Continent drifting

Henry McCubbin looks at the implications for Europe of the Greek crisis – and what it means for a vision of a progressive European Union

The organisation Transform Europe recently held a meeting in the Garcia Lorca Centre Brussels on the topic “The case of Greece, the response of the EU and alternative solutions.” Transform is a network of mainly European organisations in the field of political education and critical scientific analysis. This collaboration of independent non-profit organisations, institutes, foundations and people means to utilise their work to contribute to a peaceful statehood and to a transformation of the present world. The debate on the Greek crisis in the UK press has very much been that the problem the Greeks are having is very much theirs and at a political level Alistair Darling’s visit to Brussels for the Ecofin emergency meeting was to make sure that we gave minimal support to aid Greece out of its crisis. The left in Europe however has a different view of this crisis and it is one which sees the outcome of the attempts to rescue the Greek economy affecting us all. Sigfrido Ram’rez, of the Transform Working Group Brussels in his report on the meeting at the Garcia Lorca Centre, introduced us to Liem Hoang Ngoc MEP. Liem is not only an academic – Senior Lecturer in Economics at Paris-Sorbonne – but also an activist and founder of ATTAC.

Liem started by presenting the communication of the European Commission on the crisis which concluded that once the financial crisis stopped, economic growth will spontaneously arise after some structural reforms of the European Welfare State. In a few words, for Neoliberalism the crisis is over. This analysis is extremely worrying, because the speculative attacks on public debts show that there is an underestimation of the current risks linked to the fragility of public debt like in the past for the debts of the private sector. Moreover, Germany is maintaining its policy of wage deflation, which is extremely damaging for the recovery of the whole of the European Union as there is not enough demand in the most important European economy which may take the slack of the fall in the domestic demand of Southern European countries. This accentuates the economic divergence of the economies of the Euro-zone creating economic unbalances, particularly the commercial balance, whose effects are still underestimated. However, the consequences are the same for the Southern European countries suffering the most from these asymmetric shocks, namely being constrained to follow the German policy of wage deflation. In this case, the perspectives are dim because this will imply the killing of incipient growth recovery stimulated by the liquidity provided by governments. In his view, if Greece, Portugal and Spain defaulted, this will mark the end of the European project as conceived by Jacques Delors for whom the single currency was a means for further integration, preceding the creation of federal instruments at the European level. Such a crisis of state finances will mark the transformation of the European Union in a de facto Free Trade Area.

For this reason, Liem pointed out that the economic crisis is bringing European integration to a crossroad: either it marks a return towards a resurgence of economic nationalism with the return to national currencies, or it succeeds in taking a federalist turn with new European instruments. He singled out three particular instruments that may be used for this turn: an increase of the European budget with macroeconomic ambitions; the issuing of Eurobonds; and last, but not least, the authorisation to the European Central Bank to finance the debt of member states. The problem is not legal but political, more particularly that neither Germany nor Britain are in favour of more federalist solutions. The likely solution will be a reaffirmation of the stability pact rules with the consequences of killing the recovery and bringing down public finances given that member states will not be in position to increase taxation or receive more fiscal receipts to reduce their deficit. He concluded by calling the attention of the meaning of this neo-liberal turn for any future Left government in a European country which could experience again what the Greek Socialist government is currently suffering. It is precisely for this reason that the Left needs to attempt from now a modification of the political balance of power in the European Union.

Nicolaos Chountis is the Member of the European Parliament (MEP) representing Syriza (party of the Greek left) and from 2005 to 2009 he was the Secretary of the central political committee of Synaspismos. Departing from this economic analysis and its political consequences for the left, Nicos Chountis followed with a strong criticism of the European Commission, whose action is not being that of building the rescue of Greece on the basis of solidarity. In his view, it is wrong to consider that the financial crisis is just an imported external shock from the USA to Europe, but the depth of the crisis confirms that the institutionalisation of neo-liberalism in Europe with the Maastricht Treaty and all its democratic deficits was the work of irresponsible politicians who supported the Stability Pact which appears now as a structural error. Indeed, the fiscal crisis is not just a particular case of Greece or of the PIGS but also a trend in all European countries including Germany.

