Economic Crisis Rips Europe

Down With the European Union! For a Socialist United States of Europe!

This article was written by our comrades of the Spartakist Workers Party of Germany. It was first printed in Workers Vanguard No. 992 (9 December 2011), newspaper of the Spartacist League/U.S.

The economic crisis intensifying in Europe—a particularly severe expression of the world capitalist crisis—was triggered in the spring of 2010 as global financial capitalists, fearing that heavily indebted Greece would default on its loan obligations, began spurning Greek government bonds. These fears have extended not only to Portugal and Ireland but also to the much larger economies of Spain and Italy, which are both having trouble refinancing their state debts. Now France, which along with Germany is central to the European Union (EU), has been threatened with a downgrading of its government debt. Frenzied efforts by the EU to devise new “rescue packages,” as well as futile appeals to Brazil and China to step in and help with a bailout, have all proved insufficient. A headline of the financial news service Eurointelligence (22 November) describes “a slow motion train wreck” of the euro, the euro zone (consisting of the 17 countries in the EU that use the euro as a common currency) and probably the EU itself.

Fears over a spreading “credit crunch” in Europe have unsettled international financial markets, threatening to drive the world economy into another major downturn. U.S. banks have been reducing their holdings in European government bonds, while American money market funds have been closing the spigot of money they lend to European banks. This has forced banks in Europe to tighten lending standards, hoard capital to shore up their balance sheets and withdraw financing from longtime customers. Governments are promising ever more severe budget cuts in the hope of pacifying bond markets. The net effect has been a “credit crunch and a squeeze on aggregate demand that is forcing Europe into recession” (Economist, 26 November). Industrial orders in the euro zone fell by 6.8 percent in September, the steepest decline since December 2008.

While initially bourgeois politicians in Germany refused to admit the possibility of a Greek default, fearing that this would destabilize the euro, German chancellor Angela Merkel is now openly threatening to expel Greece from the euro zone. On December 5, Germany and France issued their first joint call for amendments to the EU’s treaty to introduce more centralized oversight of the euro zone and additional penalties for countries that violate the rules of “budget discipline.”

Over the past several weeks, governments deemed insufficiently zealous in enforcing capitalist austerity have found themselves unceremoniously tossed out of power. In Greece, Prime Minister George Papandreou of the bourgeois Pan-Hellenic Socialist Movement (PASOK), whose credibility was waning with a populace infuriated by the cutbacks, was removed in a political coup organized by EU leaders and domestic opponents, including members of his own party, after he suggested that there should be a referendum on economic policies. The new government, which now incorporates the main opposition party, New Democracy, as well as PASOK and a small, fascist-infested organization (LAOS), has pledged to continue the austerity program. Similar methods were used to get rid of Silvio Berlusconi in Italy. In Spain, fury over the austerity policies of José Luis Rodríguez Zapatero’s Socialist Workers Party (PSOE) government led to the election of Mariano Rajoy’s right-wing Popular Party.

The concern of all wings of the bourgeoisie in the major EU countries is not at all to rescue countries like Greece but to bail out their own banks. The bottom line is that the workers and poor must pay for the capitalist crisis. Underlining that Germany is the pre-eminent power in the EU and calls the shots, Merkel has dictated hardline austerity budgets for debtor countries seeking financial assistance. Governments have engaged in an orgy of spending cuts, with layoffs of public employees, pay cuts, reductions in welfare expenditures, privatizations, etc. In Greece, wages have decreased by 15.4 percent, while the official unemployment rate now exceeds 18 percent. In Spain it is close to 23 percent.

We Trotskyist internationalists are opposed on principle to the EU and any other imperialist alliance. Recognizing that the euro would be an instrument of the EU imperialists, we opposed its introduction. We also opposed the Eastern extension of the EU because it was clear that it meant increased exploitation of the workers of East Europe. At the same time, we have fought against the chauvinist discrimination against East European workers in West Europe.

