Angela Merkel wins 3rd term in Germany where does Europe go now?

After a 3rd successive win for Angela Merkel In the German elections over the weekend much of Europe will be waking up with different feelings. Certainly the Northern European states will be much relieved although this result was never really in any doubt in all honesty. Yet for Southern Europe this election win may be greeted with fear and worry as to what Germany and Europe as a block does next. It was clear that many of the big economic decisions have been put off until after this big election so we will see in the coming months and years where Germany sea’s things going and how it reacts to really dire situations in the likes of Portugal, Spain, Italy and most pressing no doubt will be Greece. Angela Merkel who won her 3rd general election on Sunday received popular backing due to Germany's prosperity of late and ever since the great recession anyway have stormed ahead in the global race in terms of capitalist development. Her conservatives took about 42% of the vote, the polls said. TV projections said that might almost be enough for a historic absolute majority. Otherwise Mrs Merkel might have to seek a grand coalition with the Social Democrats - estimated to have won 26%. Her preferred liberal partners appear not to have made it into parliament. This is an amazing result for Angela Merkel, currently Germany's - and Europe's - pre-eminent politician. It was clear that she would win this election, but no-one really predicted that she could get so close to an absolute majority. The final results are not yet in, but it may still be that she needs a coalition partner. The obvious solution is a grand coalition with the centre-left Social Democrats. The party improved its share of the vote in second place, but still did not do as well as it wanted. But there are divisions within the SPD about going into coalition again as a junior partner. In 2009 they were punished by the electorate for doing that in 2005. Now the same thing has happened to the liberal Free Democrats, who have been in coalition with Mrs Merkel for the last four years, but appear to have been kicked out of parliament altogether. Exit polls for ARD public television put the liberal Free Democrats (FDP) on 4.7%, which if confirmed would be a disaster for the junior coalition partner, leaving it with no national representation in parliament. Party chairman Philip Roesler called it "the bitterest, saddest hour of the Free Democratic Party". The FDP was beaten by the Green Party (8%) and the former communist Left Party (8.5%), and even, according to exit polls, the new Alternative fuer Deutschland, which advocates withdrawal from the euro currency and took 4.9%, just short of the parliamentary threshold. There was some speculation on German television that Mrs Merkel's Christian Democrats (CDU) and their Bavarian sister CSU might even win enough seats for an absolute majority - the first in half a century - if both the FDP and AfD fail to make it into parliament. The ARD channel's projection had her group winning 297 seats against 301 for the other three parties, while ZDF had her dead even with the other three. The turnout in this election is interesting Turnout, projected at about 72%, was higher than at the last federal election - which had the worst on record. So clearly the Christian democrat’s wre catching on to a wave of support out there for now. How long this will last all depends on the economy in my view. Quoting Marxist economist Michael Roberts from his blog at http://wp.me/pLequ-2mg "Germany is the largest and most important capitalist economy in Europe, if not yet the most important European imperialist power (there it vies with the UK and France). It is the main creditor and funder of the Eurozone member states. So what does this election campaign and result tell us about the future of German capitalism and the strategy being adopted by its political leaders? On the surface, all looks good for the economic health of Germany as there appears to be very little difference on policy between the CDU and the SPD. You would find it hard to push a sheet of paper between them on major policy issues for Germany. So it seems likely that a Grand Coalition between the CDU-CSU and SPD will be formed with two-thirds of the seats in parliament and German capitalism looks set fair for the status quo for another four years. However that is too simple a calculation. There are new economic and political pressures for German capitalism that will make it more unstable than before. The first thing is that there has been a long-term trend in German (and other Euro) politics: namely, the fragmentation of electoral votes from two or three parties into several. That’s a recipe for instability and paralysis, as we have seen in Greece, Italy, Belgium, and the Netherlands etc. This election has slightly reversed that trend with the two main parties polling about 56% compared to 50% last time, but that is no better than in 2005. Some 16% of votes will not be represented in parliament due to the 5% hurdle -- more than ever before. The turnout may be slightly better than in the recession year 2009 at 73%, but it's well down from the 1990s. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-turnout.png&sa=D&sntz=1&usg=AFQjCNF41yoervmoJG4NpkLHvT9WvnBImg And then there is the joker in the pack: the eurosceptic Alternative fur Deutschland party (AfD), a party made up of academics and other petty-bourgeois elements, strongly opposed to ‘handouts’ to the 'free-spending' peripheral Euro states and demanding a return to the D-mark. The AfD polled 4.9%, just not quite enough to gain representation. But by polling close to the 5% threshold, that will stir up new currents beneath the surface of serenity in German politics, especially leading up to the Euro elections next May. Despite the Euro debt crisis and the 'contingent' costs to the pockets of the German taxpayers from the bailout payments to the distressed Eurozone states, the German ruling class is still convinced that the euro is worth having over the D-mark. That is because German capitalism has gained most from the trade and capital integration of the single currency. The best indicator of that is to look at what has happened to German capital's rate of profit. The European Commission AMECO database provides a measure of the net return on capital invested for many countries including Germany. There are several technical issues with this measure, but I think it gives a relatively good guide to trends (partly because it is supported by alternative data from the Extended Penn World Tables that I have used before to measure country rates of profit). The AMECO measure shows that Germany's rate of profit fell consistently from the early 1960s to the early 1980s slump (down 30%) - much like the rest of the major capitalist economies in that period. Then there was a recovery (some 33% up - using Penn measures) with a short fall during the recession of the early 1990s and then stagnation during the 1990s as West Germany digested the integration of East Germany into its capitalist economy. The real take-off in German profitability began with the formation of the Eurozone in 1999, generating two-thirds of the entire rise from the early 1980s to 2007. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-net-return-on-capital.png&sa=D&sntz=1&usg=AFQjCNFr1RYT5b1fFsbk9DjyM4nw0ektBg German capitalism benefited hugely from expanding into the Eurozone with goods exports and capital investment until the Great Recession hit in 2008, while other Euro partners lost ground. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fchange-in-rate-of-profit-under-emu.png&sa=D&sntz=1&usg=AFQjCNEi79xb4yKwJAHaMooXHtdv4Knd_A Once the east was integrated, Germany's manufacturing export base grew just as much as the new force in world manufacturing, China, did. