let the country sink”, stated George Papandreou, the prime
minister. “Yes, we have to take more measures.”
This declaration of war against the workers of Greece and Europe
generally has not gone unchallenged. Such austerity plans have provoked
protests across the eurozone, not least in Greece, which has seen a series of
general strikes embracing private and public sector unions. “We demand from the
government and Brussels that people and their needs are put above markets and
profits,” said Stathis Anestis, a member of the executive committee of GSEE,
the umbrella union of private sector workers.
Europe
In Spain, workers have protested against the government’s proposal to
increase the retirement age from 65 from 67, raising VAT rates and imposing other cuts.
As in Greece, the government is looking to reduce its massive budget deficit of
11.2% of GDP at the expense of the working class. “Reform” of the labour market
is also being proposed to bring about greater flexibility of labour and
allowing employers to sack workers more easily. This at a time when unemployment
stands officially at nearly 20%, double the average rate of the eurozone.
Rodriguez Zapatero, the Socialist Party prime minister, stated bluntly that Spain
will introduce its economic austerity plan to cut its budget deficit “whatever
the cost”, and “if we have to make more cuts or demand more austerity, then we
will do so.”
In neighbouring Portugal, public sector workers staged a one-day general
strike in March in protest at the wage freeze being imposed by the Socialist
government, again an attempt to cut its budget deficit. Jose Socrates, the
prime minister, said the austerity plan proposed would be “bold and decisive”.
“Similar conflicts pitching the requirements of international creditors
against the demands of workers’ representatives are breaking out elsewhere in
the eurozone”, commented the Financial Times.
In Ireland, workers have also taken to the streets in protest at cuts in
public sector pay. The government has slashed public spending through wage cuts
and welfare payments, and is looking for a further 3bn euro cut in next year’s
budget. The plan, agreed with the European Commission, is to return the deficit
to below the 3% limit set for members of the eurozone by 2014. Despite this,
the budget deficit is expected to rise from 11.3% of the GDP to 12%, as growth
rates remain low.
Public sector unions are threatening to step up their industrial action
and have rejected the terms of a deal where the government in the Irish Republic
ruled out further pay cuts and compulsory redundancies, on the basis of savings
from public services.
Other countries will not be far behind, including Britain.
Whoever wins the May 6th UK general election, the question will be poised sharply of
reducing the historically high budget deficit. As in the rest of Europe,
workers in Britain
will be forced to struggle against the coming austerity measures. Already,
George Osborne, the shadow Chancellor, has made it clear that if the Tories
win, “Within months we will be the most unpopular government since the war”.
The epoch of austerity
The epoch of austerity facing the working class, the likes of which we
have not seen since the inter-war period, marks the beginning of an entirely
new period. The period of reforms, which has largely characterised the previous
60 years, is now at an end. We are now in a period, which could possibly last
for decades if the working class do not take power into their hands, of
counter-reforms and brutal attacks. The ruling class will always find a way out
of even the deepest crisis at the expense of the working class. It will sharpen
the class struggle and serve to harden the working class, especially the youth.
Millions who have never before been involved in struggle will be forced to
defend themselves. They will learn from this bitter experience that their
problems can never be solved under capitalism. They will begin to draw
political and even revolutionary conclusions.
“Such shake-ups are of very great revolutionary importance”, explained
Trotsky. “They shake off their conservativeness. They force them to seek an
account of what is happening, what is the perspective. And every such shake-up
pushes some stratum of the workers onto the revolutionary road.”
On the basis of capitalism lies a nightmare for working people.
Conditions determine consciousness, as Marx explained. On the basis of events,
consciousness will be brought into line with the objective situation in an
explosive fashion. The titanic events that lie ahead will propel the working
class in the direction of changing society. On this basis, a mass left wing
will develop especially in the traditional organisations of the working class.
In order to prevent the set-backs of the past, it is vital that we build the
forces of Marxism and connect them with these left currents. With a correct
programme and leadership, the rotten capitalist system can be swept way and the
basis laid for the socialist transformation of society in Britain and
internationally.
