Operation Piggy Bank
Escalating Conflicts are causing the European House to Falter
(article originally published in German in the October 21st, 2011 issue of the newspaper analyse & kritik)
The conflicts within the German government coalition and the increasing tensions at the European level are closely intertwined. The conflicts are escalating on the one hand due to an abundance of intensifying, mutually opposed interests: what is central is Berlin’s refusal – resulting from domestic political pressure – to introduce further reaching measures in order to stabilize the eurozone.
The New York Times (September 12th, 2011) notes a “cacophony” in Berlin, which sows “fresh doubt […] about the nation’s commitment to the euro.” The announced resignation of German ECB chief economist Jürgen Stark is a sign of growing “frustration” in Berlin. In the American newspaper of record, an economist is granted the opportunity to outline the rising aggressive nationalism in Germany as follows: “The German electorate is not in the mind-set to undertake actions it sees as subsidizing less worthy nations. As a result, the government is moving in a very isolationist way to try to establish a fortress Germany that’s economically secure despite the risks in its European Union partners.”
The Limits of Debt-Financed Growth
It’s safe to assume that German chauvinism has been the greatest winner of the crisis in Europe so far. By now, even the old German predilection for the public humiliation of dissident groups is flaring up: European Commissioner for Energy Günther Oettinger recently demanded that the flags of European debtor countries should be flown at half-mast in front of EU institutions. And the president of the CDU economic council, Kurt Lauk, demanded the resignation of EU President Barroso for committing the “mortal sin” of starting an initiative for Eurobonds.
There are also tough disputes concerning the controversial question of the ECB purchasing state bonds of heavily indebted EU countries. This has also been strongly criticized by Germany and contributed decisively to the resignation of ECB executive board member Jürgen Stark.
Furthermore, there are intensified conflicts within the EU concerning a forced integration. France above all hopes that the crisis can be overcome by means of a further-reaching European integration, for example by the implementation of a common budget or tax policy. The Prime Minister of Luxemburg and President of the Euro Group Jean-Claude Juncker makes similar arguments. On this front, German policy also acts as a brake.
There are also further battle lines, such as the critique of numerous Central Eastern European countries of German-French hegemony within the EU, or the conflict between the Euro Group and the USA concerning further stimulus packages, vehemently demanded by Washington. China has also come forward with the proposal of supporting the eurozone with billions in loans. And finally, domestic political conflicts are increasing in other Euro countries, where – unlike Germany or Austria – national chauvinism is not on the rise, but rather protests against the austerity terror and crisis policies of governments.
This barely manageable multiplication and intensification of conflicts is a result of the most recent exacerbation of the objective systemic crisis of capitalism. The structures of the EU system are dissolving, since all important actors at the moment are making an increased effort to impose their own interests without engaging in the compromises that were previously customary. Through this distributive struggle between individual states, institutions, or social groups, the previously petrified structures of the EU have fallen into an instable or “fluid” state. It’s clear that the EU as we know it will not survive the crisis.
The EU has always been characterized by conflicting interests between individual states. But why are tendencies toward dissolution becoming predominant during the present crisis? Why isn’t the “European House” crisis-proof, so that a compromise now appears impossible? Europe’s integration into a single currency area was made possible by the fact that the various governments believed that the advantages of this integration project would far outweigh the disadvantages. Germany – or more precisely, the German export industry – has reaped the most benefits from the eurozone, as is generally known. Since the introduction of the euro, Germany’s current account surplus with the eurozone adds up to 750 billion euro, which equals a flow of wealth to Germany in the same amount.
So the EU is already a transfer union – a transfer union benefiting German export industry, made possible not least by declining wages and the casualization of wage laborers within Germany. The southern countries of the eurozone seemed to profit from it as net recipients due to financial allocations from Brussels and low-interest rates on bond issues from the eurozone. For a while, the southern European euro countries were able to finance the indebtedness of their economies – which rapidly increased due to the German trade surplus – at extremely favorable terms. This southern European indebtedness had a stimulating effect on the economy. In many heavily indebted countries, regular deficit cycles developed in which the dynamic of indebtedness advanced to the status of the most important economic motor. For example, before the outbreak of the crisis Ireland and Spain exhibited a much higher rate of economic growth than Germany for years due to the real estate bubbles in those countries. The periphery as well as the core of the EU appeared to profit from “European integration” due to continuous borrowing.
