Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page: http://www.socialistparty.org.uk/issue/693/13123

From The Socialist newspaper, 9 November 2011

Editorial of the Socialist

Failed G20 summit takes eurozone nearer to the abyss

The G20 meeting of the world's most powerful government leaders on 3 and 4 November was a 'No Cannes Do' summit. The discussions were hijacked by the Greek crisis. George Papandreou's call for a referendum on the eurozone bailout package - additional loans for even more savage cuts - infuriated European leaders and led to the withdrawal of the package.

So the Greek deal, first packaged on 21 July, remains up in the air. The G20 leaders failed to agree on concrete measures to shore up the eurozone, and produced no new initiatives to stimulate growth in the world economy. It was the latest in a series of dysfunctional G20, European Union (EU) and other summit meetings that have promised decisive solutions but failed to deliver.

It was agreed in principle to increase International Monetary Fund (IMF) money available to intervene to prop up debt-crisis countries like Italy. But the US and China refused to pledge definite amounts.

China also declined to provide more capital for the European Financial Stability Fund or any other 'vehicle' designed to rescue European governments or banks. European governments, they said, would have to take responsibility for the eurozone crisis.

Germany, however, by far the strongest eurozone economy and the pivot of the eurozone, refuses to increase its support for the weaker eurozone countries. Meanwhile, big bond market speculators are pushing up the borrowing rates of countries like Italy to unsustainable levels.

Every day the G20, IMF or EU leaders fail to act, the eurozone slides nearer to the abyss of a systemic crisis, with bank failures and government defaults that would provoke a new slump in the world economy.

Austerity means higher deficits

Austerity measures across Europe, including Britain, are strangling growth. On 3 November the European Central Bank cut the base interest rate by 0.25% to 1.25%. The ECB's new head, Mario Draghi, warned that Europe now faces a "mild recession".

Even without a new banking crisis, however, it is more likely that Europe will slide into a more serious recession. Eurozone leaders will get the opposite of what they want. Negative growth in the most debt-burdened countries, like Greece and Italy, will result in even bigger deficits.

Cameron and Osborne have been congratulating themselves that Britain is not part of the eurozone. But a financial crisis or economic downturn in Europe would inevitably impact on British capitalism.

The biggest share of British trade is with Europe. A new downturn in the eurozone would mean a downturn in Britain as well, possibly even more severe than the 'great recession' of 2008-09.

Greek tragedy

The Cannes summit was dominated by the Greek crisis. Shaken by a wave of general strikes and mass protests, Greek leader Papandreou called for a referendum in Greece on the bailout package. This provoked fury from the eurozone leaders, who saw it as an attempt to torpedo the deal.

Papandreou's call for a referendum was a manoeuvre to maintain his position rather than a genuine attempt to give the Greek people a democratic choice. No doubt he believed that he could get majority support for the cuts package by linking it to continued Greek membership of the eurozone. Angela Merkel, Nicolas Sarkozy and other eurozone leaders, however, feared that a referendum could result in a rejection of the package.

In the event, under intense pressure from eurozone leaders and his rivals and opponents in the Greek parliament, Papandreou dropped the call for a referendum in favour of the formation of a government of 'national unity'. In reality, this will merely be an interim, austerity coalition with the sole purpose of approving an IMF/eurozone austerity package.

A general election early next year will provide the Greek people with no real choice at all. Both Pasok, the governing party, and the right-wing opposition, New Democracy, support austerity measures. The only differences are points of detail.

While imposing unparalleled, brutal levels of unemployment and poverty on the Greek working class and sections of the middle class, the cuts package has no chance of overcoming Greece's debt problems.

The country's industrial production is 23% below the 2008 level. Further cuts will prolong this slump, most likely producing an even bigger deficit. Even if all the cuts demanded by the IMF and eurozone were carried out to the letter, in nine years' time Greece would still have a national debt of over 120% of GDP - a level previously considered to be 'unsustainable'.

New austerity measures will provoke new waves of mass struggle against the Greek ruling class and its political representatives.

Italy on the brink

The sovereign debt crisis is now engulfing Italy, the third largest economy in the eurozone. In cash terms, its national debt - 1.9 trillion or 120% of GDP - is on a far bigger scale than Greece's debt of 350 billion. The Italian economy is sliding back into recession.

The Berlusconi government has passed a cuts package, but neither the eurozone leaders nor financial markets have any real confidence that Berlusconi can implement the package of cuts and counter-reforms. Berlusconi's days as Italy's leader are clearly numbered. But none of Italy's political leaders have any solution to the growing crisis.

The interest rate on Italy's ten year bonds is now nearly 7%, an unsustainable level. The government needs to refinance 300 billion of debt next year, but faces the prospect of being excluded from raising money on bond markets. Yet the funds currently available for a rescue through the IMF or the EFSF are completely inadequate.

At the same time, the ECB, while it has purchased some Italian government bonds, does not appear willing to step in to support Italian debt. There is now the real prospect of an Italian default, which would detonate a major crisis in the world capitalist economy.

The future of the eurozone

A taboo was broken at the Cannes summit. For the first time in public, a number of eurozone leaders threatened the expulsion of Greece and raised the prospect of a breakup of the eurozone.

