Origins of the Eurozone Crisis

The rivalry between imperialist powers dividing the surface of the earth between their various economic interests, led to open conflict between 1914 and 1918. This reflected the limits of capitalist development at that time, where the technology, technique and organisation could no longer guarantee a sufficient market within the borders of a single nation-state.

Although the precise history of the war could have been changed, the fact of a devastating war that covered the globe was an inevitable development of the laws of capitalist development, of the endless competition, the development of monopolies and cartels and the military representation of those firms by the capitalist state.

The war resulted in revolution across Europe, initially and successfully in Russia, with a long period of revolutionary opportunities stretching across the inter-war period. The existence of the Soviet Union, although isolated and increasingly brutalised under the bureaucracy of Stalin, nevertheless presented a challenge to the capitalist world, especially when the limited post-war recovery fell into slump after the 1929 stock market crash. International trade contracted and nation-states retracted into themselves, or came to rely increasingly on exploiting their colonies.

In addition to the needs of imperialism to expand Fascist dictatorships were established to subordinate the working-class completely to the needs of capitalism. Nazism in Germany re-equipped the nation to fight a second imperialist conflict against the rest of the capitalist world, along with a crusade against the Soviet Union.

For various reasons the Soviet Union was not defeated, and as the largest land army in Europe at the time extended its social system across much of Eastern Europe creating a buffer which was exploited to reconstruct and reinvigorate (for a period) the crisis-ridden Stalinist system. Europe emerged from the war utterly devastated.

European governments with the support of America made a series of measures aimed at preventing a revolutionary wave and curtailing the spread of Stalinism across Europe. An injection of capital from the US, as well as direct military occupation in the defeated countries, repression of strikes and purges of Communists and other militants in the trade unions took place alongside deflationary policies which hit wages hard.

Capitalism was saved in Europe, backed by the built up fortunes of the USA, but not least because of the role of Stalinism. Communist parties in France and Italy joined bourgeois governments and in Britain as well, called for the restraint of strike action. Stalin's spheres of influence, extending the grip of the bureaucracy, replaced internationalism and the revolutionary opportunity that existed after the second world war was squandered.

However a stalemate existed between two social systems: a bureaucratically planned economy versus American Capitalism. The co-operation which began in the late 50's across Europe was aimed at competing with these two continental economies of America and Russia. Barriers to trade were reduced and the freer movement of certain traded items and labour were put into place.

The post war upswing kicked in after the Korean war. It was based on the mass introduction of new technologies into industries, the strengthening of the organised working-class guaranteeing wage rises roughly in line with productivity allowing for an increased consumer market, the exploitation of ex-colonial nations producing raw materials, military and state spending on welfare, and widespread reserves of labour.

The world wars had shown capitalist development exploding through the barrier of the nation-state. Europe was the main arena of these conflicts as the oldest and most developed capitalist powers were there. The world wars marked either their long-term decline or their defeat, as the class struggle took on the form of a new world balance of forces between America and Russia.

During the period of significant economic upswing between the mid-50's and early 70's, as was the case across the capitalist world, profits were relatively higher and more stable due to the conditions of the boom. This allowed temporary institutions of collective bargaining to be established that provided the working-class with relatively higher wages and conditions, as well as welfare programmes.

Likewise the integration of European economies could develop to an extent under this so-called 'golden age', but when conditions begin to decline the process went into reverse. The global capitalist economy went into crisis in the early 1970's opening a new period of class struggle with the bourgeoisie attacking workers rights, wages and public spending in order to replenish their lost profits.

The idea of a common currency had been raised in the discussions which followed the war. A common currency would allow for even greater integration in terms of trade and would be backed by the economy of an entire continent. This project was only pursued to completion in the aftermath of the fall of the Berlin wall, the collapse of Stalinism in Eastern Europe and Russia and the reunification of Germany. In 1998 the Euro was launched, and put into place for the initial Eurozone countries by 2002. a set of budgetary requirements were demanded of countries aiming to join which were aimed at lowering inflation and public spending at the expense of rising unemployment.

At the time Militant Labour/The Socialist Party did not expect monetary union would even last long enough to be properly launched. Our reason was the inability of capitalism to overcome the rivalries of the nations in Europe. While a measure of sovereignty was handed to Europe in the Treaty of Maastricht, no fiscal union was established. This meant there was no way to balance between the very different economies within the Eurozone.