For Chountis it was also irresponsible to rescue a financial sector which had overcome its structural role by going into other sectors and that now that it has been rescued by public moneys it does not have any problem in attacking the public hand which saved them from bankruptcy. Transform’s guest passed onto the solutions suggested by Liem agreeing that the UE budget is now too low to serve as economic stabiliser but it is much more important to underline for the public the absurdity that private banks are ‘printing’ money by borrowing from the ECB at one per cent and then lending to the Greek government at five per cent. Furthermore, the Left should insist that the European Council controls the participation of the International Monetary Fund (IMF) which is the central institution which support the dollar and the international economic policies of the USA. Otherwise this implies that the European Union has opened a very dangerous door for the future resolution of similar problems as there is no European Treaty which envisages the participation of this non-European institution. If this has been done it is because politically, it participates from the same neo- liberal logic of the stability pact which is not based on European solidarity but on fearing and shaming Southern European countries which are constrained to knock in the IMF’s door. In a few words, for Chountis, the Left must take note of what this call to the IMF means for the role of the European Union in the future economic architecture of international economic relations after the crisis.

In a paper delivered by Haris Golemis of the Nicos Poulantzas Institutehis conclusions sum up a perpetual problem of the left when he tries to offer alternatives under the heading “Radical left alternatives: Easy to conceive, difficult to apply”. According to Golemis the radical left in Europe can feel completely vindicated for its criticism of the neoliberal construct established by the various European Treaties since Maastricht. “The neoliberal European project is staggering and nobody can guarantee its future. However, ex-post vindication is not an achievement per se, although it can be a useful weapon in the ideological and political struggle with both the right and the centre-left political forces, which are responsible for the state of the Union. The problem is that the left has neither managed to prevent this disastrous neoliberal process of integration nor change it after it started. Effectiveness is even more urgent today, since the situation in Europe is extremely difficult for the working people in all countries.

I am in a position to know that in Greece Synaspismos has a coherent programme for a progressive exit from the crisis, which includes specific proposals for the Euro-zone and the EU in general, and I am sure that the same is more or less true for most European left parties. What we don’t know is the way the radical left can gain the ideological and political hegemony in our countries in order to change the balance of political and social forces, without which no social transformation is possible at national and European levels. In the face of the ongoing crisis and the problems in Greece, the countries of the South of Europe, the Euro-zone and the EU in general, the European radical left should:

Seize the opportunity to speak about the irrationality, instability and injustice of financialised capitalism, i.e. the capitalism of our times. It is an outrage that humanity is dependent on the mood and plans of a handful of hedge funds and big banks. Markets should not be allowed to rule our lives.

Denounce the neoliberal architecture of the European project as reflected in the Lisbon Treaty and at the same time propagate the need for the ‘refoundation of Europe’ along new lines that must be based on the popular will. If this does not happen, the ‘actually-existing EU’ will, sooner or later, meet a fate similar to that of ‘actually-existing socialism’.

Try to build broad political and social alliances on the national, Southern European and EU levels.

Explain the impasse of the policies dictated by the Stability Pact and effected through the national Stability Programmes and remind the people of the infamous history of the IMF which, after having disciplined some new EU entrants (Latvia, Hungary, Rumania) is now being invited to save a member of the Eurogroup.

Propose credible but not necessarily detailed programmes for the exit from the crisis, including radical measures (i.e. debt adjustment, socialisation of part or all of the banking system, etc.), which should be carefully designed in terms of their effectiveness and consequences.

Avoid falling into the trap of defending national interests, by supporting ‘social contracts’. Despite what mainstream parties claim in order to receive cross-class support, there are no win- win solutions, especially during a major crisis.

Don’t hesitate to support possible government measures that can increase the tax base without hurting the wage earners who usually bear the heaviest tax burden in the countries of the European South. Populism does not pay in terms of a long-term radical left strategy.

Reject hostile or friendly proposals for the exit of a country from the euro-zone or the EU. Recently, some left intellectuals and extreme left groups in Greece, but also a number of distinguished members of Synaspismos and Syriza, are flirting with the idea of a so-called ‘progressive’ exit from the Euro- zone. My view is that, with the present balance of forces, an exit of Greece or another country of the European South from the Euro-zone cannot be but ineffective and is ‘conservative’, even dangerous. It would mean a return to a depreciated national currency which will increase public and private debt denominated in euro, reduce real wages and pensions and lead to a huge flight of capital that will increase fiscal and foreign exchange difficulties, making inevitable the recourse to the IMF. Furthermore, it will enhance the divisions between the working class of the country in question and the working classes of the other EU countries to the benefit of the populist and extreme right.

The situation in Greece, the South of Europe and EU is really worrying and unstable. One cannot say if the crisis will destroy the dilapidated neoliberal project of Europe’s dominant classes and mainstream political forces or will be a catalyst for a so called neoliberal ‘political governance’ of a Union with or without some or all of the PIGS. In these historic circumstances, the European radical left should try to regain its transformative outlook which is constitutive of its identity. Our comparative advantage in this arduous task is internationalist solidarity, cooperation and common action. Let’s try to concretise this aim.