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From The Socialist newspaper, 17 February 2010

Capitalist crisis threatens the eurozone project

THE ECONOMIC and political crisis in Greece and other member countries of the eurozone has thrown the single European currency into its deepest crisis since its introduction in 2002.

Kevin Parslow

Financial speculators are openly betting against Greece being so economically damaged by the recession that the country will have to leave the eurozone, or that the measures taken to bring Greece 'into line' will have such terrible effects on the eurozone as a whole that the project will be damaged.

They have devised a derogatory acronym 'PIGS' - short for Portugal, Italy, Greece, Spain - for those countries most likely to put the euro under strain or even default.

Stability pact

Introduced in 2002, the euro was supposedly underpinned by the 'Stability and Growth Pact'. The main terms of this were that no government within the eurozone (or those wishing to join) should run a budget deficit of above 3% of gross domestic product (GDP), and that no government should have a national debt greater than 60% of GDP.

When Portugal in 2002 and Greece (2005) went over these barriers, they were threatened with fines and sanctions. But when France and Germany, the two heavyweights of the eurozone, both went over the 3% in 2005, the Stability and Growth pact was simply ignored and then modified!

Now, with budget deficits soaring due to the effects of the deepest recession since the 1930s and the measures taken to attempt to counter it, a number of countries are in danger of blowing the euro apart. This has led the leaders of the eurozone to demand savage austerity measures from the Greek government in return for unspecified 'support'.

Currencies crisis

The Socialist explained from the euro's conception that it would come up against the constraints of the capitalist system and national borders. In the European Union, these were inherent despite years of proclamations of 'unity'.

In the precursor of the single European currency, the Exchange Rate Mechanism (ERM) of the European Monetary System, both Britain and Italy were forced out in 1992 when crises saw their currencies crash below the agreed lower limit.

Speculators, including George Soros, made over $1 billion betting on Britain leaving the ERM, while the British government spent 27 billion trying to stay in! Italy later returned when the bands were widened to allow a 15% fluctuation of national currencies but Britain has stayed clear of returning to the ERM or joining the euro.

A similar development is now affecting the eurozone, and speculators are hovering, hoping to make a windfall now.


While the world capitalist economy advanced, even if most people benefited little from economic growth, the euro was able to maintain relative stability. But the onset of the recession has totally changed this.

In response to the economic crisis, European capitalist governments have taken measures against the jobs, conditions and services of the working class throughout the continent.

The Greek government is coming under the cosh of the euro's governors, led by the German capitalists. And the Greek and international capitalists want more; the Greek economy contracted by 2% in 2009 rather than the expected 1.2% and a Greek banker told the Financial Times: "It's hard to see how Greece can avoid a further tightening of fiscal policy."

Greek workers are protesting precisely against the savage austerity measures proposed by the Greek government, backed up by European governments, in order to prevent a euro default and collapse.

If they get the cuts through, European governments will come back for more and will demand sacrifices from Portuguese, Spanish and Italian workers, as well as the working class of any country who refuses to accept the blame for the crisis of the capitalist system. If the Greek workers stop the cuts, it will raise the confidence of workers internationally to fight the consequences of the recession.

The European working class, whether their countries are in or out of the eurozone, is facing massive attacks. An international struggle against cuts in pay and services and against job losses, would begin the struggle for genuine workers' unity and a socialist Europe.

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