Acute crisis of capital flight
The current stage of the crisis of the EU/Euro is marked by capital fleeing the European south. The symbol for this are the increasing interest spreads over German bonds. But also banks and the corporate sector are in acute shortage of capital while private consumption is plunging. Together with the severe austerity imposed by the EU centre the European south is suffering deep recession of which the worst is still to come. Large sections of the population including the middle classes are being impoverished to an extent and in a pace unprecedented since decades.
For any peripheral country this would mean immediate default and devastating social crisis as countries like Mexico, Indonesia, Argentina and many other countries did suffer from. Only being part of the EU and the Euro, default could so far be postponed – to social costs which might exceed even the ones to be expected with bankruptcy as Argentina had exemplified.
Actually small economies like Greece and Portugal de facto underwent controlled default with a partial debt restructuring which, however, did in no way resolve the problems but conversely exacerbate and spread them. Now big players like Spain and Italy which is part of the G7, and periphery and centre at the same time, are on the verge of bankruptcy shaking the very fabric of the Euro and the entire Union.
There is no simple and mono-causal explanation for the crisis which is definitely going beyond capitalist cyclisity.
One certain and obvious reason are the extreme imbalances expressed in the current accounts both globally and within Europe. As to the European current account imbalances nobody can deny that they have been massively exacerbated by the common currency. While the German centre embarked on real wage deflation the South did the exact contrary incited by cheap capital from the centre (credit bubble). The productivity deferential between the centre and the periphery went astray and so did the current accounts. The common currency made an offset through exchange rates moves impossible. The Southern industry gradually has lost global marked shares while capital went into financial speculations offering much higher interest. Eventually the system exploded and the capital flux direction reversed leaving nothing but misery.
A deeper lying phenomenon are the extremely low interest rates driving the generalised move into financial speculation. This is on its turn connected to the “savings glut”, as the elites’ economists call it. Capital is being accumulated while not productively re-invested but pumped into the financial casino. This for its part can also be explained by a widening gap between potential global output on one side and demand on the other side due to three decades of massive attacked on the toiling masses worldwide. The crash could so far be avoided, mitigated or postponed thanks to the credit bubble which burst only partially due to the containment measures mainly taken by the US elites. For how long this can go on remains an open question.
Without necessarily devising a full-fletched crisis theory one thing is, however, evident: The capitalist-imperialist elite and their market got no efficient mechanism of capital (resource) allocation. Despite the fact that in certain locations and periods is can provide for explosive development of the productive forces (on the costs of the toilers), it always remains uneven. The bust always follows the boom triggering social crisis, conflicts and wars. A system controlled by the interests of the global majority might not have these explosive hot spots in space and time but it would unfold more just, even and sustainable.
Back to the European crisis: It could indeed serve as the trigger for the global crash.
The US and the Anglo-saxon global elites press for an urgent programme to avert the European crash which could let the global credit bubble burst and tear down the entire world economy. They want the ECB to follow the Fed with an extremely expansive monetary policy called Quantitative Easing. This includes guaranteeing for the debtors both sovereign as well as corporate ones (as the US government did) best expressed in proposal for Euro bond.
The US is de facto a strongly centralised state (despite the de jure federative constitution), while within the EU the main levers of economic policy (except monetary) remain in the hands of the national governments. It is not by accident that a de facto common state has been proposed. But this is for many reasons impossible even more given the acuteness of the matter. So the elites do not regard it as a solution.
The European centre and especially Germany do not want to take the risk for the periphery over which they have no effective control. But this is not the only reason. There is also an ideological, dogmatic element with the absolute priority of monetary stability which excludes expansionary monetary and fiscal policy and orders austerity with regard to public expenditure as the only remedy.
This is what they have forced upon the EU periphery in exchange for bailouts and some minor guarantees. This recipe so far has caused disastrous results even amplifying the crisis. Worse is to come.
The EU has been moving within this dilemma always coming closer to collapse. It is completely unclear how long this walk on the edge of the sword will be possible. As the crisis deepens the risk taking and the guarantees will have to increase massively. If Berlin refuses swift further and much bolder bailout measures, the Eurozone will be inevitably torn apart with ensuing defaults of the European south. This might send shock waves into the global system which is might not sustain. The main loser of such a scenario would be the union’s centre and especially Germany speaking in economic terms let alone political ones. Or, the other option, is to gradually give in to what the Anglo-saxon financial centre as well as the Southern periphery demand, with the danger that the measures will bring relieve only for a short period of time soon requesting new and bigger steps towards shouldering risk. Given the austerity, the recession as well as the contacting world market there is no end of the severe crisis in sight.
So the break-up of the eurozone seems to be rather a question of when than a matter of whether. Given the political limbo of the EU and especially Germany the crack might be closer as one expects.
Destabilisation of the ruling European elites
The European Union is the project of the European capitalist elites to unify the continent under their exclusive rule as the only possibility to remain a global power, however, always within the system of US hegemony. No internal anti-systemic opposition should ever get the chance to raise its head.