As is well known, this constellation no longer exists. Due to excess indebtedness in the eurozone, the eurozone will no longer play such a prominent role, which is why skepticism towards Europe is running rampant among the German public and efforts to dispose of the indebted countries in the cheapest way possible are getting stronger. Confronted with rising costs and European markets melting away, Berlin is making an effort to reduce Germany’s entanglement with the EU to a minimum.
The EU between Disintegration and Integration
Furthermore, Berlin is also attempting to rearrange the eurozone according to its own interests, by preaching strict budget policy and introducing debt limits. In most EU institutions, in France (whose banks are rather strongly exposed in the Southern half of the Eurozone), and in the Southern Euro-countries, a contrary tendency dominates. Here efforts are made to rearrange European structures in order to involve Germany in the costs of the crisis: whether by means of Eurobonds, or a strong expansion of the crisis mechanism European Financial Stability Facility (EFSF), which according to the most recent proposals should be able to transfer money directly to banks. Thus, antagonistic interest coalitions within the EU clash, ultimately aiming at a disintegration (Germany) or further integration (France, Southern Europe).
Unfazed by the intra-European conflicts, the crisis of the capitalist system is gaining momentum. Due to the very probable bankruptcy of Greece, the eurozone is threatened by a renewed financial market crisis which is already making itself felt by rising interest rates in inter-bank trading and which can only be delayed in the short-term by liquidity injections from the ECB. A bankruptcy of the Greek state might still be manageable for the European financial sector if further heavily indebted countries – like Italy – aren’t seized by the subsequent shock waves on the financial markets. But such a scenario is very probable, since a bankruptcy in Athens would automatically lead to higher interest burdens for Italy and Spain. Such a “domino effect” in the European debt crisis, however, would definitely blow away the EU and its financial system. The crisis of European state debt is at the same time a crisis of the European financial system that made this running up of deficits possible.
At the same time, the impending recession in the EU and in Germany is announcing its arrival, precisely due to the austerity programs throughout Europe imposed under Berlin’s decisive influence. With the ebbing of the credit-financed impulses of the stimulus packages, the world economy is once again entering a recession. This actually existing “dependency” of the world economic system upon credit-financed demand also constitutes the background for the apparently absurd initiative by US Treasury Secretary Timothy Geithner and Defense Secretary Leon Panetta to convince Europe, at the highpoint of a debt crisis, to adopt further credit-financed stimulus packages.
The German Strategy of Public Humiliation
Thus the “crisis trap” also closes its jaws In the EU: politicians would actually have to implement stimulus programs in order to stimulate a sagging economy, and at the same time impose harsh austerity measures in order to stabilize the budget situation. The common European currency actually functions as a catalyst of crisis processes, contributing to a situation in the EU where the debt crisis is threatening to enter a catastrophic stage: the euro robbed the inferior Southern European economies of the possibility of buying their own state bonds and using an independent low-interest rate policy in order to dampen the effects of the crisis, like Great Britain is doing. Instead, months ago Berlin imposed a turnaround in interest rates in the eurozone which has contributed to a further cooling of the economy in Southern Europe. The lack of sovereignty in matters of monetary policy for the European debtor nations has thus robbed them of important possibilities for postponing the current aggravation of the crisis.
The political class can attempt to maintain debt-financed mass demand for as long as possible in order to postpone an economic collapse. Treasury Secretary Geithner implicitly admitted as much during his initiative in the Polish city of Wroclaw on the occasion of a meeting of European central bankers and financial ministers. Meanwhile, a Europe led by Berlin has been rejecting these insights and is instead deepening the crisis by means of draconian austerity programs. In the EU, this conflict between proponents of further debt and brutal budget balancers is intensified by the diverging interests of individual countries and the concomitant opposing tendencies of strengthening or loosening European integration.
In the crisis, as a result of the collapse of this deficit cycle, there is a looming threat of a relapse into chauvinism, nationalism, barbarism. The left is thus confronted with the task of opposing these reactionary tendencies, organizing and coordinating the struggle against the capitalist crisis on a global level – and fighting for an alternative system, in which – along with capital and the state – artificial national borders belong to the dustbin of history. The construction of transnational or global organizational and social structures – a task at which capitalism can only fail – has to be placed on the agenda by the left, in light of the numerous global problems confronting humanity. Future struggles must also be conducted globally. Some approaches are already becoming manifest in the Occupy Wall Street movement, which is aiming precisely for such a global coordination and organization of the struggle.