Europe ’s class policy: A blank check fo r the banks, austerity for workers

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Europe’s class policy: A blank check for the banks, austerity for workers
31 July 2010

The same week that European officials announced the results of bank stress tests
designed to give bankers a green light to continue their speculative ways,
European Central Bank (ECB) President Jean-Claude Trichet published a column in
the Financial Times (July 22) arguing for an end to economic stimulus programs
and the rigorous imposition of austerity measures across Europe.

In the article, entitled “Stimulate No More—It is Now Time for All to Tighten,”
Trichet wrote that following the financial breakdown of September 2008, the
world was just able to avoid a “financial meltdown and a second Great
Depression,” but at a high price. According to ECB calculations, “the volume of
taxpayer risks earmarked to support the financial sphere ... was as high as 27
percent of gross domestic product.” Trichet noted that a similar percentage of
GDP was made available to the banking system on the other side of the Atlantic.

The total cost to European taxpayers of the bailout of the banks in 2008-2009,
Trichet wrote, amounted to more than €4 trillion, with a comparable sum made
available to US banks.

Governments across Europe and, by implication, in the US and internationally,
had to, Trichet declared, “confirm their determination to consolidate their
public finances,” i.e., press ahead with austerity programs which will gut
social programs and condemn millions of people to unemployment and poverty.

Trichet’s remarks followed the decision by the G20 group of nations in June to
switch to a policy of coordinated budget-cutting. Following the emergency euro
rescue package of €750 billion agreed to in May, European governments had
already begun to implement unprecedented austerity packages across the continent.

According to one economic commentator for a French business TV channel, the
Greek debt crisis has pushed European governments to do more to reduce social
spending in the past 10 weeks than they have done in the past 10 years. Trichet
is demanding that this dismantling of the European welfare state be accelerated
and broadened.

In order to ensure that European governments “consolidate their public
finances,” the European Union, together with the International Monetary Fund, is
preparing punitive measures to be used against countries that fail to slash
spending fast enough. EU commissioners are demanding the right to inspect
national budgets and issue sanctions against states failing to comply with their
demands.

Commenting on the need for such measures in the case of Hungary, European
Economic and Monetary Policy Commissioner Olli Rehn declared recently, “We must
sharpen our claws.”

The EU and the European Central Bank adopt a very different attitude toward the
banks that unleashed the crisis in the first place.

The stress tests on European banks published last week were anything but
“stressful.” Undertaken largely due to pressure from US and Asian investors and
their respective governments, the tests were a “confidence-building” exercise
dictated by the banks themselves to clam jittery money markets and stabilise the
euro.

According to the business magazine Money Week: “The European bank stress tests
were a whitewash, of course. You’d have to have been particularly naïve to
expect anything else… to put it bluntly, Europe’s regulators didn’t even try to
pretend that this was a serious exercise. Out of 91 banks, just seven failed.
And those were the ones we knew were in a mess already.”

Prior to the tests, Der Spiegel reported that the 14 German banks being tested
were told they had “little to fear because the criteria for the tests were
watered down in hectic negotiations between the European Central Bank, the
European Commission and European banking watchdogs.”

Following the publication of the stress tests it was revealed that 6 out of the
14 German banks defied the parameters of the tests and withheld information
about their sovereign debt holdings. The failure of these banks to release their
figures indicates that they continue to hold large quantities of toxic debt on
their books.

The stress tests throw light on Trichet’s warning in his Financial Times
commentary of “a future economic catastrophe.” Trichet is well aware that many
European banks remain burdened by huge amounts of bad debt. This is combined
with the massive indebtedness of a number of ailing European economies. A
renewed banking crisis in the event of a default on credit payments by a
sovereign country or another major financial institution is entirely possible.

It is to pay for last year’s bank bailout and prepare for more rescue operations
to come that Trichet demands austerity measures directed against the working
class. In this, he articulates the class-war policy of the international
capitalist class.

The global economic crisis is the form in which a fundamental reordering of
social relations is taking place, aimed at wiping out the past economic gains of
the working class and reducing the wages and conditions of workers in the older
capitalist centres to those of impoverished and brutally exploited workers in
Asia and Latin America.

In response to the diktats of finance capital, governments across Europe, in
North America, Japan and Australia are seeking to impose historic cuts in
working class living standards. They and the ruling elites whose interests they
serve rely on the services of the trade union bureaucracy to do so.

In country after country—Greece, Spain, Portugal—the unions are working to
dissipate working class opposition by limiting it to token one-day strikes and
protests, while they support the governments that are implementing the cuts. In
June, the general secretary of the European Trade Union Confederation, John
Monks, declared his complete agreement with EU-IMF plans for austerity in Greece.

There is growing popular opposition to these attacks. But the working class
requires its own class program and strategy to counterpose to the class-war
agenda of the bourgeoisie.

New, democratic organizations of workers, such as factory committees, must be
established in opposition to the trade unions to carry out industrial action in
defense of jobs, wages and basic social needs. Above all, the resistance of the
working class must be guided by a new, revolutionary political perspective,
based on the international unity of workers in the fight for workers’ power and
socialism.

Stefan Steinberg

http://wsws.org/articles/2010/jul2010/pers-j31.shtml

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