Countries with a surplus would not voluntarily hand those surpluses over to nations in deficit, and no powers existed to make them do so. In practice membership of the Eurozone and EU is a mechanism for the reduction of workers wages, conditions and public services. The budget guidelines that were implemented did not aim at redressing this imbalance within the Eurozone but aimed to institutionalise neo-liberalism, with the in effect rule that budget deficits could not exceed 3%.

The capitalist triumphalism that followed the end of the cold war had worn off by this point and the global economy was teetering on the edge of recession. However that recession was delayed for a period (until 2007) by a colossal piling up of debts underpinning otherwise exhausted consumer spending. These debts themselves formed a market of sorts, and the newly deregulated finance sector went to town, stacking up greater and greater problems for the recession that eventually broke out from 2007 onwards.

The single currency, with low interest rates to reflect the needs of the strongest, export-led economies in the Eurozone offered little more than cheap money for those nations without a significant export sector. So, for example, the Spanish and Irish governments encouraged a property bubble, and in countries like Greece huge debts were amassed and then hidden with the help of banks including Goldman Sachs. This debt burden prevented many Southern and Eastern European economies from incurring more debt to contain the bank losses, recapitalise the banks and initiate stimulus packages when the crisis hit.

The Eurozone crisis has reflected the inability of capitalism across Europe to develop co-operation let alone integration. Steps taken in this direction have started to go into reverse as a result of the global economic crisis. Nevertheless the Eurozone project has lasted longer than we expected, along with the global economy.

Greece has emerged as the weakest link in the chain of the Eurozone. It represents only 2% of European GDP and yet the fear of a Greek default is rooted in the prospect of defaults of the larger nations such as Spain and Italy, but also Portugal and Ireland. According to recent analysis the domino effect of these so-called peripheral economies defaulting and leaving the Eurozone would be 58% losses of the value of European banks; effectively a wipe-out!

The break up of the Eurozone would also have a significant impact on trade, with Britain high on the list of most affected countries in that scenario. Sudden losses across the banking sector could lead to another seizing up of the credit system and in effect cause a second recession in a not yet recovered global economy.

Efforts have now been improvised to contain the debts in at-risk nation's banks, with the new Treaty imposed through a fear campaign, handing powers to the European Commission to fine countries attempting to spend more than the markets will permit. The debts and bonds of at risk economies have been bought up by the ECB and the newly formed European Stability Mechanism, as well as a kind of Quantitative Easing programme.

This however does not solve the problem and transfers the risk to European institutions. These purchases have not been offered to Greece, and were resorted to when it was clear that bail-out funds, provided at the cost of the hollowing out of the public sector and living conditions of the working-class, would not work and could not be made available to the larger economies of Spain and Italy.

All of these measures, however, are not attempts to form a proper union across Europe, merely an attempt to strengthen the powers that are needed to force governments to pay for the crisis by attacking their increasingly angry and militant working-class populations.

Belatedly the bourgeoisie are recognising the limits of their project and presenting them as the origins of the crisis. However it is the inability of capitalism to - in a democratic, sustainable and fair way - develop a European-wide (and global) economy that lies at the heart of this contradiction. The hunt for growth in the global economy has been ongoing since the break-down of the post-war upswing, itself a unique period of time rooted in the sheer destruction of global imperialist conflict and the balance between world forces of two competing social systems (under the threat of nuclear war).

That hunt has turned 'running on the fumes' of the bloated credit system into a growth model in itself, alongside the increasing exploitation of the rest of the world and the haphazard industrialisation of China. This world growth has accumulated massive problems for capitalism globally, but the inability of each national ruling-class to transcend the limits of the short-term profits of capitalism has resulted in the tortuous scramble to prevent the unfolding of the Eurozone crisis.

As socialists we oppose the EU and the Eurozone because they are institutions that intensify capitalist exploitation and the project of Neo-Liberalism. Our opposition has nothing in common with 'Little England' nationalism or xenophobia of the right-wing. We are in favour of the integration of the European economy on the only basis that it would be possible; a democratic plan of production under a socialist society. In order to achieve that an important plank of our programme is international solidarity with the European working-class in the common struggle against capitalist oppression and the battle for a socialist world.