As Marxists, we understand that an imperialist alliance or bloc can hold together for some time, but since capitalism is based on the nation-state, these alliances must break up under their own internal contradictions. Our opposition comes from the basic standpoint of opposing capitalism and imperialism. We fight for the expropriation of the bourgeoisie through socialist revolution and for an internationally planned economy that will overcome the limits of the nation-state. Our call is for a Socialist United States of Europe!

To date, the Greek working class has carried out 14 one- or two-day general strikes, trying to fight back against the joint offensive of the European imperialists and its own bourgeoisie. While these strikes have made it more difficult for the government to enforce austerity measures, the attacks on jobs and living standards are unrelenting. In the Italian capital of Rome on October 15, hundreds of thousands of workers and youth demonstrated against the much-discredited Berlusconi government and the measures it was trying to introduce, such as privatizations and raising the pension age. After Berlusconi fell, the leaders of the liberal opposition supported the new government in the name of national unity in order to enforce the very same measures against which the masses had demonstrated a month earlier. In Portugal, a one-day general strike on November 24 stopped nearly everything in the country. But the “Communist” opposition undermines workers struggle with its appeal to the national interest, complaining about “relinquishing the sovereignty of the country” (Junge Welt, 25 November).

The reformist labor leaders cannot lead effective class struggle against capitalist austerity because they politically support the EU and more broadly are wedded to the bourgeois order. The leaders of the main body of Spanish trade unions are allied to the PSOE, while in Greece the main union federations are run by PASOK supporters—i.e., the very parties that until very recently were spearheading the austerity drive in those countries. The reformists accept the class-collaborationist lie that the workers and their exploiters have a common “national interest” and therefore the workers must make their “fair share” of sacrifices when the economy goes bust. But workers and capitalists have counterposed class interests. The boom-bust cycle is endemic to the capitalist system and will be eliminated only when the proletariat takes power and seizes the productive property of the bourgeoisie.

Class struggle in Germany as well as France in solidarity with Greek, Italian, Spanish and Portuguese workers would not only broaden their struggles against austerity but also would help workers throughout Europe to free themselves from nationalism and break from their own bourgeoisies. In Germany, the class-collaborationist policies of the Social Democratic Party (SPD) have played a significant role in enabling the German bourgeoisie to increase its competitiveness against its rivals. The coalition of the SPD and the bourgeois Greens, in power from 1998 to 2005, was instrumental in increasing German competitiveness by slashing wages and working conditions and carrying out attacks on the “welfare state,” centrally through a series of measures known as the “Hartz” reforms that greatly reduced unemployment and social welfare benefits. The use of temporary labor increased dramatically and a huge low-wage sector was created. With the median figure for real wages declining 7.4 percent between 2000 and 2010, now 1.4 million people with full-time jobs need additional welfare in order to survive.

While Germany already had the largest economy in Europe, its increased competitiveness explains why it can run the show on the continent. It is clear that German capitalism’s increased profitability comes directly out of the pockets of the German working class. This points to the connection between the struggle against imperialism abroad and the fight against capitalist rule at home. Above all, what is necessary is forging revolutionary internationalist parties in Germany and elsewhere that can lead the working masses in their struggles for life’s necessities as part of the fight for workers rule.

EU: From Anti-Soviet Alliance to Imperialist Consortium

Dominated by Germany and France, the EU exists centrally to advance the interests of these imperialist powers and their junior partners in exploiting their own working class and to use the more dependent states, such as Greece and many East European countries, as their summer holiday resorts or low-wage manufacturing backyards. We have been consistent in our political opposition to the EU and its predecessors. Thus, we wrote in “Labor and the Common Market” (WV No. 15, January 1973): “In the imperialist era, alliances between capitalist states, including their economic aspects, are directed against other states, advanced as well as backward states. The Common Market is essentially an unstable alliance between French and German capitalism on the basis of the most reactionary economic policies.”

The EU is a fragile formation exposed to continuous tensions stemming from the disparate national interests of the European imperialists, which are constantly threatening to tear it apart. Nor can it be otherwise. Although the productive forces have long since outgrown a national framework, capitalism is a system that rests essentially on nation-states: each of the various national capitalist classes needs its own state to push through and defend its interests at home and abroad. Hence under capitalism, the goal of political union or a European superstate is necessarily reactionary and an empty utopia.

