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“Crisis of Eurozone and the future of periphery countries”

Οκτώβριος 15, 2012 Σχολιάστε Go to comments

European Economists for an Alternative Economic Policy in Europe

Euro-Memo Group 18th Annual Conference, 28-30 September 2012

(University of Poznan, Poland)


Extensive Summary

Latest EU Summit decisions (December 9th, 2011 and June 29th 2012) were nothing but yet another attempt, on behalf of the dominant Eurozone elites, to support the unsound structures of the ‘Economic Monetary Union’ (EMU) and the ‘single currency’ (euro). These are measures to sustain an unsustainable structure based on ‘neoliberal ingredients’, such as the ‘Stability Pact’, the ECB, the ‘support mechanism’ (EFSF/ESM) and the ‘Euro Plus Pact’, well known to lead European nations towards a modern economic and social ‘bagnio’. Although Eurozone leaders exult after every Summit, they can not conceal neither its profound crisis nor its collapsing image, which immediately requires to overcome the situation, based on the interests of peoples and workers of Europe.

For Greece, in particular, recent Summit decisions heightened the Greek economy crisis and failed to establish debt sustainability. Fears of further, burdensome, ‘odious’ commitments at the expense of the Greek people, after validating the new loan agreement and the new Memorandum, have brought the country even closer to official default. These fears were fostered by ‘negative echo’, obscurities and ‘loose ends’ left by this particular agreement on the issues of bond ‘haircut’ (or PSI – Private Sector Involvement), broad unfavorable vibe originating from Eurozone-wide recession (GDP anticipated to decrease by 0.5%) and the European Fiscal Compact provisions.

The European peoples in “gas chamber”


In particular, the new agreements resolves no part of the Euro-zone’s profound internal contradiction between permanent ‘locking’ of the currency rate and countries with different level of competitiveness, which operates as a mechanism of ‘surplus production’ for the weaker economies. Also, it does not project a single economic policy (fiscal, monetary, income) and a respective structural (developmental), with redistribution of resources and income among countries and social groups, so that economic – social convergence is promoted. Moreover, there is no central bank as ‘last resort’ – loaner and strong centre of financial relations’ regulation: competitiveness is supported only by income policy and especially labour cost, which, objectively, can only be reduced to certain levels. The concept of ‘internal devaluation’, as a lever of enhancing of economy competitiveness and boosting growth, contains a profound contradiction: it cannot explain how ‘competitiveness’ can be boosted in every country, when all Eurozone member – states implement ‘internal devaluation’ policies i.e. making their manpower always cheaper. Plain and simple, it is a policy of ‘labour dubbing’, which leads to nowhere, apart from EU peoples and workers sinking to abjection. This policy of ‘salary’s freeze’, started by Germany, has pushed wages downward all across the Eurozone especially in the peripheral countries! Finally, the ‘democratic deficit’ in EU institutions and the Eurozone, not only does not close but it expands; countries and peoples have no saying in essential choices that concern their future.

Therefore, sustainability for both the Eurozone and the euro, despite consecutive decisions and one-day gloating, remains stale. Instead of drastic debt ‘haircut’, nationalization of banks, growth support, income redistribution etc., we move at a snail’s pace, if not backwards. Even this skimpy debt ‘haircut’ that has been implemented it is characterized as an ‘exception’ not applying to another country. Yet once again, finance capital interests (‘loan shark’ bankers and institutional investors) are prioritized over societies. Regional countries experience from their accession to the ‘support mechanism’ clearly shows that ‘Memorandum’ policies have sunk them in prolonged recession, high unemployment, poverty and economic and social decay.

Unsound and in a way, ignorant claims of achieving ‘primary surpluses’, ‘balanced budgets’ etc., raise serious questions on fiscal management (tax revenue policies and public spending) of technical issues such as accounting balance of revenue and expenditure. Same principle applies on the great issue of growth and employment, the solution of which once again lies on market mechanisms, whereas ‘low labour cost’ income policy remains a pivotal tool of keeping weaker economies competitive. In the ‘new economic government’ dictionary, terms like redistribution of wealth, economic convergence, regional growth, full employment, establishment of social rights, better standard of living, are quasi – unheard of.!