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-exports.gif&sa=D&sntz=1&usg=AFQjCNGAvNAoRfD_k0eH_TtrCblJ_qivOQ But the fall in profitability during the Great Recession was considerable and AMECO forecasts do not suggest a significant recovery in profitability since. Indeed profitability will be below the level of 2005 from now on. So things may be more difficult from hereon. It is interesting to consider the reason for the rise in the German rate of profit using Marxist categories. The rise in the rate of profit from the early 1980s to 2007 can be broken down into a rise in the rate of surplus value of 38%, but only a small rise of 5% in the organic composition of capital. This is consistent with Marx's law of profitability in that the rate of profit rises when the increase in the rate of surplus value outstrips the increase in the organic composition of capital. It seems that the ability to extract more surplus value out of the German working class while keeping the cost of constant capital from rising much was the story of German capitalism. In other words, constant capital did not rise due to innovations and investment in new technology while surplus value did, due to the expansion of the workforce using imported labour from Turkey and elsewhere at first - and then expansion directly into Europe later. The real jump in the rate of profit began with the start of the Eurozone. In this period, the organic composition of capital was flat while the rate of surplus value rose 17%. German capital was able to exploit cheap labour within EMU but also in Eastern Europe to keep costs down. The export of plant and capital to Spain, Poland, Italy, and Greece, Hungary etc (without obstacle and in one currency) allowed German industry to dominate Europe and even parts of the rest of the world. Most important, the fear of the export of jobs to other parts of Europe enabled German capitalists to impose significant curbs on the ability of German labour to raise their wages and conditions. The large rise in the German rate of profit was accompanied by a sharp increase in the rate of surplus value or exploitation, particularly from 2003 onwards. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-rosv-rop.png&sa=D&sntz=1&usg=AFQjCNGU4KUz6jCJ9U2ZVKbQ20LUCZ3JRg What happened from 2003 to enable German capitalism to exploit its workers so much more? In 2003-2005 the SPD-led government implemented a number of wide-ranging labour market 'reforms', the so-called Hartz reforms. The first three parts of the reform package, Hartz I-III, were mainly concerned with creating new types of employment opportunities (Hartz I), introducing additional wage subsidies (Hartz II), and restructuring the Federal Employment Agency (Hartz III). The final part, Hartz IV, was implemented in 2005 and resulted in a significant cut in the unemployment benefits for the long-term unemployed. Between 2005 and 2008 the unemployment rate fell from almost 11% to 7.5%, barely increased during the Great Recession and then continued its downward trend reaching 5.5% at the end of 2012, although it is still higher than in the golden age of expansion in the 1960s. German unemployment rate (%) http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-unemployment-rate.png&sa=D&sntz=1&usg=AFQjCNEzSZ2AGskTJV1lGgToukvTSEclCA A wonderful success then? Not for labour. About one quarter of the German workforce now receive a “low income” wage, using a common definition of one that is less than two-thirds of the median, which is a higher proportion than all 17 European countries, except Lithuania. A recent Institute for Employment Research (IAB) study found wage inequality in Germany has increased since the 1990s, particularly at the bottom end of the income spectrum. The number of temporary workers in Germany has almost trebled over the past 10 years to about 822,000, according to the Federal Employment Agency. This is something we have seen across Europe - the dual labour system in Spain being the prime example. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-employment.gif&sa=D&sntz=1&usg=AFQjCNEKIaU2Vl7a73hveITTmsI8dpuOBQ So the reduced share of unemployed in the German workforce was achieved at the expense of the real incomes of those in work. Fear of low benefits if you became unemployed, along with the threat of moving businesses abroad into the rest of the Eurozone or Eastern Europe, combined to force German workers to accept very low wage increases while German capitalists reaped big profit expansion. German real wages fell during the Eurozone era and are now below the level of 1999, while German real GDP per capita has risen nearly 30%. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-real-wages.png&sa=D&sntz=1&usg=AFQjCNEuj6PZ5zLg8Qai43vI23Pt9lKwrQ No wonder German capitalism has been so 'competitive' in European and world markets. The Hartz reforms may be regarded as a success by German capital and mainstream economists. But they have always been very unpopular among the German public. In this election, no major party has dared to run on a platform that openly endorses the Hartz reforms. Indeed, several parties tried to win votes by promising to roll back the Hartz reforms, including the SPD which initiated the reforms in 2003-2005 under Chancellor Gerhard Schroeder. Of course, this is not to deny that the German working class is better off than its peers in the rest of the Eurozone and this explains why German voters, who have voted, did so, by and large, for parties that wishes to preserve the status quo. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-household-income.png&sa=D&sntz=1&usg=AFQjCNGraKVZK-v3oaAV2UWeMV23CR-Y8A The German ruling class and the leadership of the two main parties are generally agreed that the Eurozone must be kept intact as it is, despite the cost of the debt crises in the peripheral EMU states. After all, German capitalism has gained hugely from the Eurozone, as I have shown. Greece should not probably have been allowed in, as Merkel and others have said on several occasions, but now it is in, it is too risky to kick Greece out as it sets a dangerous precedent. And the cost of yet another Greek bailout in the next year is small. But there are are some differences between the CDU and the SPD over the Eurozone. The CDU does not want any integration of debt and debt payments within the Eurozone through things like a euro redemption fund or Eurozone bonds, while the SPD does. The CDU does not want German capital taking on any contingent liability of the future or existing debt of the likes of Italy or Spain; even if it never happens that they cannot service it. Even so, a Grand Coalition will agree eventually to ease the terms of repayment of the bailout recipients - indeed it will probably put repayment back for likes of Greece to the indefinite future. Remember that the US allowed the UK to repay what they owed the US after the Second World War for ages - it was only fully paid off in 2005! However, the Grand Coalition will be set with difficulties from its beginning. It will be under the pressure from the right, the eurosceptics and the small business FDP to refuse any further bailouts and apply severe austerity to the peripheral EMU states and France. The SPD will be under pressure from the left to break with the coalition to reverse the Hartz reforms, spend more and avoid nuclear energy or leave the coalition. German capitalism may have been a 'success story' over the last 25 years since the integration of East Germany. But its long-term prospects do not look so good from here. It has a declining and ageing workforce (this will be the last election in which the majority of voters were under the age of 55) and less areas for exploitation of new labour outside Germany, while competition from the likes of China and Asia will mount. And the costs of maintaining the Eurozone will grow. All these are issues for the strategists of German capital now that there will be a new coalition in power. http://www.google.com/url?q=http%3A%2F%2Fthenextrecession.files.wordpress.com%2F2013%2F09%2Fgerman-demographics.gif&sa=D&sntz=1&usg=AFQjCNEmoxSciJdR3jOOFQD3wYAd46iHeQ The German electorate may have voted for the status quo again in this election, but the relatively low turnout and the low share of the vote for the main parties show that there is growing disillusionment with the 'success' of German capitalism that has given just a few crumbs for the working class off the table of bounty for German capital income. And the burden on the working class in paying for the further ambitions of German capitalism is set to rise. "