French president Sarkozy said that it had been a mistake to let Greece into the eurozone. German leader Merkel threatened the expulsion of Greece unless it accepted the cuts package. Olli Rehn, EU commissioner, said that Greece was embarking on "a course that would lead it outside the eurozone... We do not want that but we must be prepared for every scenario, including that one, for the sake of safeguarding financial stability and saving the euro."

These statements have opened up a Pandora's box. Even if the Greek crisis is patched up for the time being, the prospect is clearly raised of a breakup of the eurozone in the future. Some eurozone leaders have called for moves towards a fiscal union, with a political infrastructure with powers to regulate tax and spending.

The richer countries, with trade and budget surpluses, are never going to agree to repeatedly bail out the weaker economies unless they have control over their budgets. But if it was not possible to achieve this kind of integration in a period of economic upswing over the last decade, how on earth will it be possible in a period of global stagnation or recession?

The present crisis shows ever more clearly that capitalism is incapable of overcoming the limits of the nation state and conflicting national interests.

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.


In The Socialist 9 November 2011:


Fighting the cuts

Build for 30 Nov strike - The fight of all our lives!


Socialist Party event

Socialism 2011: Crucial preparation for the fightback


Socialist Party youth and students

Jarrow march ends, fightback continues

We won't pay 9K! - Scrap tuition fees


Socialist Party workplace news

Unison members say YES to strike

Southampton: Sink Tory cuts!

Bombardier protest against job losses

Workplace news in brief


Socialist history

1935 - when angry Welsh protests forced a government u-turn

1915 - How strikes and rent strikes won gains for Scottish tenants


International socialist news and analysis

Failed G20 summit takes eurozone nearer to the abyss

Greek workers must resist the dictatorship of finance capital

Socialist MEP among Gaza peace activists kidnapped by IDF

Israel: General strike over job security


Socialist Party news and analysis

Housing slump

Miliband the militant? No way!

News in brief


 

Home   |   The Socialist 9 November 2011   |   Join the Socialist Party

Subscribe   |   Donate  




Related links:

Eurozone:

triangleEU-Canada trade deal battle points to Corbyn's Brexit opportunity

triangleCorbyn's Brexit opportunity

triangleEurope and the workers' movement after Brexit

triangleEU: busting the myths that Remain is best for the 99%

triangleEU referendum: Vote OUT the Tories

G20:

triangleG20 betrays refugees created by its own policies

triangleParis climate summit falls short in world's hottest year

triangleThem & Us

triangleMet finally apologise for G20 death

Debt:

triangleNasty party imploding...drive out the Tories

triangleNHS meltdown - fight the Tory cuts

triangleHousing crisis: Corbyn's positive measures blanked by Labour's right

Greece:

triangleSolidarity with Athens bus cleaners!

triangleFight for a socialist Brexit

Cuts:

triangleSalford Unison condemns pay cuts

Italy:

triangleGlobal finance: Are those storm clouds ahead?

Economy:

triangleThe end of the Tories?

IMF:

triangleIMF helps cause inequality it slams

Europe:

triangleTravel chaos for Ryanair customers as airline cancels thousands of flights

Britain:

triangleWorkplace news in brief

Banks:

triangleThem & Us

International

International

11/10/17

Catalonia

Catalonia: Workers can finish what Puigdemont won't

4/10/17

Catalonia

Solidarity with Catalonia - the people have the right to decide

4/10/17

Catalonia

Eyewitness: Irish socialist MP participates in events

2/10/17

Catalonia

Exemplary resistance by the people of Catalonia

27/9/17

Germany

Germany: Election results in political earthquake

27/9/17

Catalonia

Strike against Madrid's 'state of emergency'!

27/9/17

Germany

German elections: rise of the far right and right-wing government will provoke resistance

27/9/17

France

French Labour reform protests

25/9/17

Catalonia

Catalonia: Student strike called

20/9/17

Myanmar

Brutal repression of Rohingya people sparks massive humanitarian crisis

20/9/17

Catalonia

Solidarity with Catalonia in the Spanish state

15/9/17

Germany

Berlin hospital strike

13/9/17

Korea

Korean peninsula: is nuclear war likely?

13/9/17

Students

Interview with leader of students' union in the Spanish state: "When we fight, we win!"

6/9/17

US

Hurricane Harvey: A tragedy made far worse by capitalism

triangleMore International articles...


Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party

triangle13 Oct The end of the Tories?

triangle11 Oct Nasty party imploding...drive out the Tories

triangle11 Oct CWU fights court attempt to stop national strike

triangle11 Oct The fight against racial discrimination is tied to fighting against...

triangle11 Oct Catalonia: Workers can finish what Puigdemont won't

triangle6 Oct Boeing bust-up threatens thousands of skilled jobs

triangle4 Oct The nasty party turns on itself... but the Tories must be driven out

More ...

triangle16 Oct Teesside Socialist Party: After the party conferences

triangle17 Oct London: TUC lobby & rally; and London march

triangle18 Oct Warrington & St Helens Socialist Party: 1917-2017; the October Russian Revolution

triangle18 Oct Hackney Socialist Party: 100 years ago - the Bolshevik-led revolution

More ...

Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube

Archive

Archives:

October 2017

September 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

February 2017

January 2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Legal

SP RSS feed RSS

Platform setting: = No platform choice

V2