Thursday, 28 June 2012

Merkel Must Go To Save The Euro

It is now clear that if the Eurozone – and possibly the EU as a whole – is to survive, Angela Merkel and her Government has to go. The chorus of calls from international, and Big European Capital has become deafening, for the EU's politicians to sort out the Eurozone's political crisis. Obama and US politicians and bureaucrats have been demanding they sort it out, as a precondition for instituting the kind of Keynesian fiscal stimulus that has been implemented in the US. The IMF, OECD, and even some of the conservative Credit Ratings Agencies have made similar comments, saying that austerity is killing the patient, and a plan for growth is required. Even China has made similar comments. The views of the dominant sections of European Capital, are channelled through the EU bureaucracy, and they too have been demanding that steps be taken immediately to sort out the political crisis, and institute a plan for growth.

The ECB has notably stayed out of the Bond Markets in recent months, and has made it clear that it will not take on the role that the politicians themselves need to fulfil. The top bureaucrats from Van Rompuy, the President, through Barroso, and the Commission have set out the necessary plans for the establishment of a Banking Union, of Fiscal Union, of Eurobonds, and of Political Union. The bureaucrats put in place only months ago to act as the conduit of European policy into the nation states have either been replaced by elected Governments as in Greece, which now demand a change of emphasis towards growth, and away from austerity, or else, as in the case of Mario Monti in Italy, have themselves become advocates of such a change of policy. Monti, has most vociferously adopted this position in opposition to Angela Merkel and other German politicians and bureaucrats. But, similar views are being expressed by other recently appointed bureaucrats such as Mario Draghi at the ECB.

If that were not enough powerful voices such as George Soros over recent weeks have pointed out that unless the European politicians sort it out, and drop the austerity measures in favour of growth, there will be a catastrophe. Monti has said the same, arguing that the Eurozone had just this week to sort it out, meaning at the Eurozone Summit (the 20th over the crisis) happening today. Monti has reason to take such a stand. The Coalition of forces in Italy that supported his coming to office to replace Berlusconi, is falling apart, as the austerity measures tank the Italian economy just as they have done in Greece, Ireland, Portugal, Spain, and Britain. Berlusconi is reported to be amassing his forces ready for a comeback, which is neither good for Italy nor for Europe.
The voices of international Capital, and of European Big Capital are being channelled not only through the European and Nation States (though not uniformly), and through sections of the media – hence the recent media attacks on the Tories in Britain – and through Social Democracy. Although, Syriza is presented as some kind of Far Left organisation, in reality it is merely a Left Social Democratic Party whose positions are wholly consistent with a continuation of Capitalism in Greece, and Europe. The same is true of Hollande, and the French Socialist Party, which is acting now as the political spearhead of these forces throughout Europe. Its position of essentially Keynesian stimulation to promote growth, has not only been supported by international Capital, which has lowered French borrowing costs, but is being supported by Social Democrats in Portugal, Spain and elsewhere.

Even so, none of this changes anything unless Germany comes on board. At the moment, Angela Merkel is following the example of Margaret Thatcher by an insistent “Nein, nein, nein” in response to calls for emergency assistance to save the Euro. Yet, its reported that in private, Merkel's position is not at all so rigid as the public pronouncements. She has already agreed to a number of moves that only months ago she was insisting were not acceptable. But, Europe does not have time for these political cat and mouse games. One trader said yesterday that if the politicans do not come up with a credible plan by the end of the week, they could come in to work on Monday to find that everything had collapsed.

Merkel does not oppose the idea of a Fiscal Union, or Political Union. On the contrary, she repeatedly says that she is in favour of closer European integration. The point is she is only in favour of that integration on German terms. That means she is only in favour of it, if FIRST, other countries, essentially the peripheral – and not so peripheral, like Spain and Italy – economies agree to make themselves more like Germany, and if Germany gets a veto over their spending. On one level, of course, that is not unreasonable. A Workers Europe would have to operate on some similar basis too. Otherwise what is created is some kind of huge Welfare State where workers in one part see large amounts of the Value they create transferred to another, rather than there being a rational plan to ensure that everyone has work that creates Value. But, in practical terms here and now it can never be a basis on which to proceed.

The example is often given that Germany underwent a ten year programme of restructuring its economy and labour market. That is true, but it did so under conditions of growing prosperity not of rapid economic decline in workers living standards! In fact, it was not just a ten year period beginning with Gerhard Schroder that brought about those changes. German Social Democracy ensured such a transformation continuously from the end of WWII. It was one of the most successful examples of the Fordist/Welfarist model that incorporated the Trades Unions and the Workers Party – including for example, within the Works Councils – that ensured that workers co-operated with Big Capital to introduce new technology and techniques, and the necessary labour flexibility to go along with it that ensured large increased in German productivity, facilitated the development of German high value production etc. in return for high wages, and high levels of social welfare provision.

