The “Eurocrisis” is first and foremost about the failure of capitalist over-production as well as about inter-imperialist rivalry. French and German bosses are fighting to make sure their own bankers are not stuck with losses coming from the inability of other European governments to pay their debts. Chinese bosses are looking for opportunities to gain greater economic influence on the European continent. And U.S. bosses are worried about the possibility that the Eurocrisis will trigger a second worldwide financial crash. To analyze the current crisis, we must first look at how current European power relations developed.
After the mass destruction of World War II, the main political goal of U.S. bosses was to limit post-war communist influence in a devastated Europe. According to General Lucius D. Clay, Deputy Governor of the U.S. Occupation in Germany: “There is no choice between being a communist on 1,500 calories a day and a believer in democracy on a thousand.” Although crudely anti-communist, this quote shows why the U.S. backed the resurgence of what was then the West German economy in 1946. French bosses, the long-time enemies of the German ruling class, were initially opposed to this move. But by 1950, under U.S. pressure, they went along.
In 1952, Stalin had written, in Economic Problems of Socialism: “To eliminate the inevitability of war, it is necessary to abolish imperialism.” Marxist analysis of capitalism showed workers how big economic crises led to mass destruction of productive forces in imperialist wars. But liberal and social democratic politicians claimed that the various national bourgeoisies could reconcile their differences peacefully. To that end, European economic unions like the Coal and Steel Community (founded in 1951) were promoted as a way for countries to avoid the terrible consequences of war. These unions, however, were maintained within the context of U.S. dominance.
After the fall of the Soviet Union and German reunification, European bosses began asserting their independence. The European Union (EU) was formed in 1993. In 1999, eleven EU countries, led by France and Germany, established a common currency, the Euro, in a subset of the EU known as the Eurozone. Now a majority of EU countries use the Euro.
The EU’s bank, the European Central Bank (ECB), is supposed to represent the interests of all seventeen 17 EU member countries. But the reality is that both Germany and France wield huge power over the ECB. Germany contributes most to the ECB’s capital and has the biggest banks in Europe. The ECB policy of raising interest rates in the midst of a sharp economic downturn has damaged the economies of smaller EU countries, but benefits Germany.
Thirsting for maximum return on investments, European banks put an enormous amount of capital into the U.S. upsurge in housing before the 2007 crash. As the U.S. housing market collapsed, these profit-driven bankers moved money into the purchase of “sovereign” bonds issued by various EU governments. Between the second quarter of 2007 and the third quarter of 2009, EU banks shifted $827 billion into bonds issued by Portugal, Ireland, Italy, Greece, and Spain (New York Times, 11/11/11). The banks reaped huge amounts from interest and made tens of millions of dollars underwriting these bonds.
In 2009, a new Greek government admitted that previous administrations had lied about the size of the country’s budget deficit. German and French bosses used this admission as a pretext to impose a vicious austerity regime on Greek workers as a condition of any EU bailout. In reality, most of the “bailout” money sent to Greece has wound up in the pockets of the French, German and other bankers who bought Greek “sovereign” bonds.
Despite these measures, the worldwide capitalist economy has yet to recover from the crashes of 2007-2008. Short of war, capitalism has no choice but to shift the burden of the bankers’ losses to the working class. Smelling blood, the world’s biggest banks and other bondholders are seeking to turn the sovereign debt crisis into a net gain by attacking living conditions for workers throughout Europe.
Bond interest rates in Italy, Spain, Ireland and Portugal have soared. This in turn has forced local bosses in Italy and Greece to install “technocrats” (direct servants of the bankers) as government leaders, and has brought a conservative, pro-austerity government to power in Spain. All of these bosses have a mandate to attack the workers in their countries even more sharply.
But far from solving the capitalists’ problems, austerity regimes can only make them worse. Several European economies are now forecast to be in deep recession before the end of this year, making it even more difficult for their governments to cover their debt payments to the bankers.
The five countries whose sovereign bonds have been downgraded owe a total of $2.2 trillion (New York Times, 10/22/11). If they were to default on this debt, German, French, and U.S. banks would sustain some of the biggest losses. According to billionaire George Soros, this “deflationary debt trap” will lead to a “self-reinforcing process of disintegration” — that is, a global financial collapse (Huffington Post 12/5/11). Meanwhile, Chinese bosses are sitting back, hoping to pick up the pieces after the crash.
The capitalists’ current path could bring the world to a depression like the one of the 1930s, which led to World War II. Once again, the bosses’ economic crisis will compel them to re-divide the imperialists’ markets and resources and destroy productive capacity. For the international working class, the only solution to the bosses’ inevitable wars is a communist revolution.