New developments in Cyprus open new chapter of Eurozone turmoil

No trust in capitalist government! No austerity for the Euro! Kick out the Troika! For a socialist alternative! By Tony Saunois, CWI The eurozone crisis has dramatically intensified during the last week. It has blown away the optimism of the ruling class in recent months that they had resolved the crisis. Once again, the continuation of the eurozone, as currently constituted, is seriously threatened. The Cyprus crisis could also dramatically pose the viability of the euro. This time the threat has erupted not from one of the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain). The latest threat to the existence of the eurozone has come from Cyprus. It is a measure of the parlous state of the eurozone and the EU that Cyprus which accounts for 1:500 of the EU GDP (compared to Greece’s 2% of GDP), threatens the continuation of the current eurozone. These developments have intensified the crisis and raised again the spectre of rapid contagion to other countries, especially Italy, Spain and Portugal. Cyprus was also, at least initially, the first country to apparently call the bluff of the Troika. This threatens to set a “trend” for other eurozone countries to do likewise, something which Merkel and the other EU leaders are terrified of. While, at the time of writing, it remains unclear exactly how this new phase in the crisis will unfold, the developments in Cyprus represent the opening of a new chapter. Arrogantly, like a colonial master, the Troika insisted that the Cypriot government confiscate a percentage of the bank deposits held by both rich and poor, 9.9% for those holding over 100,000 euros and 6.75% for others, as a condition for a bail out of 16bn euros. The Troika would provide 10bn euros with an additional 5.8bn raised by the Cypriot government. This was perceived as a dictate by colonial rulers. Yiannaki Omiras, President of the Parliament, argued that, “Europe want Cyprus to return to be a country of limited sovereignty – neo-colonial”. The history of colonial rule under the Ottoman Empire and British imperialism is an important part of Cyprus’s history, fuelling opposition to measures being imposed by the Troika. The confiscation of a percentage of the deposits of all savers provoked a massive backlash in Cyprus and other EU countries caught in the centre of the storm, especially Italy, Portugal and Spain. In one stroke, the imposition of this measure fatally undermined the insurance guarantee for depositors throughout the EU. This can lead to a flight of capital from other weak economies in the EU, such as Portugal, Italy and Spain. If the Troika could impose this on Cyprus, then why not Italy, Spain or Portugal and other countries when the next bailout is needed? It was a blunder by Merkel and the Troika, driven by the ‘hard-line’ Dutch, Finns and Slovaks in support of Merkel and German imperialism. The deposit ‘tax’ threatened to trigger a run on the banks in other countries, as depositors withdraw money from their accounts in fear that they could loose at least a percentage of them. The consequences of this miscalculation – reflecting the arrogance of the EU leaders and that they are lashing around for solutions – has only intensified the crisis. President humiliated In Cyprus, the reaction to the Troika demands was such newly-elected President Nicolas Anastasiadis, in power for just over two weeks, was left humiliated. Bullied into accepting the deal in Brussels, Anastasiadis returned to Cyprus to face a revolt of the mass of the population and all the political parties, including his own. In the end, not a single MP voted for the deal and the governing party, DRP, abstained on the vote! They effectively called the bluff of the Troika, which, in turn, put the ball back into the Cypriot court, by threatening to cut off ECB funds in days, by Monday 25 March. Such a move would effectively put Cyprus outside the euro-zone and possibly even the EU itself. Developments in Cyprus can increase the pressure in other countries for the national governments to stand up to the Troika and the EU. However, the Troika will impose harsh conditions on Cyprus, to punish its people, as a warning to others that this will be their fate should they defy the Troika. Apart from the pressure by the mass of the population to oppose this measure there were other important factors which also allowed the Cypriot ruling class to withstand the demands of the Troika. Deal with other powers Unlike the Greek ruling class, the Cypriot rulers have the prospect to strike a deal with other capitalist powers outside the EU, in particular Russia. But the vote to reject the deal in the Cypriot parliament was not a vote against an austerity package. The cuts package had already been accepted by the previous government, led by AKEL (the Cypriot Communist Party), which has significant support amongst workers, and passed on to its successor. The bail out was a bail out of the banks, which together with tourism, are the mainstay of the Cypriot economy. Cypriot banking is awash with money from Russia – US$31bn invested in Cypriot banks by the Russian banking system alone - due to very favourable tax rates. The vote against the Troika package by the pro-capitalist parties was partly a vote to maintain Cyprus as an offshore tax haven. Banking, which is currently eight-times the size of the country’s GDP, has been teetering on collapse after being exposed to heavy losses as a result of the crisis in Greece. At the same time, Cyprus has gas reserves worth an estimated 475bn euro. This, the ruling class had hoped, would give them the opportunity to broker an alternative deal with Russia. This revealed a clash of national interests between the capitalist and imperialist powers. The prospect of Russia acquiring a share of the oil reserves, in return for at least a percentage of the bail out, enraged Merkel and German imperialism, in particular. Even US imperialism is disquieted at such a development. The extension of Russian influence into an EU country will aggravate tensions with German imperialism and other EU powers. Reflecting this threat, it appears that the Russian deal has collapsed. At this stage, Putin and the Russian oligarchs do not want to come into a sharp collision with Germany and other EU powers, which would threaten trade and other commercial interests. At the time of writing, the apparent collapse of this alternative deal has left the Cypriot government floundering around in a desperate search for a solution. Failure to secure one will possibly result in the ejection of Cyprus from the euro. This would undoubtedly provoke a major crisis in Cyprus. The introduction of a new currency would result in a massive devaluation and flight of capital from the country, massive hike inflation and a slashing of living standards. Moreover, it would also put the question of the viability of the euro back on centre stage of the crisis. This follows a respite in recent months during which the ruling classes in Europe have claimed that the euro crisis was ‘resolved’. Italy next? Yet it has already emerged following the dramatic elections in Italy. Despite the lack of a socialist alternative for the Italian workers and masses, a clear majority voted for the anti-austerity parties. The populist movement led by Beppe Grillo took 25% of the vote, campaigning against the euro, for a return of the lira and a restructuring of Italy’s mountain of 9 trillion euro public debt. There is still no government formed in Italy. Greece Italy, the EU’s third largest economy, would make the drama of the Greek crisis seem like a minor side show in comparison. Moreover, Spain and Portugal also set to follow an eruption of the euro-crisis in Italy. It is possible that the Cypriot government will be compelled to levy a higher tax on wealthy depositors and take other measures, such as nationalising the pension funds. This may allow Cyprus to remain in the euro for a period although this is far from certain. A new crisis would inevitably emerge, posing again the prospect of Cyprus’s ejection from the euro, if Italy, Spain or Portugal has not already gone through the exit door. Need for a socialist alternative. The crucial issue facing the Cypriot workers and middle class is the urgency of building a mass movement to reject any austerity programme demanded by the Troika and capitalism and to oppose any measures which see the masses help pay for a bail-out of the banks. Unfortunately, the leadership of AKEL is not organising a mass mobilisation and presenting an alternative programme to break with capitalism, as a way out of the crisis. In government, holding the presidency, until only two weeks ago, the party accepted the austerity package demanded by the EU and simply passed it on to the new government to implement. Today it calls for a “powerful response by the people” and “mass resistance”. It demands “the popularisation of the vision for the liberation of Cyprus from the suffocating embrace of the monopolies”. It urges people to take to the streets (AKEL Statement 16 March 2013). However, AKEL is not offering a concrete alternative of what should be done in the face of this crisis and the prospect of Cyprus being ejected from the euro. AKEL is currently calling for opposition to the Troika but not the eurozone. Yet membership of the eurozone means acceptance of the austerity demanded by the Troika. Many Cypriot workers and youth will ask what it did when it was in government. In the recent elections, AKEL lost up to 25% of its vote compared to 2008. There can be no trust in the capitalist government. In or out of the euro, these same capitalist politicians will attack the rights and living standards of the Cypriot working class. The Cypriot government, elected only two weeks ago on a promise of securing a ’softer’ bail out, is now largely discredited. Now it is urgent to fight for an alternative government of the workers and others exploited by capitalism. Such a government would oppose the terms of the bailout and reject the austerity programme demanded by the Troika. The banks should be immediately nationalised, under democratic workers’ control and management. Working people reject austerity to keep the euro. Such a government would face immediate ejection from the EU and the euro. A government of the working people of Cyprus would need to prepare for such a prospect. It would need to immediately introduce capital controls to prevent a flight of capital and for a new currency. An emergency economic programme would be necessary to defend the interests of workers and the poor. This would be possible on the basis of a democratic socialist plan of the economy through the nationalisation of the major companies and financial institutions. However this crisis of the EU is a crisis of the global capitalist system. A socialist government of the workers and poor in Cyprus would immediately face the wrath of European and global capitalism. Temporary loans and trade arrangements could be negotiated with other states as an interim step. But it would need also to forge links with the working people of Greece, Spain, Italy and Portugal. It would be necessary to appeal to them to follow such an example. Together the working peoples of these countries could form a democratic, voluntary federation of Mediterranean and Iberian states. This could be a bridge to reach over to the workers of the rest of Europe with the aim of forming a democratic socialist federation of European states as an alternative to the capitalist EU and Troika. The crisis in Cyprus has opened a new chapter in the crisis in the eurozone and the EU. It has illustrated that the crisis is far from resolved. Deeper and further crisis are certain to erupt in the coming weeks and months. On a capitalist basis there is no solution to the crisis. The struggle for a socialist alternative is now more imperative than ever.