As V.I. Lenin, the leader of the proletarian October Revolution in Russia in 1917, wrote:

“Of course, temporary agreements are possible between capitalists and between states. In this sense a United States of Europe is possible as an agreement between the European capitalists...but to what end? Only for the purpose of jointly suppressing socialism in Europe, of jointly protecting colonial booty against Japan and America.”

—“On the Slogan for a United States of Europe” (August 1915)

Lenin emphasized that the division of profits among imperialist rivals is ultimately determined by force. This understanding was counterposed to the claims of German social democrat Karl Kautsky, whose fantasy of “ultra-imperialism” posited the peaceful resolution of such conflicts, obviating the need for proletarian revolution. Lenin stressed: “Under capitalism there are no other means of restoring the periodically disturbed equilibrium than crises in industry and wars in politics.”

The origins of the European Union go back to the 1950s, when the West European imperialists under U.S. leadership attempted to stabilize their alliance against the Soviet Union through closer economic cooperation. Issuing out of the October Revolution, Soviet Russia remained a workers state—based on the expropriation of the capitalists and the collectivization of the means of production—despite its degeneration under J.V. Stalin. With a planned economy, the USSR provided jobs, housing, medical care and education for all, in sharp distinction to the ravages of capitalism that are all too obvious today. We Trotskyists unconditionally defended the Soviet Union militarily against the imperialists, who always desired to destroy it.

Our opposition on principle to both NATO—the post-World War II military alliance against the Soviet Union—and the EU and its predecessors was linked to our defense of the Soviet Union and the deformed workers states of the DDR (East Germany) and East Europe. With the counterrevolutionary destruction of the Soviet Union in 1991-92, the EU/NATO’s anti-Soviet function disappeared. The EU remained an imperialist trade bloc. The U.S. retains military hegemony, although not the same economic clout it once had.

Shortly after the fall of the Berlin Wall in 1989, French president François Mitterrand made France’s acquiescence to German reunification, achieved when capitalist West Germany swallowed up the DDR, dependent on the two countries’ agreement on a common currency. This was supposed to restrain a newly strengthened Germany from running roughshod over other European states, principally France. Additionally, the currency would be a weapon against the international hegemony of the U.S. dollar. But the unity between these two imperialist powers is itself fraught with conflict, as the disputes over how to deal with the current crisis in the euro zone demonstrate.

The Maastricht Treaty of 1992 authorized the introduction of the euro, which was first traded in 1999 before being introduced as actual money for consumers in 2002. The French Communist Party (PCF) originally opposed the treaty, fearing that it would lead to the dominance of German imperialism over French imperialism, i.e., they opposed it from the reactionary perspective of French nationalism. Later, the PCF made its peace with the euro. So has pretty much the entire European reformist left, which either explicitly supports the EU or claims that it is a framework that can be utilized to better the situation of working people (a “social Europe”).

The forerunner of the League for the Fifth International and its British group Workers Power took an abstentionist position on the 1992 referendum on the Maastricht Treaty. They were enthusiastic over the EU “social charter,” with its empty promises of guaranteeing workers rights, sexual equality and such, as was the British Labour Party. Workers Power (June 1992) argued that “the terms of the Maastricht Treaty can also be a basis for extending rights and gains from states where the working class never won those gains, or where it has lost them,” and they continued that “to some extent European workers will be better armed to fight back on a continental scale after the implementation of the terms of Maastricht.” The French group Lutte Ouvrière (LO) similarly wrote in 2005, “Even as is, on a capitalist basis, with all the accompanying injustices and insufficiencies, the European Union represents progress in a certain number of areas.” Workers Power and LO are latter-day Kautskyites, flunkeys for capital, with touching faith in “democratic” imperialism and its various alliances.

Opposition to the EU and the euro does come from some bourgeois quarters, however. A section of the German bourgeoisie has always been very skeptical about the euro, thinking that German imperialism could function better with the deutschmark. There are strong anti-EU sentiments among the British Tories, while various fascist and right-wing populist groups oppose the EU from the standpoint of national chauvinism. In effect, the reformist left has conceded opposition to the EU—correctly seen by many workers as an instrument of capitalist austerity—to the reactionary right wing.