The same was true in Britain in some ways. In the 1940's and 50's, the number of pits that were closed, and the number of miners jobs that were lost in the immediate aftermath of nationalisation, far exceeded those wrought by Thatcher. But, there was essentially no resistance to these changes. The main reason for that is that under the conditions of the Post War Boom, there was a high demand for Labour. Workers were paid off from the pit on a Friday, and walked into a new job on the Monday. In addition, the loss of jobs, and closure of the least efficient pits was necessary in order to focus on introducing new technology to raise productivity at those pits where it was worthwhile. The introduction of this new, expensive machinery, meant that Coal bosses had an incentive to protect their investments – in a way they did not have previously in respect of Miners – by introducing new Health & Safety measures to reduce the danger of collapses, and of explosions, flooding etc. In other words, the economic boom meant that workers had little reason to resist the changes, because they could see an immediate benefit for themselves arising from them. That's not to say that Capital didn't benefit even more, it did which is why it introduced the changes.

But, for the same reasons it is clearly ridiculous to believe that Greek workers, or workers in Spain, Portugal, or Italy are going to accept ten years of massively falling living standards, unemployment and everything that goes with it, in order to bring about similar changes and restructuring. Ireland is perhaps an exception here, because Ireland, unlike, many of these other countries has a sizeable, modern, efficient sector of its economy based on technology already. Moreover, such changes in the peripheral economies and in Spain and Italy, would only make sense in this context, if there were higher value jobs for them to go to. At the moment there seems little prospect of that, and the more uncertainty that surrounds the future of these economies, the less likely it is that anyone will want to invest there.

As I've set out before in economic terms solving the Eurozone crisis is not difficult. The problem is its not really an economic crisis, its a political crisis, and resolving the politics is the difficult bit. What is needed is a fiscal and political union, and the establishment of Eurobonds. That would provide the basis for the establishment of a real growth plan for the whole of Europe, which would remove the uncertainty, and begin to modernise the economies of the periphery, so that they establish high value, internationally competitive sectors of their economy – as for example, Ireland, Germany and some of the Nordic countries have done – that are able then to support the rest of the domestic economy – i.e. the large number of people who work in the service and commercial sector meeting the needs of domestic workers. Given the current Long Wave Boom in the global economy, there is no better time to achieve such a solution.

The problem is that Merkel and her Government cannot sign up to such a solution. That is not because, as is often portrayed, the German workers will not accept such a deal. The reality is that German workers understand that they have benefited considerably from the EU, and from the Euro. Merkel's standing in Germany has been falling, and her Party has been losing heavily to the German Social Democrats and Greens. But, both the SPD and the Greens, support the establishment of Eurobonds etc.! So, why doesn't Merkel adopt that position. The answer is quite simple. Its the same reason that Cameron and the Tories abandoned their position of outspending Labour, and adopted austerity. In order to retain the support of their core Conservative vote, and membership, they are forced to adopt these positions, because otherwise they would have no chance of election at all. Simply adopting some of the positions of the Social Democrats would not win them the votes of Social Democratic workers, but it would lose them the votes of their core supporters.

So Merkel is trapped by the dynamics of bourgeois democratic, electoral politics. That is why the only solution, the only way to save the Euro is for Merkel and the CDU to go, and for them to make way for an SPD/Green Government. They could at least set out in convincing terms a plan for Fiscal Union, and for Political Union i.e. for the beginnings of a United States of Europe, and could immediately put in place the mechanisms for selling EU Bonds, and for a growth strategy for Europe. That is not to say, that such a plan would not mean Germany also demanding oversight of national budgets etc. - though this would be framed in terms of EU oversight – in order to ensure that any monetary or fiscal transfers were not simply being used to finance consumption rather than investment. But, it would mean that these two things could proceed hand in hand, in a necessary and logical fashion in a way that currently they cannot.

It looks likely that as with Greece, Italy may also face early elections. It would be useful if Merkel were to announce the same in Germany. Indeed, it would be useful to have a General European Election to be able to debate and decide on all these issues in an open and democratic manner. But, then if they don't come to a decision by the end of this week, there may be nothing left to decide upon. The pictures from Greece, frequently dwell on the ruins of the Acropolis, a symbol of that long dead Greek democracy. European politicians show all the signs that they may be about to create a new lot of ruins of European civilisation. The political divisions that are preventing the resolution of the problems of Europe demonstrate that Capitalism has now long since gone beyond the bounds of the Nation State – which is why all those reactionaries who look to a solution in a return to it are wrong – but it may be that Capitalist politicians are not capable of going beyond it. In that case, the historic task falls clearly to the workers of Europe to achieve it, by establishing their own unity across borders, and moving forwards to a United States of Europe, and a European Workers Government. It is task we should be undertaking right now.

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