Turmoil reveals limits of European integration

The severe debt crisis in Greece is having major repercussions in the eurozone, the European Union (EU) and internationally. The eurozone governments fear daily that the contagion could spread beyond Greece, as a number of other economies have been labelled as being at risk of possibly greater problems, including Spain, Portugal, Ireland and the UK. Although the UK is not in the eurozone, most of its trade is with Europe and so it is vulnerable in the present turmoil.

The immediate prospect of Greece defaulting on its debts seems less likely now that European governments and the IMF have put together a 110 billion euro rescue package. But the crisis has been acute enough to bring into question the survival of the present eurozone, and the dangers are far from over. One or more countries may yet be compelled to abandon the euro in order to have more room to manoeuvre economically (in particular to devalue their currency), a dire scenario for European capitalism that was barely contemplated in the triumphalism of the euro’s creation.

Whatever the eventual outcome, this crisis is a major setback for the ruling classes of Europe. German prime minister Angela Merkel, on behalf of Germany’s ruling class, firstly tried to resist bailing out Greece. Her hardline approach reflected a fear that a bailout would set a precedent; Spain, Portugal and other struggling economies could follow suit in asking for large-scale financial help. The sums involved would be astromonical and viewed as an intolerable burden by the ruling classes of the better-off European countries.

On the other hand, the German government has faced huge pressure from working and middle class people against using taxpayers’ money to bail out the Greek government and multinational financial institutions. Nevertheless, Merkel felt forced to participate in putting together a bailout package, as the alternatives for German capitalism seemed even worse. Allowing Greece to overtly default on its debts (which is inevitable if nothing is done) or kicking Greece out of the eurozone could trigger an even greater political and financial crisis.

Protesting Teachers in Greece
French and German banks are estimated to hold around 70% of Greek debt, so they would face massive turmoil and for some, possible bankruptcy. A default or eurozone exit would weaken the overall credibility of the euro (which has already lost 13% of its value since November) and increase the risk of market speculation against the other debt-ridden eurozone states.

This in turn would push up interest rates and threaten the fragile and uncertain economic recovery in Europe. A renewed banking crisis could be part and parcel of this. But a Greek default or one elsewhere could still happen despite the present massive bailout, as could a country leaving the eurozone.

Attacks on workers
In Germany private donors have desperately been sought to make it seem that German workers will not be bearing such a great part of the cost of bailing out Greek and European capitalism. The bailout package that has been negotiated also comes with an insistence on barbaric cuts in living standards for Greek workers and outright lies and exaggerations about their present pension and other entitlements.

The decision to include the IMF in bailing out Greece was a massive blow to the prestige of the eurozone ruling classes. All their options are hugely problematic for them, which reflects the depth of the capitalist crisis they face.

When the euro was introduced, the Committee for a Workers’ International (CWI) predicted that the project would break down at a certain stage, and was derided by other ‘Marxists’ for saying this. The CWI pointed out that it was one thing for it to go ahead while the world economic upswing continued, but quite another when this boom approached its end.

The economic crisis has revealed the obstacles to European integration and the impossibility on a capitalist basis of overcoming the limits of the nation state and the national interests of the ruling class in each country. European capitalist integration has now probably reached its limits in this period, with the process stagnating and even being thrown into reverse.

Protest in Greece
An illustration of this is the sharp national antagonisms between the ruling classes of Germany and Greece and also France and other EU powers that have come to the fore. They all try to place the blame elsewhere, while they all preside over the capitalist crisis and its spread. In the run up to the recession they all tolerated or encouraged to one degree or another the almost untrammelled pursuit of fast profits by big business and the financial institutions, no matter what the cost, and they still do.

Ordinary people barely benefitted during the boom years that preceded the recession, and now are told to pay extra hard for the profligacy of the rich during those years. Workers everywhere are being told to pay twice over, through their taxes being used to bail out the banks and through direct attacks on their jobs, wages and public services.

There have already been some significant protest strikes and demonstrations across Europe, despite many workers still hoping that the attacks on their living standards will be short term and that the situation will soon improve.

As the economic crisis and its consequences drags on, this hope will inevitably switch to an even greater mood of anger, and a will to resist the human misery that the capitalist classes are seeking to impose.