German Imperialism’s Third Try to Rule Europe

In a 1997 statement, the International Communist League stressed that a common currency without a common state is not viable:

“Control over the quantity of money within its boundaries is a basic economic prerogative of a bourgeois state, one necessarily closely linked to other instruments of economic policy. A stable monetary system based on the ‘euro’ would require tight and permanent restrictions over taxation and government expenditure in all the EU member states.… But since capitalism is organised on the basis of particular national states, itself the cause of repeated imperialist wars to redivide the world, it is impossible to cohere a stable pan-European bourgeois state. A European imperialist ‘superstate’ can be achieved only by the methods of Adolf Hitler.... Should the Maastricht project for a common European currency come into being, it would amount to only a brief, conflict-ridden episode.”

—“For a Workers Europe—For Socialist Revolution!” WV No. 670, 13 June 1997

We now have the first really serious world economic crisis since that statement was written, and the conflicts that have arisen in Europe threaten to bring the EU rapidly to the point of implosion. Behind this open fragmentation is the built-in instability in the monetary system of the EU and the fact that it is formed of competing national states with different levels of labor productivity. These differences, exacerbated by the crisis, have been reflected through the differentials in public borrowing and interest rates on state bonds.

German imperialism made huge profits through driving down wages at home and through the introduction of the euro, and they would like to keep things that way. For years, Germany has run a trade surplus, which was financed through massive private and public debt in other euro zone states and spurred by the fact that the common currency helps keep German industrial exports cheap throughout the euro zone. The German bourgeoisie is not about to reduce the surplus, arguing that this is the problem of the countries with a trade deficit.

Ordinarily, each country has its own currency, and a debtor country can get some relief and regain competitiveness by devaluing its currency. But this is not possible in a currency union. The German bourgeoisie demands that debtor countries slash wages, pensions and welfare. Another proposal is for German capital to lend more funds to the poorer countries in the euro zone—but this is vehemently opposed by the German bourgeoisie. In a Financial Times online (13 September) column on the breakdown in the euro zone, Martin Wolf wrote: “This is what I heard from an Italian policymaker: ‘We gave up the old safety valves of inflation and devaluation in return for lower interest rates, but now we do not even have the low interest rates.’… And, not least: ‘It would be better to leave than endure 30 years of pain.’ These remarks speak of a loss of faith in both the project and the partners.”

There is no way out for debtor countries like Greece under the setup dictated by the German bourgeoisie. The sharp cuts in public spending have had a predictable deflationary effect—the Greek economy has contracted by 7.5 percent over the past year. A smaller economy means less tax revenue, thereby increasing the deficit and prompting demands for more austerity. At the same time, many bourgeois pundits across the board have issued hysterical warnings on how bad things will be if Greece leaves the euro zone. But that depends on the conditions imposed. After Argentina pegged its currency to the U.S. dollar, its economy went into a deep recession and the country went bankrupt in 2001. Investors in Argentinean bonds lost 70 percent of their money, outraging international banking interests. Following the bankruptcy, Argentina stopped pegging its currency to the dollar and the economy recovered, albeit not until average wages had dropped 30 percent.

The example of Argentina shows graphically that Greece might be much better off if it defaulted and left the euro zone, reinstating its own currency. However, while this might provide relief from the downward spiral, leaving the euro zone will not insulate the Greek proletariat from the world economic downturn and capitalist devastation. In Britain (which is in the EU but not in the euro zone), the Tory government of David Cameron is just as intent on slashing spending as his counterparts on the continent. On November 30, British public sector workers staged a massive one-day strike against austerity measures, including threatened layoffs and an extension of the wage freeze. Socialist revolution is the only solution to unemployment, wage cuts, imperialist war and the other depredations of decaying capitalism.