Why Greek people should back Syriza this Sunday reports from Paul Murphy MEP

This Sunday will see a major turn in the euro crisis book of developments. The good people of Greece who have been through so so much and are living in almost povety status go to the polls again this Sunday for the second time in under a month to vote who should govern them. The question is very clear austerity in the EU or austerity outside the EU. Either way the Greek people are locked into austerity unless Syriza the beacon of hope on the left and who’s eye’s many on the left all over Europe and the world will be on. This could be a explosive situation as our socialist party MEP Paul Murphy explains below.

the run-up to Sunday's election. He'll be writing daily reports of his experiences; the first of these is below.
The eyes of Europe's left and many working class people suffering under austerity are now on Greece. This was brought home to me when I arrived yesterday in Greece and found myself amongst many international visitors who were also present to support Syriza in the final days of the election campaign. Those present included Francisco Louca, the leader of the Left Bloc in Portugal, together with many of his Portugeuese comrades; Willy Meyer; a Spanish MEP of Izquierda Unida; a left MP from Argentina, and people from Occupy Wall Street. Many more are coming, including the Marxist academic, David Harvey, and Gabi Zimmer MEP, the President of the GUE/NGL left group in the European Parliament.
Is this simply 'revolutionary tourism' that we are all engaged in? Not at all. A war has been waged across Europe since the economic crisis began. This is not a war between the peoples of Europe, rather it is a war waged by the bankers, bondholders, speculators and rich capitalist elite against working class and poor people. Austerity has been imposed, not because it 'works', from the point of view of working people or the economy as a whole, but because it is a means for those forces to make the rest of us pay for their crisis. Concretely, in Ireland, Greece, Portugal and Spain this takes the form of the repayment of unsustainable and odious debt that is paid by the destruction of people's living standards and society.
Greece is at the very frontline of this war. The Greek people have suffered the most vicious austerity, with Greece having been turned into a laboratory for extremely harsh neoliberal measures. The human costs are seen in the 22% rise in suicide, meaning Greece has the highest suicide rate in all of Europe; the soup kitchens of the orthodox church which feed over 200,000 people daily, and the mass unemployment, with an official rate of 21% (50% for young people). When we look at Greece, we see the future that menaces working class people in the other countries that have also been the victims of austerity programmes. It is therefore a basic duty of solidarity to support the struggles of workers in Greece against these policies.
However, the working class people of Greece are not simply the victims of this war, they now have a unique opportunity to strike a blow against the austerity agenda and demand alternative socialist policies. If they strike that blow by electing Syiza in first place on Sunday and laying the basis for a left government, it will have enormous ramifications for people all across Europe. It will open up a new chapter of explosive struggle within Europe and potentially expose the mantra of 'there is no alternative' for the neoliberal propaganda that it is. It can also turn a new page on the development of left parties elsewhere in Europe.
So I have come to Greece to express the solidarity of the Socialist Party in Ireland and the Committee for a Workers' International (www.socialistworld.net) with the Greek people suffering under austerity, and also to show our support for Syriza in these vital elections. Together with the sister party of the Socialist Party in Greece, Xekinima, I will do whatever I can to enable Syriza to achieve a victor,y and I am also here to learn from the struggles of the Greek working class.
It is only slightly over a month since the last general election in Greece, and we are now two days away from another one. May's election produced a resounding defeat for all of the bailout parties and a massive rise of support for Syriza, the 'Radical Coalition of the Left', which finished in second place. A government could not be formed and so another election was called. In the opinion polls, the main right-wing party New Democracy and Syriza now vie for first place. Whichever finishes in first place will get a 50 seat bonus in the 300 seat parliament as a result of an undemocratic system constructed to try to ensure stable rule by establishment parties. If Syriza wins, it may be in a position to form a left government.
It is this possibility that has raised the stakes and tensions in this election campaign. The political and economic establishment in Greece and throughout Europe have waged a massive campaign of fear against the Greek people to terrorise them into voting for New Democracy. Like in Ireland, there is a large majority which wishes to stay in the euro, and this group is preyed upon by right-wing forces who declare that if people elect Syriza, Greece will be ejected from euro, will have to return to the drachma, and will see its crisis will deepen dramatically. In contrast, the hopes of many who have suffered terribly under two so-called 'bailout' programmes have been raised by the real possibility of a left government committed to ending austerity.
This hope was in clear display at the major outdoor election rally I attended last night, where an estimated 6,000 plus people attended. Flags and banners of Syriza and its component parts flew throughout the crowd as music such as 'People have the power' and 'Bandero Rossa' blared out of huge speakers. Eventually the first Syriza MP to address the crowd strode onto the stage, a female former PASOK MP who broke early with PASOK to join Syriza. She was warmly welcomed as was her internationalist speech. She emphasised that “it is finally the time of the people” and said that on Sunday, Greek people had the opportunity to “send a message of struggle and solidarity across Europe”. Tackling the scaremongering tactics of the right, she denounced the leaders of Europe who have been terrorising people for years and are now using “the final terror – memorandum [of understanding – what the 'bailout' deal is popularly referred to in Greece] or drachma”.
After a relatively short speech, the leader of Syriza, Alexis Tsipras walked onto stage to loud and sustained applause. His speech was one of hope, tapping into the expectations of change after this election. He repeatedly declared that Monday would see a new era open up, one of “sustainable and just development.” In detailing the “historic opportunity” that people face on Sunday, he rejected the scare tactics and declared that the vote is “a referendum on memorandum or hope”. Despite the length of his speech, around 45 minutes, neither he nor the crowd flagged at the end of what must be an extremely gruelling campaign. The message was one of confidence of victory on Sunday and that real change would flow from that.
