Manifesto on the crisis of the Euro
The following is the introduction to the Manifesto on the crisis of the Euro, which was produced by Attac Germany’s Scientific Council on March 1st 2011.
The statement accompanying it says:
“The public debt crisis can only be overcome through fundamental reforms of the global financial system as well as the EU”
In order to get an understanding of the crisis within the Eurozone and to start thinking about ways that resistance against the larceny of the bank bailout and the piling of private debt onto public deficits can be organised, it is very worthwhile reading this in full.
Thanks to Pope Epopt for the link.
Introduction: Europe at the crossroads
The Euro is in danger. This danger comes from those who claim to be its saviours in the current crisis - from the German government, the parties supporting it, and most of the German media. They believe that responsibility for the crisis lies mostly with those members of the Eurozone that have trouble servicing their debt, and have therefore been forced to subject themselves to the EU’s as well as the IMF’s socalled ‘conditionalities’. In a rerun of the last decades’ debt crisis in the countries of the global South they are pushing for savage cuts in welfare spending. They are demanding cuts in public sector wages, and the elimination of infrastructural spending. In short, the social and cultural rights of citizens are being trampled on, at the same time as collective sovereignty is being curtailed. The mere rump of a ‘European Social Model’ agreed some 11 years ago in Lisbon is being silently buried in this financial crisis of the banks and the debt crisis of the states.
Behind all this is the attempt to free up funds through these austerity measures, funds that could then be used to bail out those borderline bankrupt financial institutions that are ‘systemically relevant’. This is a conditionality imposed by the IMF (especially obvious in the Greek case), which has been invited by the EU to deploy within Europe the expertise garnered some decades ago during the ‘Third World’s’ debt crisis. Tough austerity policies are increasingly the rule across Europe.
We need to intervene here, at the beginning, which is why the current attack on our collective social achievements has to be met with determined, Europe-wide resistance. Demonstrations in Athens, Dublin, Lisbon and Paris or Rome on their own are not enough, our resistance needs to also reach Berlin and Brussels if the EU is to be more than merely ‘Capital’s Europe’, if it is to become a social, ecological and democratic model - against the dictatorship of the market, especially financial markets, against the political forces that help to impose them, and against the ideology of neoliberalism that justifies them as pragmatic necessities to which there can be no alternative.
A breakdown of the Eurozone could trigger chaos in all of Europe and beyond, a chaos that would endanger more than ‘just’ social cohesion. The decades that have passed since the Maastricht-Treaties created the European Monetary Union are a long time. What would have been the right thing to do in 1991, namely to not experiment with a monetary union between countries with large differences in competitiveness without sufficient democratic regulation of the European economy, simply because the Eurozone could not be an ‘optimal currency zone’, has been rendered obsolete by historical realities. Gorbachev’s words continue to ring true: “S/he who is too late is punished by life” (Wer zu spät kommt, den bestraft das Leben). In 2011, 20 years after Maastricht and twelve years after its introduction, the Euro is still no ‘optimal currency’, but it is a European reality that has to be supported against the destructive forces unleashed by the economic, financial and monetary crisis, in order to prevent a slide into economic chaos and the triggering of political conflicts that could otherwise have been prevented.
The project of European monetary Integration can only be salvaged if there is a fundamental reversal in political direction. There are only two paths we can take right now, and they lead in opposite directions: one towards the disintegration of the Eurozone, another towards the strengthening of European statehood, because a currency without a state is indeed hard to imagine in the long run. Conservative and neoliberal economists and politicians are toying with the idea of splitting the monetary union into two or even more groups. On one side a strong, monetarily and financially largely integrated ‘Core Europe’, on the other side the countries that have been left out of or excluded from the Eurozone, with their own national currencies.
Thus it would be Germany, France and a few other countries that would continue using the Euro, but Greece might have to reintroduce the Drachma, Italy the Lira, Portugal the Escudo.
Unlike in the 1970s, we are today not dealing with the disintegration of a regime of fixed exchange rates (the ‘Bretton-Woods-System’) into its component parts of national currencies with then flexible exchange rates. Rather, we might see the collapse of a monetary union that has existed for more than a decade. The component parts - national currencies - would in fact have to re reinvented. In addition, conditions within the Eurozone vary widely, a fact that would likely make this process extremely conflictual. The new currencies that would replace the Euro would most likely suffer an immediate drop in value. Devaluation would increase the value of Euro-denominated debts (which therefore also need to be serviced in Euros). Rating agencies would downgrade the countries’ credit rating. The financial crisis would also be exacerbated because countries that would (have to) leave the currency union would pay much more in debt service. While devaluation would increase monetary competitiveness, this advantage is unlikely to be very useful if real competitiveness does not increase as well. What is missing here are the relevant export industries. To the extent that the new currencies are devalued, the remaining Euro will appreciate. This revaluation would limit the competitiveness of industrial capital (the so-called ‘real economy’) in the Eurozone’s member states and encourage financial capital to speculate. What sort of equilibrium would then be achieved after a period of economic turbulence is impossible to predict.
The other path leads towards deeper political integration. The minimal rules on government debt set by the Maastricht Treaty are obviously insufficient to prevent Europe-wide imbalances and crises. These are inevitable if countries like Germany reduce unit labour costs at the same time as they are increasing in other European countries. Governments are as responsible for this process as the trade unions, which over the last few decades in Germany have been content to accept far more modest wage deals than in other European countries. The current account imbalances that are the necessary result of this divergence have resulted in a loss of competitiveness in many countries, which in turn has led to higher levels of debt.
Germany has in turn experienced a current account surplus, and a concurrent increase in money wealth. These imbalances are triggering a severe crisis of the Eurozone, because adjustment at the European level is left to market forces that are neither neutral, nor efficient.
The current system of crisis management requires indebted countries to adjust, but not surplus countries. The structural flaw that already contributed to the collapse of the Bretton-Woods-System in the 1970s is being replicated in the Eurozone. The steps required to correct this flaw would be: on the income side of state budgets, develop rules for fiscal policy and for tax competition, and balancing mechanisms for countries with current account deficits and surpluses, respectively. Also, actively interventionist policies would have to work towards reducing the real economic divergences that exist in so many areas within the Eurozone (from wages to industrial policy). If the Eurozone is to have a future, it is European statehood that needs to be strengthened, not the market.
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Comment by: Jim Monaghan
Apr 24th 2011 at 08:04
There is a big debate on this. My own view is that there is little a small economy like Ireland can do to buck neo-liberalism. Only the EU can do a stimulus which could lead somewhere. Alas, the various world powers are acting in narrow self interest.A feather in the storm
http://www.internationalviewpoint.org/spip.php?article2091
http://www.internationalviewpoint.org/spip.php?article2096