German-French Axis Rattles Along Until It Breaks

Concerned about the stability of the euro zone (and the French economy), President Nicolas Sarkozy earlier supported the introduction of euro bonds—a scheme whereby the euro zone states would issue common bonds—or alternatively that the European Central Bank buy government bonds directly to bail out countries in trouble. But Merkel has not gone along, knowing that ultimately the money in these schemes will come from Germany. The Obama administration has also pleaded with Merkel to ante up more money. The bottom line is that nothing happens unless it is acceptable to Berlin. As a creditor nation, the Germans stress the need for a balanced budget and a strong euro (the deutschmark in drag), with inflation considered the worst thing in the world. This is justified by reference to two periods of German inflation in 1923 and after WWII, ignoring the equally disastrous deflationary policy during the depression of the early 1930s.

When EU Commission president José Manuel Barroso proposed introducing euro bonds under the name “stability bonds,” the German right-wing tabloid Bild (23 November) ran the headline: “Britain, America, and the Whole EU. They All Want Our Money.” Meanwhile in France, Jacques Attali, a former adviser to Mitterrand, charged that Germany twice led Europe into suicidal wars in the past century and said: “Today, it is again Germany’s turn to hold in its hand the weapon for the continent’s collective suicide.” The PCF chimed in by denouncing Sarkozy for giving in to Merkel over the crisis and accusing him of a “financial Munich,” a reference to the 1938 decision by France and Britain to refrain from going to war against Hitler’s Germany over its occupation of the Sudetenland.

At the EU summit at the end of October, the heads of state of the ten non-euro zone countries were excluded from a discussion on the euro crisis. This elicited a complaint from British prime minister Cameron, who noted that the crisis in the euro zone impacted elsewhere, including London, a world financial center. Sarkozy snorted at Cameron, who not too long ago was his brother-in-arms in the bombing of Libya: “You have lost a good opportunity to shut up. We are sick of you criticizing us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings.”

The EU is falling apart under the tensions of conflicting national interests. These tensions can also be seen in the imposition of restrictions on the right of passage within the EU, supposedly guaranteed by the Schengen agreement. In 2010, about 400,000 people who wanted to migrate to the EU were stopped on its borders. In the Netherlands, Finland, Denmark and other countries in Northern Europe, populist anti-immigrant parties are gaining support, nurtured by chauvinist government campaigns carried out under the guise of the “war on terror” that largely targets Muslims. It is in the interest of the working class in each country to fight for full citizenship rights for all immigrants and refugees! Down with the EU and racist “Fortress Europe”!

SPD and Left Party: To Capitalism’s Rescue

In response to the capitalist attacks stemming from the crisis in the EU, the Spartakist Workers Party of Germany recognized the urgent necessity for the working class of Europe, and especially the powerful German proletariat, to take class-struggle action. On May Day 2010, the SpAD intervened for “Solidarity with the Greek workers!” and for “Class struggle against the German capitalists!” (Spartakist No. 183, May 2010). The chief obstacles to such struggle are the reformist workers parties, SPD and Left Party, together with the trade-union bureaucracy, and the left groups that orient toward them.

In the summer, the SPD came out in favor of euro bonds. Peer Steinbrück, a former SPD finance minister, gave the reasons in an interview with Spiegel (12 September):

“One has to explain to people that the EU in this form is the answer both to 1945 and to the 21st century, in a dramatically altered world with new heavyweights, and that Germany benefits from the continued integration of Europe in political, economic and societal ways. And, of course, that means the Germans will have to pay. But the money is well invested in both our future and Europe’s, in peace and prosperity.”

Steinbrück and the SPD are playing here with the fear of war, which is prevalent in many parts of Europe as a result of the two world wars. This takes real chutzpah: during the Balkans war in 1999 the SPD-led government was the first since WWII to introduce German troops outside the country. The SPD’s differences with Merkel are strictly tactical, amounting to a debate over what’s best for German imperialism. Its support to the euro bonds scheme reflects the fear that Merkel’s hardline policies could destroy the EU, thereby possibly killing the goose that has laid a golden egg for German capitalism and enabled the Social Democrats to continue supping at the table of German capital. The SPD exemplifies what V.I. Lenin called bourgeois workers parties: parties with a working-class base, especially through the unions, but with a thoroughly pro-capitalist program and leadership. The SPD besmirched the banner of workers internationalism by voting for war credits for German imperialism in 1914. Ever since, the SPD has been a vehement enemy of revolution.