Within Tsipras's speech however, the pressures of the struggle to finish first in the elections were also clear. In the course of the election campaign, the demands of Syriza have somewhat moderated – moving from outright rejection of the memorandum of understanding to a demand for its renegotiation – for example. In the speech, there were also concessions to nationalism, portraying Syriza as the true upholders of the 'Greek flag' in contrast to those who support the Troika, while the word socialism was notably absent (although not from the crowd, who interrupted Tsipras at one stage with a chant demanding the end of capitalism and socialist change!)
The danger with these concessions is that Syriza seems to me not to be preparing people fully for the scale of the struggle that will be unleashed on a European scale if a left government is formed in Greece. Ending austerity in today's Europe means a revolutionary break with the logic of capitalism and the implementation of socialist polcies. On a European scale, it also means not just a national battle, but a Europe-wide war.
In particular, this danger finds its highest expression in Tsipras's promise last night that Greece will not be kicked out of the euro if Syriza is elected. This may well prove to be a hostage to fortune.
The dynamic of the Eurozone crisis, with or without Syriza being elected, points to Greece being kicked out of the Eurozone. If Syriza comes to power and keeps to its promise not to implement austerity, a major clash with Angela Merkel and the leaders Europe's governments together with the European Commission and Central Bank will ensue. While no country can be legally expelled from the Eurozone, the political leaders of Europe could achieve expulsion by cutting off funding to the state and Greek banks and provoking a major crisis.
Regardless of the possibility of being forced out of the euro, Greek people are still correct to vote against austerity and for a change of policy. The savage austerity in Europe is deepening the Eurozone crisis and creating massive instability. Continuing with that policy will not secure Greece's place in the Eurozone or guarantee any stability. So people should not vote on Sunday on the basis of false promises that Greece will stay in the euro if austerity is implemented, but rather take the opportunity to vote for radical anti-austerity and socialist policies.
In Syriza's five point programme at the the time of the first election, and in many of their statements since, they have opened the discussion on many of the key questions to be tackled by a left government. Like in Ireland, the first issue has to be a refusal to pay the debt, because the effort to repay it is destroying the economy and society. Syriza has also rightly highlighted the importance of taking the banking system into public control - this can only be done through nationalisation and democratic control and management. With such a banking system, capital controls could be imposed to stop the flood of rich people's money out of the country and to provide credit for small businesses and farmers.
Regenerating economic growth will require a break from the past policy of relying on the rich to invest their wealth, which they have proved unwilling to do. Instead, the key sections of the economy need to be taken into democratic public ownership and a plan developed to redevelop the economy, including a strong and sustainable manufacturing and industrial base.
If Syriza is elected on Sunday, it will be a big step forward towards this fundamental and necessary change. But it would be mistaken to think that it will represent the final chapter of the struggle against capitalist austerity. The people of Greece should prepare for the continuation and intensification of the attack of European leaders against them. However, they should also know, as demonstrated by the many international visitors here, that they will not be alone. Tens of millions of people across Europe will welcome a clear rejection of austerity and the election of a left government. It would assist massively in developing the Europe-wide struggle necessary to defeat the capitalist establishments and their austerity.
There is the distinct feeling amongst all of the international guests of being privileged to be in the eye of the storm here on the eve of the what may be an extremely important development for working people across Europe. I intend to take full advantage by learning lessons from the Greek struggle that can be applied in Ireland and across Europe.
Paul Murphy is Socialist Party MEP for Dublin West in Ireland.

Euro crisis deepens but which way out for workers and youth ?

By Tony Saunois (CWI) with Andros Payiatos, Xekinima (CWI Greece)

Syriza leader Alexis Tripras: it’s “a war between peoples and capitalism”
The Greek elections called on May 6 resulted in a political earthquake. Powerful after-shocks are still hitting the global economy, the EU, and Greece itself. These are now set to be the precursor to even stronger political and social upheavals in Greece and throughout the EU.

The workers’ organisations and youth in Britain and throughout the EU need to extend their solidarity to the Greek workers. The workers’ movement throughout the EU needs to oppose the demands that the “Troika” and others are making for the Greek workers to accept more austerity. Such solidarity is a part of the struggle of workers in all countries against the attacks made on them by their own ruling class and governments.

The elections shattered the old established political allegiances but left no coalition of parties from either the left or the right able to form a parliamentary majority. The government has been left paralysed, and new elections have been called for June 17.

This paralysis in parliament is a reflection of a Greek society convulsed in turmoil. There are powerful features of both revolution and counter-revolution. As the Financial Times has warned: “Looting and rioting could occur. A coup or civil war would be conceivable” (18/5/12).

Syriza (Coalition of the Radical Left), whose share of the vote leapt from 4.6 percent to 16.78 percent, emerged as the second most successful group in the elections. This tremendously positive development, which has given hope to many workers and socialists internationally that something similar could take place in their own countries, has terrified the ruling class in Greece along with Merkel, Cameron, Rajoy and the other political leaders of capitalism. It has thrown down a potential challenge to the “Troika” and the austerity programme dictated by it.

The crucial question now is: can this left advance be pushed further and channelled into a bigger victory in the second election? Will the Greek working class and its organisations embrace a rounded out revolutionary socialist programme? Without this it will not be possible to resolve the crisis in Greece or begin to solve the devastating social consequences of the austerity packages thus far introduced.