Although Monti and Rajoy were presented as the Summit’s ‘winners’, in fact, they gained nothing more but a ‘letup’, because both the Spanish banks’ recapitalization ability and Italy’s loaning with low interest rates, come with severe austerity measures (€30 billion in Italy and €62 in Spain, with Cyprus following at a similar pace). These ‘packages’, despite lacking official ‘Memorandum’ status, are as painful to the peoples as those applied in Greece, Portugal and Ireland. In short, the austerity ‘context’ remains the same: great cutbacks in salaries, pensions and social spending, in order to reduce deficits, create primary surpluses and decrease public debt. This is, of course, an unreasonable goal, when economies are steadily drowning in recession. On the other hand, the ‘markets’, judging that no positive economic prospects were shaped, while implementation of measures is continuously postponed, did not loose up spreads or loaning interest rates.

In conclusion, it becomes evident yet again that the unpopular and undemocratic EMU structure (Eurozone) has no room for progressive reforms and improvements; instead, it needs to be re-established to the better interests of peoples and workers. Even in ‘systemic terms’, only two prospects come out as potentially ‘viable’: first, reorganize the Eurozone federally on an economic and political level (which is difficult, if not impossible, due to  inherent capitalistic contrasts between Eurozone member – states’ dominant elites); second, an ‘organized return’ to the ECU era (European Currency Unit), i.e. before the introduction of the euro (2000), when member – states’ currencies, despite their problems, determined their exchange rates among themselves, within the context of a ‘European Monetary System’ (EMS), in a fluctuation range of +/- 2.5% to 7%. However, therouteofEuropeanintegration, inordertobesolventandsustainable and compatible with ‘historically necessary’ demands (that is, socialist prospect), presumes a new ‘architecture’, which will be founded on interests of European peoples and workers, on an economic, social and political level.

Euro-zone’s sustainability and the prospect of Greece


Euro-zone’s sustainability problems arise as supporting measures fail, given that they do not resolve its structural problems. It comes as no surprise that more and more well – known Europeanists express appeals for collectedness and calls for initiatives towards ‘rescuing the Eurozone’. In this context, former Commission President Romano Prodi called for Germany to take over leadership toward a ‘federal Europe’, in an article in US newspaper ‘Christian Science Monitor’. In particular, he notes that ‘Germany might think it is too big for Europe, but it is certainly too small to face alone the new global challenges when compared to the United States or China. Therefore, Germany needs Europe, too. And it needs a “European” Europe, not a “German” one […] And only if European countries, under the German leadership, re-engage in the European construction can we overcome the waves of mistrust between countries and against Europe. We are all paying too high a price for the lack of a political Europe. It is time to strongly advance toward political union through the front door by launching a new constitutional process’!

A ‘manifesto’ by three German intellectuals (Jürgen Habermas, Peter Bofinger and Julian Nida-Rümelin) moves in the same direction: acknowledging that the EMU is no longer sustainable, they suggest deepening of the European Union, with political integration, at least for the Eurozone member – states and adopting an EU Constitution, with a plebiscite in all countries. Moreover, they suggest temporary suspending of the Fiscal Compact, debt restructuring for the Eurozone countries within the Maastricht criteria and collective guarantees for government bonds to avoid risk of sovereign default. In order to establish that issuing collective guarantees will not suspend structural reforms and fiscal consolidation, it will have to come with severe collective control of national budgets. In short, what they are actually suggesting is the enhancement of the Eurozone ‘federalization’ process.

However, the process of European integration is not merely an issue of abstract visions and ‘good intentions’, but closely linked to a broader panel of international and class relations and respective interests. European integration as a policy of cooperation between dominant bourgeoises, is based on the ‘criterion of power’; the stronger a country is in terms of political and economic power, the more compelling is its role in the European integration process. On an institutional level, the power of greater and wealthier member – states is expressed by decisions taken for the future of integration: Germany, ‘the Great Homeland’, attempts to penetrate ‘lesser homelands’ and effectively place the EU economy under German control.

The contradictions amongst dominant national elites for the role of ‘hegemony’, while avoiding respective ‘responsibilities’ (redistribution of resources through a federal budget, issuing ‘eurobonds’ to support weaker economies, etc.) holds back the whole ‘federal union’ idea. This contradiction intensifies ‘divergence’ of economies instead of ‘convergence’, boosts ‘centrifugal’ tensions instead of ‘centripetal’ and ‘unequal economic development’ within the Union. Therefore, the EU, much less the Eurozone, cannot respond in unreal declarations and utopian visions of ‘economic convergence’, ‘social cohesion’ and ‘Europe of the peoples’, when dominant are these social and political powers that act in terms of might, competition and hegemony, instead of full partnership, solidarity, social justice, real democracy and popular sovereignty.

