Thursday, 9 August 2012
Will the Euro zone break up?
As with the Soviet Union many capitalists couldn’t see how it could continue but also couldn’t see how it could break up. Many contradictions lay within the Euro zone today not least the nation state and how it fundamentally relates to capitalism. The CWI of which the socialist party is affiliated to predict at its inception the Euro could not last when not if a global economic crisis hit as we are seeing now. Nations will want to protect their own interests and national agitation will increase as a further feeling of trying to save their own backs first. With the news today that one of the fore thinkers behind the Euro project now laying doubt on the project and how long it can last we are left wondering how long it really can last and in what shape or form a break up could come in. Some members of the euro zone may have to leave the bloc as the debt crisis continues, according to one of the architects of the euro. "Everything speaks in favour of saving the euro area," said Otmar Issuing, a former European Central Bank chief economist. "How many countries will be able to be part of it in the long term remains to be seen," he added. His message comes as the ECB warned of a lack of lending within the region. The central bank highlighted the fall-off in money being lent across borders between the 17 countries that share the euro, saying the euro zone is becoming increasingly fragmented. The ECB said cross-border loans in the overnight money market fell to 40% of total loans, from 60% in a similar period last year. A recent report by Morgan Stanley focused on the "Balkanisation" of the euro zone banking system. "Its banking and money team have highlighted how the weaker euro zone economies - Spain, Italy, Portugal, Cyprus, Greece and Ireland - have been progressively starved of credit as banks in the bigger, stronger economies of Germany and France have stopped lending to them," the BBC's business editor Robert Peston said. 'Reforms pending' Mr Issing was a member of the German Bundesbank until 1998 and then worked at the ECB, during the introduction of the euro in 1999 until 2006. Promoting his new book on saving the euro, Mr Issing said: "We are still a long way off saying 'that's it, now we are sure to make progress'. "Substantial reforms in almost all countries are still pending." He added that it was not true that Germany would be better off returning to the deutschmark, saying the euro had been more stable than the mark. "One should focus on bringing the euro back to what it was meant to be: a stable currency, stabilised by an independent central bank, which follows a clear mandate, nothing else, and that the other protagonists, especially national governments, do their homework," Mr Issing said. This is impossible on capitalist lines a stable Euro is looking increasingly unlikely and a break up more and more inevitable now holding it together now looks a feint hope rather than a plan for European leaders. The comments come after France's central bank said that its economy would fall back into recession this quarter. The Bank of France estimates that the economy will contract by 0.1% in July to September. It has already predicted a fall of the same level between April and June. Italy is also set for its third consecutive quarter of contraction, while the Bank of England cut its UK growth forecast to close to zero from about 0.8% predicted in May. The UK is not in the euro zone but is hugely affected by what happens on the continent as a lot of the UK’s trade is with European countries and a break up of the Euro will affect the UK in a big way. Bigger than many economists care to imagine at this point. This could throw the whole system into turmoil and lengthen the crisis even further. What is clear to me is that capitalism has no way out of this crisis and many opportunities will arise for workers to take power. Whether they will or not depends on many factors but there will be the chance we must be ready for it.