As the elections on May 6 also demonstrated, if the left fails to meet this political challenge with the correct programme, slogans, intensity of struggle, and methods of organisation, then the extreme far right will certainly be willing to step into the void. The growth of the fascist Golden Dawn, which emerged from the election with 6.97 percent of the vote and 21 MPs, is a serious warning to the Greek and European working class. It illustrates the threat which will emerge as the crisis deepens in the next weeks and months if the left fails to offer a real alternative to capitalism.

The collapse of the established political parties, especially New Democracy (ND) and PASOK, was the clearest manifestation of the overwhelming rejection of those parties which have enacted the austerity programmes, slavishly following the demands of the “Troika”. Under both New Democracy and PASOK governments, and the outgoing coalition led by them, Greece has been under effective occupation from international bankers, the ECB, IMF, and EU. The European capitalist classes have adopted a modern version of colonial rule, appointing EU commissioners as overseers in each government Ministry.

The stooge parties of the EU have been vomited out by the Greek people. In the last three decades ND and PASOK garnished between 75 percent and 85 percent of the votes in each election. The combined vote of both these parties this time was a mere 32.02 percent - 18.85 percent for ND and 13.18 percent for PASOK.

Brutal attack on living standards
The Greek working and middle classes have suffered a brutal attack on living standards and working conditions for years. As a result of the economic crisis and austerity packages, Greece’s GDP (total output) will have fallen 20 percent from its 2008 level by the end of 2012. This is one of the largest ever falls in GDP suffered by any capitalist country since the depression of the 1930s.

These are not cold statistics. The lives of millions of working- and middle-class people have been shattered. The social consequences have been devastating. Public sector workers have seen wages slashed by 40 percent. A cup of coffee costs the same in London or Athens. Yet in Greece many workers are paid only €400 per month – a pittance. These are literally starvation wages for many. The church estimates it now feeds 250,000 people at soup kitchens every day. Healthcare patients are now expected to pay in advance for treatment, and the number of hospital beds is being slashed by 50 percent. One hospital refused to release a newborn infant until the mother paid the bill. Thousands of schools have been closed down. Many tens of thousands have fled the cities and gone back to the countryside where they can live with families and at least get access to food.

The middle class is being destroyed, with many becoming homeless, left to queue alongside the most downtrodden immigrant workers at food and homeless refuge camps. These camps appear like a southern European version of the “favela” shanty towns of Brazil. Unemployment has soared to over 21 percent – and an astonishing 51 percent amongst the youth.

The right wing and the fascist Golden Dawn have tried to whip up nationalism and racism by targeting illegal immigrants, whose numbers are estimated in hundreds of thousands. This is a major challenge for the workers and left organisations. Emergency measures to house and feed these people through the introduction of a special public works programme should be demanded by the left. A programme not at the expense of the Greek workers, but funded by the EU.

Workers fight back


The Greek working class has tenaciously fought against these attacks and each government which has enacted them. PASOK replaced New Democracy in the autumn of 2009, only to cave to the diktats of the “Troika” by applying the most vicious attacks against the Greek workers since the end of the civil war in 1949, ignoring its own promises to the contrary. PASOK’s support then collapsed as workers rejected its policies. The trade union leaders have been compelled since the beginning of 2010 to call sixteen general strikes – three of them for forty-eight hours – by the pressure of the workers. Still, the attacks have continued to rain down on the Greek population. The failure of the trade union leaders to take the struggle forward led to exhaustion among workers as one general strike followed another, appearing to lead nowhere. Now in the elections they have vented their rage against the pro-austerity parties.

Tens of thousands, out of desperation, have emigrated. Many more are on the waiting lists. Some have sought a way out by moving to Australia, Britain, and Canada. It has been estimated by the Greek press that in Australia alone there are currently 30,000 illegal Greek immigrants. Some, incredibly, have even gone to Nigeria and Kazakhstan, so desperate has life become in Greece.

Others, driven by desperation and the humiliation of the plight they find themselves in, have taken a more tragic exit. The international press featured the suicide of 77-year-old retired pharmacist, Dimitris Christoulas, who shot himself in front of Greek parliament because of debt. The trigger was effectively pulled by the “Troika” and its policies.

Having increased 22 percent, the suicide rate in Greece is now the highest in Europe. One radical journalist who recently returned from Greece witnessed a Mercedes car driven into the sea by a small businessman who killed himself. Under Greek law debts cannot be passed onto the family.

These are conditions reminiscent of those described in John Steinbeck’s epic novel about the U.S. depression – The Grapes of Wrath.

There is bitterness, hatred, and anger directed toward the Greek rich elite and their politicians who cannot safely walk the streets or enter public restaurants. The rich are transferring their money to Switzerland and other European countries while the mass of the population is left to suffer the consequences of the crisis.

In the May 6 elections, the Greek people punished all those politicians and parties which had implemented the austerity policies.

Syriza oppose coalition with PASOK and ND
The leadership of Syriza, particularly its top figure, Alexis Tsipras, correctly took a bold stand by refusing to join a coalition with either PASOK or ND given their support for the terms of the bail out and their continuing acceptance of austerity. He offered to instead form a left block with the Greek Communist Party, KKE, and tried to include the split from Syriza – Democratic Left – in order to fight for a left government.

Although limited, he proposed such a left front be based on a programme of freezing any further austerity measures; cancelling the law which abolishes collective bargaining and slashes the minimum wage to 490 euros per month; and launching a public investigation of the Greek debt, during which period there would be a moratorium on debt repayments. This programme, although inadequate to deal with the depth of the crisis in Greece, would have served as a starting point for developing the struggle against austerity and as a basis for a programme necessary to break with capitalism.

Scandalously, the leadership of the KKE refused to even meet with Tsipras, which was a continuation of its previous sectarian approach towards Syriza, the rest of the left, and the trade union movement. Syriza had correctly proposed a left front together with the KKE and ANTARSYA – the anti-capitalist left alliance in the elections. This was refused. The idea of a left front of Syriza and the KKE was something initially campaigned for by the Greek CWI section, Xekinima, in the period 2008-2010. Though viciously attacked initially, this idea gradually developed support and was eventually taken up by Tsipras and the Syriza leadership.

Had such a joint election list been formed it would have emerged as the largest force and got the 50-seat bonus in parliament which the Greek election system gives to the largest party. Even if this was not enough to form a parliamentary majority, it would have put the combined left forces in a commanding position to enter second elections and to offer the realistic prospect of a left government.

While the KKE refused to even consider joining a coalition left government, historically they were prepared to join a capitalist coalition. The KKE entered a coalition with ND in 1989. The KKE General Secretary, Aleka Papriga, has argued that they have learnt from this experience and use this to justify not joining forces with Syriza. However, a united left front, on the basis of fighting against austerity, is entirely different from joining a pro-capitalist government with ND.

