'REFRIGERATED, HOSPITALISED, dead', are the words used to describe the European Union stability and growth pact after it was trashed by Germany and France.

Manny Thain

The pact was originally agreed in 1997 on the insistence of Germany's government and its central bank. It was an attempt to impose harsh rules on member states by restricting their budget deficits to 3% or under. EU states would be fined if they fell out of line. The stated aim was to provide a strong base for the euro. In reality, it was one more weapon in the 'neo-liberal' offensive against the working class.

According to the Financial Times (26 November): "Grim-faced finance ministers ruefully accepted that Germany would not be bound by the rules it intended to apply to others". The pact had been transformed, it said, "from a set of iron rules to something more like a voluntary code".

German ministers had faced down Romano Prodi, the European Commission president, and beaten back the European Central Bank. In the end, only Austria, Finland, the Netherlands and Spain voted against. This is the third successive year that France and Germany have fallen foul of the pact. Now they are being asked to bring their deficits to within the 3% limit by 2005. The threat of fines has been lifted.

It may take some time for the economic impact to become clear. But increasing divergence between EU states, higher budget deficits and government debt are on the cards. These would exert immense pressure on the single currency itself.

The political impact, however, has been immediate. The timing could not be worse, from the point of view of the big-business backers of the EU 'project'. This week, 25 present and future members of the EU aim to finalise a constitution: "The last thing needed was a brutal reminder that there are two classes of member states in the union: big bullies such as France, Germany, Britain and Italy, which can get away with blocking or bending the rules, and lesser states, which must negotiate and obey." (Quentin Peel, Financial Times, 27 November)

Workers' resistance

Spain's vote against Germany and France illustrates this tension. The draft treaty gives more voting weight to big member states. Spain is set to lose out. France and Germany throwing their weight around provides ammunition for JosŽ Mar'a Aznar, Spanish prime minister, against transferring even more power to them.

In retaliation, Germany, the biggest donor country, has warned that it may cut EU finances - a threat to recipient countries like Poland and Spain.

Another result is that governments of the former Stalinist states of Eastern Europe due to join the EU next May are likely to face tougher working class resistance to their neo-liberal policies of privatisations, cutbacks and redundancies - as shown by the recent Polish miners' strikes.

This fiasco shows the EU for what it is - a corrupt club run in the interests of big business. The most powerful players operate with impunity, breaking even the most fundamental rules when it is in the self-interest of their national ruling class. If they can shatter the stability and growth pact then, ultimately, no rules apply to them.

All the while, Europe's working class face attacks on working and living conditions; made to pay for the economic and social upheaval caused by the bosses' capitalist system. But as the recent public sector workers' strikes in Germany and those in France and Portugal earlier this year show, these attacks will be resisted.

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