More than 20 years ago, on the eve of the introduction of the Euro, the Marxist tendency predicted that faced with new and insoluble problems the common currency would “break down amidst mutual recriminations”. Those recriminations began in a five-and-a-half-hour-long conference call between EU leaders last Thursday.
Coronabonds
The question that split the European Council was that of Coronabonds: a eurozone-wide debt instrument that would make it easier, and cheaper, for struggling southern states to access funding for emergency health and economic stimulus measures.
On the eve of the summit, the leaders of nine Eurozone countries, including France, Italy and Spain penned a letter to the European Council leader, Charles Michel, calling for “a common debt instrument issued by a European institution to raise funds on the market on the same basis and to the benefits of all member states”.
But this proposal received short shrift from wealthier northern states such as Germany, the Netherlands and Finland, which have consistently opposed the creation of so-called Eurobonds in any form since the idea was first raised during the 2009 Eurozone crisis.
Italy’s Prime Minister, Giuseppe Conte: “If Europe does not rise to this unprecedented challenge, the whole European structure loses its raison d’être to the people” / Image: NAJ OLEARI
These northern states have always opposed this idea for the simple reason that they would effectively be paying for the spending of other states. The patronising term “moral hazard” has been repeatedly raised by German and Dutch politicians, referring to the risk that lazy and profligate southerners would lavish unsustainable lifestyles upon themselves (such as eating every day) at northern taxpayers’ expense. Rather than helping to squash this poisonous debate over “strivers” and “skivers”, which we have seen in all countries, European integration seems to have amplified it to a continental scale.
Southern states are afraid of a rather different moral hazard, however; that if the rest of the bloc continues to stand aloof from the suffering of fellow Europeans – and more importantly, is clearly seen to be doing so – this could undermine any remaining pro-EU sentiment amongst their populations, making further “Brexit-like” crises inevitable.
Italy’s Prime Minister, Giuseppe Conte, who has unsurprisingly been at the forefront of calls for Coronabonds, posed the matter starkly when he said over the weekend, “If Europe does not rise to this unprecedented challenge, the whole European structure loses its raison d’être to the people.” The French President, Emmanuel Macron, went so far as to declare that “what’s at stake is the survival of the European project”.
Tensions
Tensions boiled over during the Council’s ‘virtual summit’, when the Italian and Spanish leaders even threatened not to sign up to the Council’s joint statement at the end of the meeting unless support was given for the idea of a joint debt instrument. To avoid an ugly split, Michel engineered a compromise stating the following:
“At this stage, we invite the Eurogroup to present proposals to us within two weeks. These proposals should take into account the unprecedented nature of the COVID-19 shock affecting all our countries and our response will be stepped up, as necessary, with further action in an inclusive way, in light of developments, in order to deliver a comprehensive response.”
Another classic in the rich tradition of EU statements that say absolutely nothing, the statement amounts to a unanimous agreement to… come up with something in a couple of weeks. Meanwhile, more people die, particularly in hardest-hit Italy and Spain, and old wounds open wider.
The prospects for a unified and effective response from European leaders are not good. Angela Merkel set out Germany’s preference, that there is already a mechanism specifically designed for this sort of situation – the European Stability Mechanism. The problem with this is, just like calling in the IMF, it comes with strings attached; namely a raft of ‘reforms’ designed to bring down deficits, such as selling off public assets, cutting public sector wages and pensions, and attacking workers’ conditions. The cure is worse than the disease, and no government in its right mind would accept it, especially after the experience of Greece.
But the war of words was only just beginning. Following the summit, the Dutch Finance Minister provoked a furious backlash when he suggested that Brussels should “investigate” why some countries were not financially able to withstand a downturn. This obvious dig at the likes of Italy and Portugal drew an indignant response, with the Portuguese prime minister labelling his comments “repugnant” and others pointing to the Netherlands’ tax system, which was accused of assisting companies to avoid paying tax elsewhere in Europe.
Seeing the European leaders squabbling while the EU faces the greatest crisis in the history of its existence has sent the more far-sighted strategists of capital into a fit of panic. They recognise where this will lead: an increase in protectionism that would transform this recession into the deepest depression since the 1930s, if not deeper. As one editorial in the Financial Times pleaded: “Protection magnified the disaster of the Great Depression of the 1930s. It must not do so this time.”
Accordingly, they demand that their leaders “learn the lessons of history” and change course. But this split is not the accidental product of leaders’ blindness or intransigence. It is a necessary product of the fundamental nature of capitalism, which is incapable of overcoming the limitations of the nation state.
