Eurozone crisis: for a workers' Europe!

Submitted by martin on 12 May, 2010 - 9:48 Author: Colin Foster

A general strike on 5 May against planned cuts stopped Greece, and brought onto the streets of Athens the biggest demonstration there since the fall of the military dictatorship in 1974.

Although Greece's big union federations are closely tied to the governing party, Pasok, they plan further strikes. There is protest within Pasok. On 6 May three MPs were expelled from the Pasok parliamentary group for voting against the cuts.

Panicked by the growing Greek crisis, on 10 May the eurozone governments, with the IMF, put together a 750 billion euro (about 」650 billion) rescue plan not just for Greece but for other eurozone states facing financial crisis: Portugal, Ireland, Italy, Spain.

The European Central Bank will break its previous rules and start buying up the bonds (interest-bearing IOU notes) of eurozone governments.

The move is analogous to the vast "bail-out" operations (buy-outs, loans, guarantees) carried out by governments in late 2008, except that this time it is governments bailing out other governments rather than governments bailing out banks.

The "bail-out" of the banks succeeded, on the level that it stopped a cascade of big banks going bust one after the other.

This new "bail-out" may succeed, on its own level, or it may not: the financial problems of Greece, or some other government, may prove just too big to solve by doling out extra loans. In the last resort governments could just take over banks; the European Central Bank cannot take over the administration of Greece.

The 2008 "bail-outs" shifted the sharp point of the capitalist crisis from banks to governments. This "bail-out" partly shifts the sharp point of a crisis from the Greek government to the eurozone as a whole. "The euro is the fall guy", said a banker quoted in the Financial Times (12 May). "If there was not a euro-crisis before the weekend bail-out plan, there is now".

A study of the eurozone crisis written by Marxist economist Costas Lapavitsas and others shows that it is rooted in unresolved imbalances and contradictions of the eurozone project.

As Martin Wolf of the Financial Times also points out (FT 12 May), since its start in 2002 "the story of the eurozone economy has been one of divergence, not convergence".

Germany has squeezed wages and social spending, and so kept down its export costs. It has exported much more to the Mediterranean eurozone countries than it has imported. (In the case of Greece, a good chunk of the exports it has taken in from Germany and other richer eurozone countries has been weaponry. Greece's military spending is almost twice as high, relative to the size of its economy, as any other European country's).

If each country had its own money, probably the drachma, the lira, the peseta and so on would have lost value relative to the deutschmark. That would bring its own problems, but bit by bit.

Why didn't Greece and other countries simply run out of euros? Because there were vast flows of lending from German and other banks to the Mediterranean countries.

With the credit crunch, from 2008 those flows of lending dried up. At the same time, the general world slump depressed the Greek government's income.

There is now talk from both right and left of Greece quitting the euro. For sure a workers' government in Greece could not respect the rules of the eurozone, and would have to impose controls on the movement of large sums of money. It would have to find another way of linking up economically with other countries.

But if a workers' government would to lead to a break with the euro, it does not at all follow that a break with the euro would lead to a workers' government. Greece would still have huge debts to be repaid in euros, and meanwhile would suffer a huge collapse in the relative value of a reintroduced drachma. It would face bigger cuts, not smaller ones.

A full break-up of the eurozone? As Martin Wolf points out: "This would cause the financial system to implode, since the relations between assets and liabilities now in euros would become so uncertain. There would be massive capital flight into the banks of those countries deemed safe" (FT, 12 May).

The eurozone faces a compulsion either to integrate social and economic policy right across Europe, or to collapse. It may "muddle through" this crisis without either sharp choice, but if so, only by postponing the dilemma.

The socialist answer has to be to unite workers of different countries to fight for a workers' united Europe, with "convergence" through social levelling-up.

In Greece, much now depends on the ability of the socialist groups to help the workers who have struck and demonstrated to organise a political alternative. The stresses within Pasok and the Pasok-aligned unions have to be worked on, aiming towards a political regroupment with a socialist programme.

Lapavitsas report: click here.

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