[D66] Europe’s crisis

[Antid Oto]

Europe’s crisis
23 July 2011

Not since the adoption of the Treaty of Rome 54 years ago has the European Union
and its precursors stood so close to the abyss as in the past week. Experts
agreed that should the heads of government from the euro-zone countries fail to
find an answer to the debt crisis at their emergency summit on Thursday, it
would mean the end of the euro and the European Union.

The consequences of such a failure would not be confined to the economic sphere.
Ever since the Thirty Years War in the 17th century, Europe has been repeatedly
ravaged by wars, culminating in the two world wars of 1914 and 1939. Since then,
the EU and the organizations that preceded it have constituted the most
important mechanism for preventing new armed clashes between the European
powers. It was no accident, therefore, that before the summit, for many of the
senior politicians who spoke out, Europe—as Spiegel Online put it—“was still a
question of war and peace—instead of euros and cents.” They forcefully warned
against a failure of the Brussels emergency summit.

The summit has not solved the crisis but merely postponed it. It has even
exacerbated the underlying problems.

The participants adopted the long-planned second loan package for Greece worth
more than €109 billion, which like the first is linked to imposing drastic
austerity measures. In order to facilitate its repayment, the interest rate on
Greek government debt is being lowered from 4.5 to 3.5 percent, and the terms of
the loan extended from seven and a half years to 15 to 30 years.

The powers of the European Rescue Fund (EFSF) are being extended; in future it
will buy bonds on the market and proactively support vulnerable countries.
However, its total volume will not be increased.

The summit participants made a great fuss about the involvement of private
creditors in the debt of Greece. The size of their involvement is put at €50
billion by 2014. But a closer inspection reveals this to be a sham. Banks,
insurance companies and other private creditors can redeem their Greek bonds at
a small loss averaging 20 percent, or exchange them for new, long-term bonds
whose repayment is guaranteed by the EU. In this way, they can sell their Greek
bonds at a price that is far above the current market value. All future risks
are being foisted onto the public.

As a result of the measures adopted in Brussels, which still contain many
ambiguities and uncertainties, Greek government debt of €350 billion will
decrease by just €26 billion—a drop in the ocean.

Ireland and Portugal, which are also highly indebted, will also benefit from
lower interest rates from the rescue fund, but participation by the banks is
expressly limited to Greece. No provisions at all were made for Spain and Italy,
although the interest rates on their bonds have shot up in the last week, and
the debts of the two countries are regarded as a core part of the euro crisis.

It is therefore only a matter of time before pressure on the euro increases, and
the government heads will again have to meet in an emergency summit.

The question of the underlying causes of the debt crisis were not addressed ​​at
the summit, let alone answered. Politicians and the media repeat ad nauseam that
the crisis is a consequence of dubious financial stewardship, and that the
countries affected were "living beyond their means".

In fact, the debt crisis is the result of the systematic looting of state
coffers and the enrichment of the upper class at the expense of working people.
For three decades, taxes on corporations, high incomes and wealth have been
continuously lowered. The billions of euros with which the speculative losses of
the banks were offset after the financial crisis of 2008 have overwhelmed public
finances.

But there is no shortage of funds in Europe that could be used to settle the
debts. This is demonstrated by the rapid increase of private wealth and the
number of millionaires, which continues to grow unabated despite the crisis.
According to the World Wealth Report, compiled by the US investment bank Merrill
Lynch, some 3.1 million millionaires resided in Europe in 2007, who collectively
possessed total assets of $10.6 trillion (€7.5 trillion). An emergency tax of
just 4.7 percent on this wealth could wipe out the entire Greek public debt in
one shot.

This wealth is rising rapidly, even in the wake of the financial crisis. In
Germany alone, according to the Bundesbank, the sum of private fortunes has
risen for the past five quarters by a total of €350 billion—exactly equivalent
to the total debt of Greece. And this is despite the fact that medium incomes
have stagnated for ten years and lower incomes have fallen. Wealth is
concentrated almost exclusively in the upper tenth of society, which possesses
over 60 percent of the total wealth.

But these assets are off limits to the governments of the euro zone. Even a bank
levy, demanded by President Sarkozy for tactical reasons, was rejected
categorically in Brussels. The assembled leaders even used the crisis to
accelerate the redistribution of social wealth. The emergency summit in Brussels
expressly welcomed the austerity programmes in Spain and Italy, and insisted
that the budget deficit in all euro countries must fall below 3 percent by
2013—which means more drastic cuts in social spending.

Above all the “left” bourgeois parties—the Social Democrats, Greens and
ex-Stalinists—are insisting on further attacks against working people. They
parade themselves as the saviours of European unity, although their conception
of “saving Europe” is synonymous with unending austerity.

In Greece, the victory of the social democratic PASOK party was a prerequisite
for an austerity programme that will lower the living standards of workers and
pensioners by 40 percent by 2015. In Italy, the 86-year-old President Giorgio
Napolitano, an old cadre of the Stalinist Communist Party, is now ensuring that
the centre-left opposition supports the recent austerity programme of the
Berlusconi government, which is directed almost exclusively against those of
middle and lower incomes.

In Germany, the Social Democratic Party (SPD) has offered its support to the
Merkel government in order to pass unpopular measures to deal with the euro
crisis. And in Spiegel Online, Green Party leader Cem Özdemir praised Greek
Prime Minister Papandreou because he had introduced his austerity measures
against popular resistance.

In the 1920s, Leon Trotsky stressed that the European bourgeoisie was incapable
of uniting Europe in the interests of its people. The capitalist system, based
on private property, exploitation, personal gain and national interests, was
unable to guarantee the harmonious coexistence and solidarity of the European
peoples. This assessment is being dramatically confirmed today.

The debate between the right and “left” bourgeois parties regarding a way out of
crisis swings between blatant nationalism, on the one hand, and “saving Europe”
through the ruin of its people, on the other. As in the 1930s, both roads lead
to social decline, dictatorship and war.

The working class cannot subordinate itself to either of these camps; it must
fight for its own response to the crisis—the reorganization of Europe on a
socialist basis. The large financial conglomerates must be expropriated and
placed under democratic control; the assets of the super-rich must be heavily
taxed or confiscated. On this basis, it will be possible to resolve the current
crisis, to overcome the social divide in Europe and to use its vast resources in
the interests of society as a whole.

The alternative to the Balkanization of Europe into warring nation-states and
the dictatorship of finance capital and its institutions in Brussels is the
United Socialist States of Europe.

Peter Schwarz

http://wsws.org/articles/2011/jul2011/pers-j23.shtml