Given the current crisis all the promises connected with the EU are severely shaken and might soon lie completely in ruins. There was the promise of prosperity extended also to the periphery, something which is currently taken back. There was the promise of the end of nationalist-inspired conflicts, the hope for social balancing across the continent bringing the periphery close to the centre, the idea of lasting peace which is no more so sure as it used to appear. And there is the promise of democracy and civil rights extended also towards the periphery, something which is always less credible in the centre let alone on the periphery. Not long ago a vast majority believed this capitalist narrative especially in the centre. Today we see a rapid meltdown obviously more intensely on the periphery.
Along the entire period of neo-liberalism and especially since the demise of the Soviet Union in 1989/91 we have seen a contradictory process of loss of organic control and political hegemony of the capitalist elites over the broad masses across Europe. It is contradictory because one cannot deny that neo-liberalism has indeed been wielding significant influence. But at the same time it cut is organisational links of control over wide sections of the population which had been built after WWII mainly by the means of bourgeois democracy and a steady increase in prosperity also for the subaltern classes. Participation in the political system decreased, democratic rights got curbed in the fury of the “war on terror”, the growth of prosperity was stopped and even reversed and eventually the elites took exclusive control of the political system in form of a cold and creeping coup d’état. The broad masses accepted this tendency more or less with indifference. The appearance of political clowns and even more of right-wing populism is an expression of this loss of hegemony. But the hitherto dominant political passivity and widespread indifference could turn into resistance and rebellion not seen for half a century. The explosion of the Euro and the EU would create an enormous ideological and political vacuum as the main political project of the elites is evaporating.
Implosions and explosions in Southern Europe
It goes without saying that the political crisis is the deepest in the societies affected the most. Along the social rift across Europe runs also a political one. One can even observe that the crisis got the adverse political effect on the centre. Despite the fact that the social situation of the German lower classes did not ameliorate the new political role played by Germany within Europe drives them on the side of their elites. Actually they are even right to refuse the bailouts as their aim is to save capitalist elites while leaving the popular masses in misery. They are wrong, however, when they endorse Merkel’s pressure to austerity in the South.
In Greece a massive popular movement developed refusing further austerity. It let to the implosion of the decades-old bi-partite system controlled by a few leading capitalist families. In the last election the anti-austerity forces only by a small margin did not take control of parliament because of the extra-ordinary bonus granted to the first party. The EU had no contingency plans for such a situation. But also the current government is extremely weak and will break down sooner or later. The elites will no more be able to maintain power abiding by the formal rules of bourgeois democracy. They will need to resort to authoritarian measures unprecedented in the EU running head-on against their very ideological justification. At the same time we see for the first time since decades the development of a popular opposition against the elites. As radical as this opposition might be against the austerity as weak it is regarding a political alternative. By majority they still hope to remain within the eurozone which is being expressed in the programme of the Syriza coalition heading the opposition movement.
Also in Italy it will be nearly impossible to continue imposing austerity with the old eroded political system. The bi-polar system is ruined. The Monti government was a trick of last resort to expire soon. New elections might bring forces to office hostile to continued austerity and also the EU – possible not only from the popular classes as in Greece but maybe also with some parts of the elites. Therefore the elites try to institute a new electoral system so far without success. For the time being a popular mass movements erupted only at the periphery (like in Sicily) or in certain sectors. But there are signs of political change within the popular masses and also the middle classes, like the electoral success of the leftist anti-EU lists of Pepe Grillo happens to indicate. With the crisis deepening ruptures, explosions and turmoil are to be expected.
While a political alternative in further away in Spain which is in much deeper troubles than Italy also there popular protests are erupting which are doomed to grow.
… the eurozone breaks apart and with it the entire project of the union the rule of the capitalist elites will be put into question first of all at the periphery. The popular masses will become once again after half a century a factor of active historic change. This will offer unique opportunities to revolutionary anti-capitalist and anti-imperialist forces.
In which way these opening possibilities can be seized? How the beginning popular protests can be connected to the Arab democratic and anti-imperialist revolts? In which way all this is connected to the global economic and political crisis of the impero-capitalist order headed by the US? Participate in the discussion with protagonists of these struggles at the Anti-imperialist Camp in Assisi:
Respective sessions of the Anti-imperialist Camp
Assisi, Italy, 23-26 August 2012
Greece: elections or revolution?
Friday afternoon, 24 August
• Petros Al Achmar, leading activist of the Communist Organisation of Greece (KOE) which is member of Syriza
• Yiannis Rachiotis, candidate of Antarsya (Anti-capitalist Left Co-operation for the Overthrow) and leading member of the left lawyers association Alternative Intervention of Athens Lawyers (AIAL)
The Italian crisis within the European one – a popular front to emerge as an alternative?
Sunday morning 26 August
• Alberto Bagnai, economist
• Marino Badiale, university of Turin
• Alberto Perino, leader of the NO TAV movement
• Leonardo Mazzei, secretary of the People’s Liberation Movement (MPL)
• Mariano Ferro, leader of the Sicilian popular protest movement Forconi (by audio link)
• Felice Flori, leader of the Sard shephards