With the prospect of a so-called double-dip recession looming in the world economy, pressure is once again mounting on the eurozone. The prospect of one or more countries opting out, or being forced out, of the eurozone is becoming increasingly real as the crisis deepens and tensions between the capitalist classes in northern and southern Europe rise.
On 7 September, the German constitutional court ruled that the “bailout” measures are legal according to the German constitution. If they had not done so, a major crisis would have immediately ensued. The leading judge did, however, say that it should not be taken as a “blank cheque authorising future rescue measures” and ruled that from now on all of the deals will have to be pre-approved by the budget committee of the German parliament.
This decision and increasingly aggressive comments by right-wing politicians in northern Europe directed against the so-called PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) are illustrative of the attitude of a growing section of the capitalist establishment in these countries that no more “bailouts” can be agreed.
For example, the former head of the Federation of German Industries, Hans-Olaf Henkel, called for Austria, Finland, Germany and the Netherlands to leave the eurozone and set up their own currency. Leading members of the CSU, a partner in the German government, have called for a mechanism for Greece to be kicked out of the euro. This call was then echoed by the Prime Minister and Finance Minister of the Netherlands.
While this is probably still not a majority position of the capitalist establishment in Europe, which is committed to trying to maintain the eurozone, it illustrates that their room for manoeuvre is increasingly restricted. These political developments are taking place while the latest rescue deal is predictably proving insufficient, with Italy and Spain in particular coming under pressure on the bond markets.
August exposed bailout myth
The latest deal for Greece in July had only been passed days when Italy and Spain’s bonds shot up in value, with speculators effectively betting that they would not be able to pay back their debts. In response, the European Central Bank presented a list of austerity measures to Italy, with a similar approach to Spain. Right-wing governments in both countries agreed to implement these programmes and with that the ECB agreed to buy Italian and Spanish bonds.
However, that stopgap is again proving to be insufficient, with bond prices rising once more. Italian bonds rose for ten days in a row as the Berlusconi government dithered about the exact amount of austerity and faced a general strike organised by the CGIL union. Despite the latest so-called “bailout”, investors are now betting on a default for Greece –with Credit Default Swaps at a record high and two year bonds paying almost 50% interest!
The fundamental contradictions within the eurozone are inexorably coming to the fore. Instead of convergence of the economies within the eurozone, we have seen divergence with the weaker economies growing weaker. Monetary union without fiscal or political union is proving impossible.
Historic social and political struggle
Although there are perhaps some more moves available to the capitalist establishment in Europe, such as increasing the size of the European Financial Stability Facility, the fundamental choice of moving forward to fiscal union or back towards break-up of the eurozone will be posed. In reality, while sections of the establishment would like to move towards fiscal unity, which means common austerity across Europe, given the different interests of the capitalist classes across Europe as well as the resistance of working people, they will be unable to achieve that across the eurozone.
Therefore, the question of a break-up of the eurozone will be put on the agenda within the next period of time. The results of such a development would be explosive in economic, social and political terms.