A working-class left front led by workers’ parties could have served to unite in action the fragmented left forces in Greece. It could have led to the building of a powerful, organised movement outside parliament as a basis to challenge capitalism. Unfortunately, other left forces like ANTARSYA (Anti-capitalist Left Coalition) also adopted a similar attitude during the first election. However, they now face huge pressure from below, and there are sections of their ranks demanding a united front of some kind with Syriza in the June 17 elections. The issue is still being debated in their ranks, with the majority in the leadership wanting to stand against Syriza. If this line is the one adopted in the end by ANTARSYA, they will pay a heavy price with a serious fall in their support (ANTARSYA won 2 percent in the local elections of 2010 which fell to 1.2 percent in the May 6 election).

The sectarianism of the KKE leadership has provoked opposition within their own ranks as well. Some party members said in the election they would vote for the KKE but urged others to vote for Syriza. A continuation of this policy is certain to provoke further opposition in the ranks of the KKE and the possibility of a split within it.

The KKE has paid a price for this sectarian policy. Its vote only increased by 19,000 – 1 percentage point – to 8.48 percent in the May election. A recent poll for the election in June gave it 4.4 percent.

Despite the inadequacy of Syriza’s programme, its clear stand against austerity and refusal to enter coalition with any pro-austerity parties means it is strengthening its position. It is likely to emerge even stronger in the June elections. Recent opinion polls have put it on between 20 and 26 percent, which would mean it could be the largest party.

Tsipras has threatened not to pay the whole of the national debt, cut defence spending, and crack down on waste, corruption, and tax evasion by the rich. He has also supported public control of the banking system, at times implying nationalisation. He has also spoken favourably of Roosevelt’s “New Deal”. It is a radical reform programme but does not break with capitalism. However, it is a starting point for an emergency public works programme linked to the need for the nationalisation of the banks and key sectors of the economy and the introduction of a democratic socialist plan.

The rapid electoral growth of Syriza has important lessons for other left forces in other countries including TUSC in Britain. Such organisations can experience a rapid electoral growth from a low base when objective conditions are ripe for this. They need to establish a firm and clear profile to fight for workers’ interests to capitalise on the situation when other political parties have been tried and rejected. The electoral success achieved by the ULA in Ireland, especially the Socialist Party, illustrates this.

Syriza’s refusal to join a pro-cuts coalition with PASOK and ND, even on the basis of their promise to renegotiate the Memorandum with the “Troika”, is in marked contrast to other left forces and parties at this stage. In Italy, the PRC entered such coalitions at the local level and consequently destroyed its support. The IU in Spain, whose support grew in the recent election, has also now wrongly joined a coalition with PSOE in Andalucia. A continuation of this policy could erode the growth and development of the IU.

The pro-cuts parties, led by ND and PASOK, along with the “Troika”, are desperately trying to turn the second election into a referendum on membership in the euro zone and the EU rather than on their austerity policies. They, along with the EU establishment, are launching a clear campaign arguing that to oppose the austerity package will mean Greece being ejected from the euro and probably the EU.

The EU and the euro
This is a central issue in the Greek crisis and it is crucial for the left to have a clear policy and programme to face up to this question.

Unfortunately, despite taking a bold stand against austerity and against coalition with ND and PASOK, Tsipras and the Syriza leadership are not arguing for a clear alternative. In part, this reflects the pressure of a majority of Greeks – 79 percent according to one recent poll – who, while rejecting austerity, want to remain in the euro.

This reflects an understandable fear of what would follow Greece being ejected from the euro, including the potential isolation of Greece’s relatively small economy. The Greek masses are terrified of Greece being thrown back to the social conditions of the 1950s and ‘60s or the high inflation of the 1970s and 1980s. Syriza and the left need to answer these fears and explain what the alternative is.

It is also clear that Tsipras is gambling that the EU would not throw Greece out of the euro zone because of the consequences it would have for the rest of the EU. Yet this is not at all certain.

The KKE, on the other hand, opposes the euro and the EU and attacks Syriza for its attitude toward the EU and the euro. Politically, this is one of the justifications they use for not joining a left front with Syriza. While the KKE formally speaks in very radical rhetoric about a “people’s revolt” or an “uprising”, they adopt a propagandistic, abstract approach in practice which is totally unfitted to the class polarisation and willingness to struggle which currently exists in Greece. They even justified not joining a left governmental front because “what would then be the character of the opposition?” Opposition to the EU and the euro on a nationalist basis means they are trapped in a capitalist framework. What is necessary is an internationalist socialist approach that links together the struggle of the Greek workers with the working class in other EU countries.

It is true that a section of the European ruling classes are terrified of the consequences of throwing Greece out of the euro zone. The Centre for Economic and Business Research estimates that a “disorderly” collapse of the euro caused by Greece leaving could cost up to US$1 trillion. An “orderly” collapse would cost 2 percent of EU GDP –US$300 billion. Undoubtedly such a development would have massive consequences for the whole of the EU and could result in the break up of the euro zone with possibly Spain and/or other countries breaking from it.

However, the over-riding fear of the German ruling class and others is that if substantial concessions are made to Greece then Spain, Italy, Portugal, and Ireland would clamour for even more. This they cannot risk. Thus the same Centre for Economic and Business Research concludes: “The end of the euro in its current form is a certainty”.

Tsipras and Syriza mistakenly believe that it is possible to remain in the euro zone and at the same time not introduce austerity policies against the working class. Yet the euro itself is an economic corset which allows the larger capitalist powers and companies to impose their austerity programme throughout the euro zone.

Syriza is correct to say it will refuse to introduce austerity. But how would it then face up to the threat of Greece’s ejection from the euro? This is the inevitable course events are now taking. It is not credible simply to respond by saying Greece will remain in the euro and oppose austerity. If they did this, and a left government on that basis were thrown out of the euro, Syriza would not be prepared to answer being blamed by the right wing for this.

While most Greeks fear being ejected from the euro at this stage, that does not mean that the euro can or will be accepted at any price indefinitely.

Syriza needs to respond to this attack by clearly explaining that if we reject austerity they will eject us from the euro zone. Even without a government opposing austerity Greece could be ejected from the euro.

Faced with such a situation, a left government should immediately introduce capital and credit controls to prevent a flight of capital from the country, nationalise all banks, finance institutions, and major companies. It should cancel all debt repayment to the banks and financial institutions. The books should be opened to inspect all of the agreements made with international banks and markets. The assets of the rich should be seized and safe guards given to small savers and investors. It should introduce an emergency reconstruction programme drawn up democratically as part of a socialist plan which would include a plan to assist small businesses.

