The European Union is experiencing its deepest and most acute crisis ever – both in economic as well as in political terms. We are faced with massive capital flight from Southern Europe to its centre, which is not much longer sustainable. At the same time the imposed austerity is driving a downward spiral into recession leading to mass impoverishment. Popular protests are in the making while the politico-institutional framework is at the brink of collapse. The Euro and the entire EU is being threatened, destabilising the power of the capitalist elites.
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 exacerbates and spread them. Now big players like Spain and Italy, the latter a 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 cyclicality.
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 attack 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-fledged crisis theory one thing is, however, evident: The capitalist-imperialist elite and their market have no efficient mechanism of capital (resource) allocation. Despite the fact that in certain locations and periods it 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 European Central Bank 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 bonds.
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 so 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 and much bolder bailout measures, the Eurozone will inevitably be torn apart with ensuing defaults of the European south. This might send shock waves into the global system which might not be sustained. The main loser of such a scenario would be the union’s centre and especially Germany speaking in economic terms and 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 relief 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 contracting world market there is no end to the severe crisis in sight.
So the break-up of the Eurozone seems to be a question of when rather 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 longer 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 and in the periphery. Not long ago a vast majority believed this capitalist narrative, especially in the centre. Today we see a rapid meltdown obviously more intense in the periphery.
During 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 its 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 rift. One can even observe the crisis has adverse political effects on the centre. Despite the fact that the social situation of the German lower classes did not improve, the new political role played by Germany within Europe drives them on the side of their elites. The German lower classes are 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 for austerity in the South.
In Greece a massive popular movement has developed refusing further austerity. It led to the implosion of the decades-old two-party system controlled by a few leading capitalist families. In the last election, the anti-austerity forces lost control of parliament only by a small margin because of the extraordinary 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 in decades the development of a popular opposition against the elites. As radical as this opposition might be against austerity, it is weak as a political alternative. 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 among the popular classes as in Greece but maybe also with some parts of the elites. Therefore, the elites are trying to institute a new electoral system so far without success. For the time being, popular mass movements have erupted only in 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, as the electoral success of the leftist anti-EU lists of Pepe Grillo indicate. With the crisis deepening ruptures, explosions, and turmoil are to be expected.
In Spain, which is in much deeper trouble than Italy, there are also popular protests erupting which are predicted 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.