Socialist Party
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14 December 2001

No To The Bosses' EU

No To War - Yes To Socialism

The Euro and the big business club

THE BIGGEST currency union in history will become a reality when the euro is introduced into 12 European states on 1 January 2002. Over 300 million people will see their familiar notes and coins phased out within a couple of months. Launched at the start of an international economic downturn, just how successful can the euro be?
Manny Thain

Wim Duisenburg, president of the European Central Bank (ECB), claims that: 'The euro is much more than just a currency. It is a symbol of Europe's integration in every sense of the word.' And the Basque separatist organisation, ETA, wants future hostage ransoms paid in euros.

There are still many technical difficulties to be overcome. For example, fewer than 10% of the eurozone's small and medium-sized companies consider themselves fully ready for the new currency.

These problems, however, are not the biggest obstacles facing the European Union (EU). The integration of the European economy has been spurred on by the cut-throat competition it faces from the North American Free Trade Agreement (NAFTA), dominated by US capitalism, and from the Association of South East Asian Nations (ASEAN), dominated by Japan.

Some of the restrictions on markets and trade between nation states have been overcome in the most recent phase of capitalism, popularly termed 'globalisation'. When the world market is expanding, the heads of corporations, finance capital and their backers in the political establishment are able to make handsome profits on the backs of workers in the neo-colonial 'Third World' and industrialised nations.

Since the South East Asian currency crisis in 1997, however, a general malaise has crept through the capitalist system. Up to recently, the US propped up the world economy - buying the world's goods and sucking in investment. Officially now in recession, the world's largest economy is leading a 'synchronised sinking' across the world. The Japanese economy - the second-largest - is now officially in its fourth recession in ten years.

Europe is not immune: 'New data are pouring in to suggest the 12-nation eurozone is heading for a serious slowdown, if not outright recession.' (Financial Times, 4 October)

Manufacturing in the EU fell in October for the sixth successive month and service sector output shrank in September. At the end of November it was officially confirmed that Germany - the world's third-largest economy, accounting for one-third of Europe's gross domestic product (GDP) - was in recession.

Germany, France and Italy are responsible for 75% of eurozone output but, according to the European Commission, they will not meet their targets for budget deficit reductions this year. Nor will Portugal.

German finance minister, Hans Eichel, fiercely criticised the mis-named 'stability and growth pact', which sets a budget deficit limit of 3% of GDP. If countries fall foul of this rule, they can be fined up to 0.5% GDP.

Ironically, Germany was one of its main proponents to curtail 'overspending' by the Italian state and as a condition for Italy's inclusion in the eurozone. Eichel now wants its dilution as the German deficit hit 2.7% of GDP, perilously close to the limit.

To comply with the stability pact, states have to raise taxes and/or cut public spending - which mean yet more attacks on working-class living standards. Eichel described the pact as a 'medieval torture chamber'. He meant that the restraints make it difficult for finance ministers to balance the books, especially at a time of economic downturn. But, in reality, the pain and suffering is inflicted on the working class and poor who, as always, are the ones expected to pay for capitalism's recurrent crises.

However France and Germany face elections next year, neither government wants to openly attack the working class. Their political survival relies on workers' votes.

Growing tensions

The eurozone ties governments down to a one-size-fits-all interest rate set by the ECB. But national governments cannot agree common economic and social policies when they face different economic conditions. And tensions between the eurozone states are being exacerbated by the spreading international recession.

Face-saving formulas will be used to cover policy u-turns. The ECB has said that eurozone governments can postpone budget stability targets if Europe fails to stage a healthy economic recovery in 2002: 'They say the stability pact, which the EU drafted in 1996, was drawn up under different economic conditions and should be "intelligently adapted" to take account of the downturn.' (Financial Times, 22 November)

The ECB does not administer the stability pact but its policies on inflation - especially eurozone interest rates - affect government policies. The original budget deficit targets were set against a projected growth of 3.2% in 2001 and 3% in 2002. The European Commission's latest (optimistic) forecast is for 1.6% and 1.3% respectively.

The EU faces a crisis of legitimacy. The 34% turnout in the Irish referendum on 7 June and its rejection of the Treaty of Nice underlined the lack of confidence in EU institutions, as well as being a rejection of Ireland's establishment political parties. It exposed the enormous gulf between the European people and EU institutions. The referendum reflected the common and correct perception that the EU is a club for big business and was all the more significant because Ireland has received substantial EU subsidies and has had high economic growth.

The timing of the euro could not be worse for the European capitalists. They did not foresee the recession. Its effects, coupled with the fact that the individual national governments will be the focus of popular discontent, will result in crises for the single currency. Although it is impossible to foresee exactly when, some states will break away eventually and could be forced to re-establish - at tremendous cost - new national currencies.

This does not necessarily mean that the euro would completely disappear. There could be a smaller currency union, for example, based around Germany and involving the Benelux states, which are inextricably linked to the German economy. There could be many different combinations.

European governments face hard times ahead. Not least from increased working-class opposition. Two massive general strikes in Greece - the most extensive and militant mobilisations for years - defeated the government's plans to attack workers' pensions. There have been important strikes this year by Lufthansa pilots, in Iberian Airlines and Air France flight attendants, Spanish bus drivers and rail and Tube workers in Britain, and Tesco workers in Ireland.

The EU was set up in the interests of the ruling capitalist classes - a bosses' Europe. However the EU develops, recession will bring an intensified onslaught against working-class people.

Nor would the break-up of the eurozone provide any respite. Only massive and united industrial action by the working class can push back the bosses' offensive. The most effective fight back would be based on international solidarity and a socialist programme.

Ultimately, only when society is controlled and run by the majority - the working class and oppressed - will it be truly democratic.

On the basis of workers' democracy and a voluntary federation of workers' states, a continental plan of production could be drawn up which took into account the needs of society and those of a sustainable environment. Then we would be talking about a genuine European union.

It is what the Socialist Party and the Committee for a Workers' International fights for - a socialist Europe.