On the other had, this particular problem concerns radical left – wing powers on a national and international level. It is true that class struggle in the EU and the Eurozone obtains new elements. At the same time, the Eurozone crisis leads to the appearance of several approaches on the prospects of a member – state remaining in the Eurozone, as well as the aspects of ‘default of payments’ and return to a national currency. What is clearly evident is that overcoming the ‘national’ in the name of a ‘great homeland’ (European integration) does not come with a… ‘warranty’ of protecting national, let alone popular interests. TheconceptofEuropeofthepeoplesandworkers’ is incompatible with Eurozone’s neoliberal ‘pylons’ (StabilityPact, ECB, EuroPlusPact, Memoranda and Fiscal Compact). The solution for the great majority of the EU peoples lies in ‘overthrowing’ the class structure of the Eurozone. Regardless of the way, it will be a ‘radical reversal’ and in any case, for the better interests of the European peoples and not multinational corporations. Howexactlythiswilltakeplace (startingfromone, two, three, thirteencountriesoraltogethersimultaneously) remainsapoliticalissue,openfordebate!

From this point of view, defining main points in an alternative exit strategy becomes crucial. Of course, a ‘United Europe’ with neoliberal components, even if realized, it will be a Union of ‘reactionist direction’, which will have nothing to do with the vision of Europe of peoples and workers. The latter requires a refoundation of the European structure, under a new base and architecture. For the peoples and workers of Europe, especially those in the periphery, overcoming Memorandum policies and writing off the greater part of the debt, is a matter of survival; at the same time, it signifies the objective necessity for a new route for Europe towards something ‘historically necessary’: the socialist perspective.

Therefore, for radical left – wing powers of the EU, the issue is of strategic importance and those views that advocate remaining in the Eurozone ‘by any means necessary’ do not signify a reliable direction within this strategy. Instead, overcoming the Memorandum and writing off the greater part of the debt, pave the way for a hopeful prospect for the future of Greek society. These, however, are not by themselves sufficient: implementing a program of radical changes, which facilitates a progressive ‘exit strategy’ is requires. In particular, controlling basic tools of applied economic policies (exchange, monetary, credit, fiscal, income, growth, etc.) is required. In addition, nationalization – socialization of banks, control of capital flow and good use of popular savings are necessary steps to foster growth and productive restructure of society.

The latter presumes that a rectifying program is conceived and processed, in order to increase employment, national income and its fair distribution; also, radical fiscal consolidation with revenue increase and fairer apportionment of tax burdens, as well as expenditure policy with developmental, social and environmental criteria; support salaries and pensions’ purchasing power, enhance social spending, create special programs to support family farming and SMEs; recovering all privatized, former state-owned enterprises, placing them under national control and expanding them in new fields of strategic importance; fighting the cartels and monopoly structures, controlling and limiting multinational corporations’ activities; promoting equal economic relations with all countries, within the context of a truly multidimensional foreign policy; profound ‘democratization’ of the state, developing institutions of public control and true participation of workers in the decision – making process, etc.

The abovementioned keynotes openly challenge the very core of neoliberal policy and provide a start for radical changes and advanced social transforms, with a socialist prospect. They are not exclusively ethnocentric – oriented, but can be applied in toto on a supranational level, as part of a real democratic, federal – type union of countries and peoples. Implementing a program of social and economic reconstruction responds to the needs, interests and expectations of the great majority of the Greek people and mostly, employees, workers, farmers, SMEs and the youth. These elements of analternativeproposalaretheredlineforahopefulprospectofGreeksocietyandcannotbesubjectedtothe‘proviso’ of remaining in the Eurozone or not. Shouldthisparticularcontextputinsurmountableobstaclesinthisperspective (whichhappenscurrently), it is essential to overcome it anddisengage from the Eurozone.

Still, the political and social precondition for these aims is a government of radical left – wing powers, which, as an output of a common front of the Left, needs to emerge. Fostering a vigorousandpolymorphous movement of resistance, reversal and solidarity against unpopular policies, is a ‘base vehicle’ in promoting this plan. Passiveness, fatalism and acceptance of accomplished facts is the worst option possible and does not coincide with fighting traditions, historical heritage, unbowed, proud and dignified stance that the Greek people has displayed towards their foreign and domestic rulers. Coordinating and upgrading action, with respective movements in other EU countries, is an irreplaceable element of succeeding these targets nowadays, as well as encouraging similar reversals on a European level; should this take place, a new hopeful scope for a Europe of peoples, workers and the prospect of socialism will lay open.

 The main ideas of this “extensive summary” are included in the book written by Y.Tolios, “Eurozone crisis, “odious debt” and default of payments. The Greek….dilemma”, (2012), Publisher: “Topos Books”, www.toposbooks.gr, info@motibo.com

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