The Left Party—a fusion of the former Stalinist ruling party of the DDR and a split from the SPD, including a section of the trade-union bureaucracy—is seen by many leftist and working-class militants as an alternative to the SPD. The Left Party might talk a bit more about solidarity with Greece, but like the SPD it accepts the framework of the EU and the common currency while arguing that this alliance of imperialist robbers should carry out more progressive policies. Thus, the Left Party also advocates euro bonds. But since when does workers solidarity with the embattled Greek masses consist of pleading with the government to offer bank loans at a fractionally reduced interest rate?

The left face of the Left Party is its vice chairwoman, Sahra Wagenknecht of the misnamed “Communist Platform.” Wagenknecht absurdly argues that government budgets must “be freed from their dependency on the capital markets.” To this end, she wants a public European bank to be set up, which would offer favorable interest rates. Only a dyed-in-the-wool social democrat could imagine that the budget of a capitalist government could be independent of the capitalist market! And there are already hundreds of publicly owned banks in Europe; all of them play by the rules of the capitalist profit system. Wagenknecht’s reformist schemes are whitewash to obscure the Left Party’s role in supporting capitalist exploitation. They ought to know about government budgets, since they have entered into governments in Berlin and other regions that have laid off workers and cut public spending.

The German trade-union federation DGB has spent lots of membership dues money to run ads in newspapers campaigning for “Yes to Europe! Yes to the euro!” Meanwhile, the DGB bureaucrats’ “solidarity” with the Greek working class fighting against the crisis has been limited to a few speeches on May Day and maybe a letter of support. No struggle has been waged against the German government and the German capitalists, who are the most outspoken proponents of the austerity measures that are hitting the Greek, Portuguese and other working classes so hard.

The same social-democratic union bureaucracy has contributed to advancing German imperialism and its dominant role in the EU by presiding over a massive slashing of real wages. The union misleadership propounds the class-collaborationist lie that what is good for the company and Germany is good for the workers. Most recently, the labor tops agreed to a 20 percent wage cut for all new employees of Lufthansa at the new Berlin airport. In a short space of time, this sellout deal will serve to lower wages at Lufthansa generally. It is urgently necessary to defend wages and working conditions through class struggle: Organize the unorganized! Equal pay for equal work! For an end to the division between permanent employees, contracted workers and workers on short-term contracts! One company, one union, one wage scale! Forge a class-struggle trade-union leadership, linked to the building of a revolutionary party!

For the Socialist United States of Europe!

In 1929, Leon Trotsky, then the leader of the Left Opposition fighting for authentic Bolshevism against the Stalinist degeneration of the Soviet Union and the Communist International, wrote:

“In the person of the Opposition the vanguard of the European proletariat tells its present rulers: In order to unify Europe it is first of all necessary to wrest power out of your hands. We will do it. We will unite Europe. We will unite it against the hostile capitalist world. We will turn it into a mighty drill-ground of militant socialism. We will make it the cornerstone of the world socialist federation.”

—“Disarmament and the United States of Europe” (October 1929)

The Socialist United States of Europe, in conjunction with the conquest of proletarian power in the U.S., Japan and throughout the world, would lay the basis for a real international division of labor in a planned economy, thus enormously increasing the productivity of society. Establishing the genuine equality of the peoples of Europe, it would eradicate the source of the imperialist wars that have brought Europe so many times near extinction.

The multiethnic German working class, with its various components from Mediterranean lands, the Balkans and East Europe—who often bring with them more militant class-struggle traditions—possesses the living links to the struggles of Greek workers, of Turkish and Kurdish workers in Turkey and of workers elsewhere. Class struggle by German workers would resonate powerfully with the French proletariat and would be a beacon to the working class worldwide. Central to our perspective as Trotskyists is the reforging of the Fourth International as the world party of proletarian revolution, the task the International Communist League, and its German section, the SpAD, has set for itself.