This goes doubly for the EU – an attempt to bind together capitalist nation states, each with their own set of capitalists and their own national interests. During a boom, the unavoidable contradictions between them can be partially and temporarily overcome, but in times of crisis, as we saw in 2009 and are seeing today, the national ruling classes start moving in different directions.
Nationalist tendencies
The rise of nationalist and protectionist tendencies has been a recognised feature of European politics for a decade. Often ascribed to the bad influence of “populists”, it actually stems directly from the differing interests of the various states themselves who, for all the talk of European brotherhood, are in competition with one another after all.
The speed with which the majority of the single market’s founding principles have been thrown out of the window simply reflects the fact that it is not currently in the interests of the major powers to maintain them. There is little controversy over the abolition of the free movement of people and restrictions on the free movement of goods, because powerful states like France and Germany have been among the first to break these rules.
The various EU states, for all the talk of European brotherhood, are in competition with one another / Image: The Kremlin
The suspension of EU rules on state aid, likewise, reflects the growing concern of the ruling classes of Europe that their “national interests” could be harmed by the collapse of vital companies or their takeover by foreign firms. This is itself a powerful sign of the rise of protectionist tendencies throughout the bloc, with member states planning on buying up companies of national, not European importance. This raises the serious possibility of protectionist measures being applied within the free trade bloc itself and not just directed at outside competitors like the USA.
This common interest does not apply when it comes to Coronabonds, however. On the contrary, the interests of the northern and southern states are diametrically opposed on this question, and will pull further and further apart as the crisis goes on.
It is not in the interest of the German or Dutch government to raise its cost of borrowing, even by a small amount, in order to help finance the policies of foreign states over which it has next to no control. To do so would be to expose its right flank to nationalist parties like AfD, which is already gaining from the resentment built over years of austerity and the absence of a genuine left alternative.
On the other hand, southern governments, like that of Italy for example, have no option but to push for greater burden sharing across the bloc. To accept stringent conditions for support, like those required under the ESM or to quietly accept rising debt costs while the northern states (who have profited so much from the European project) sit pretty would effectively guarantee the coming to power of right-wing nationalists such as Salvini, and could even threaten their departure from the euro. In short, if they don’t make these demands, someone else will.
Impasse
This has left the EU’s institutions in a complete impasse, as can be seen from the vacillating positions adopted by both Christine LaGarde, President of the ECB, and Ursula von der Leyen, President of the European Commission – the head of the executive of the EU.
The EU’s institutions are in a complete impasse, as can be seen from the vacillating positions of both Christine LaGarde, President of the ECB, and Ursula von der Leyen, President of the European Commission / Image: PoR
Lagarde initially pleased the Bundesbank with her comment that it was not the ECB’s job to close the spread between Italian and German bonds, only to perform a spectacular u-turn in the face of investor panic and fury amongst southern states. Von der Leyen then performed the same political acrobatics when she ruled out Coronabonds as a “slogan”, reflecting her closeness to her former employer, the German government, only to suddenly announce that “all options” were on the table, and that the EU would “help Italy and Spain very intensively” after her comments provoked uproar.
It is fascinating to see these two individuals following such a similar trajectory, and it ultimately reflects the fact that the EU’s transnational institutions do not exist independently of the major member states, and therefore must reflect their interests. When their interests are so clearly and severely divided, they both initially rest upon the most powerful section – Germany – only to row back for fear of provoking a split with the sizeable and vocal minority faction.
This merry dance has determined the prevaricating and ineffectual policy of the EU ever since 2008. The can has been kicked down the road more times than anyone can remember at this point. It was kicked again on Thursday and it will be sure to get another kicking in the near future.
The inevitable reckoning cannot be put off indefinitely. Either the Eurozone will transform itself into a single, unified federation in which the question of burden sharing becomes moot, or the question of who pays for all this debt will be posed again and again until the bloc collapses. Events over more than a decade have confirmed which of these outcomes is most likely.
Class unity
European integration stalled a long time ago, held back by the contradiction of trying to overcome the bourgeois nation state on a capitalist basis. Genuine integration and unification are impossible on the basis of a system of exploitation. Today, European unity and “solidarity” are just as much a sham as the “national unity” being peddled across the world by governments handing out trillions to the exploiters while the workers are forced to work and die for their profits.
The present crisis will do more than threaten the break up of the Euro. In every country, the crisis triggered by Coronavirus has already provoked dramatic shifts in consciousness. Everywhere, what Trotsky called the “molecular process of revolution” is building up towards a mighty explosion, which will threaten not just the European project but European capitalism itself.
Genuine solidarity can only emerge from genuine equality. Not European brotherhood but class unity will save Europe from this catastrophe. We must fight for a workers’ Europe: free from borders, bankers and bosses.
“Workers of all countries, unite!”