Need for socialist internationalism
At the same time, Syriza and a democratic government of workers and all those exploited by capitalism should appeal to the working people of Europe – especially those facing a similar situation in Spain, Ireland, Portugal, and Italy – to join them in solidarity and begin building a new alternative to the capitalist EU and euro. The massive crisis erupting in Spain and elsewhere would mean the working people would rally to such a call. This could be the first step to the formation of a voluntary democratic socialist confederation involving these countries as a step towards a socialist confederation of Europe.

Such a process should be begun now with direct links being built with the left and workers organisations in these countries.

Unfortunately, a failure to boldly answer the threat of being ejected from the euro will only serve to partly disarm the movement of struggle against austerity. It may prevent Syriza from emerging as the largest party. The Greek ruling class and the “Troika” are campaigning to make the election about membership in the euro, not about austerity. They are attempting to terrify people out of voting for Syriza and to rally fragmented right-wing voters - including from right-wing parties that failed to enter parliament - around New Democracy. However, after years of austerity measures and brutal attacks it is not certain this strategy will succeed.

Despite Syriza’s weakness on the EU and euro, at the time of writing Syriza seems certain to increase its support and has a serious possibility of becoming the largest party in close competition to ND. Recent polls have put both parties at between 20 and 23 percent of the vote.

New phase of the struggle
Should Syriza emerge in the lead or at the head of a government this would not signal the end of the crisis, but it would begin a new phase that the workers organisations need to urgently prepare for if they are to take the struggle forward.

Syriza itself needs to be strengthened by workers, youth, the poor, and all those opposed to austerity joining its ranks and getting organised. Syriza, as a coalition, is now attempting to broaden out to begin including social movements and organisations.

Tsipras has rightly called for the left to come together in a united front. This needs to be given a concrete organised expression through the convening of a national assembly of rank-and-file delegates from the left parties, trade unions, workplaces, universities, neighbourhoods, and community organisations.

Local assemblies of elected delegates from these same spheres should be urgently formed under the initiative of SYRIZA to prepare for the coming struggles and to ensure that a future left government carries out policies in the interests of working people.

The ruling class is beginning to feel threatened by the emerging challenge of Syriza and the left. There is the threat of a collapse in society if the left does not seize the moment. Government funds may even run out before the election on June 17.

Lessons from Chile
Although in a different era, there are some parallels between the situation in Greece today and the situation which developed in Chile between 1970 and 1973. There are also many parallels with developments taking place in Latin America today in countries like Venezuela, Bolivia, and Argentina.

In Chile in the period 1970-73 a massive polarisation developed in society. The right and the ruling class prepared their forces - they could not allow the impasse to continue.

The fascist organisation Patria y Liberdad marched, bombed, and attacked local activists and acted as a fascist auxiliary to the military which struck in a deadly coup on 11 September, 1973.

Golden Dawn, which praises the former Greek military dictatorship and Hitler, can act as a fascist auxiliary should the ruling class, or sections of them, conclude they have no alternative but to “restore order” from the chaos and social collapse which threatens Greek society through a military intervention. Although this is unlikely to be the first recourse of the ruling class, they could eventually move in this direction. If Golden Dawn’s support declines - as the polls indicate it will in this election - it would be positive, but it would not be the end of the threat posed by this fascist organisation.

The fascist leader of Golden Dawn, Nikolaos Michalokiakos, threatened those who have “betrayed their homeland”, saying: “[T]he time has come to fear. We are coming”. They cannot become a mass force in their own right, but like Patria y Liberdad they can become (and already are) a vicious organisation that can act as an auxiliary to attack minorities and the working class.

Golden Dawn is sending its “black shirt” thugs to attack immigrants who suffer daily beatings and threats from them. According to press reports in Gazi, Athens, they left leaflets outside gay bars warning they would be the next target and attacked gay people leaving the bars.

This poses the urgent necessity of forming local anti-fascist assemblies that should establish groups to defend all those threatened by fascist attack.

In the June 17 election, should Syriza emerge together with other left forces and win a parliamentary majority, a left government headed by Syriza and Alex Tsipas could rapidly be pushed towards the left under the pressure of the mass movement and depth of the crisis. This is also a fear of the ruling class. Such a development in Greece would also set an example in other countries, such as Spain and Portugal.

A government of this character could at some stage even include some features of the Allende government in Chile 1970-73 and also some features of the Chavez, Morales, and Kirchner governments in Venezuela, Bolivia, and Argentina. This could include taking measures that attack capitalist interests, including widespread nationalisations. While at this stage Syriza and Tsipras are not speaking of socialism as an alternative, this could change. In an interview published in the British daily paper The Guardian, he argued that it is “war between peoples and capitalism” (19/5/12). This represents a significant step forward but illustrates how he and the Syriza leadership could be pressured by the situation to go even further to the left. When first elected to power, Chávez in Venezuela did not make reference to socialism. Such a scenario in Greece is not at all certain but such developments could not be excluded at a certain stage. Particularly under the impact of the deepening crisis and class struggle, demands like nationalisation, workers’ control and management can be embraced by wide sections of the working class. This can push “left” governments to adopt such measures, at least partially. This was the experience of the first period of the PASOK government in 1981.

Should the pro-cuts parties be able to cobble together a coalition, on the basis of ND becoming the largest party and gaining the 50-seat bonus, then it would lack any credibility, authority, or stability. All such parties with such a low level of support forming such a government would effectively constitute a coup against the majority of the Greek people by minority pro-austerity parties. They would face intense anger and bitter struggles by the Greek working class. Such a government would face the huge anger of society and a ferocious struggle of the Greek workers to get rid of it, particularly as they will see the powerful possibility of a left government around Syriza, who would, under these conditions, be the main opposition force, deepening its presence and roots in society.

In this situation, Syriza should prepare a struggle against the government and the capitalist system. Xekinima, the Greek section of the CWI, would propose that under these conditions the central slogan should be for a struggle to bring these institutions down through strikes, occupations, and mass protests.

The rapid growth of Syriza is an extremely positive development. However, the depth of the social and political crisis unfolding in Greece will put it to the test along with all political forces. If it does not develop a fully rounded-out programme, set of methods, and approach of struggle that can offer a way forward to the masses, then it can decline as rapidly as it has arisen. To assist those forces in and around Syriza in drawing the necessary political conclusions as to the tasks needed to take the struggle forward, the strengthening of the Marxist collaborators of Syriza in Xekinima is also an urgent necessity.

Greece on the edge, will the EU leaders let them go ?

At the present time, foreign creditors and the Troika (IMF, ECB and EU) are trying to impose a new round of severe cuts on Greece, including 20% wage cuts in the private sector and an immediate slaughter of 15,000 public sector job as part of the destruction of 150,000 jobs by 2015. At the same time, support for the parties supporting the technocrat government of Papademos is in sharp decline. In one recent poll, Pasok, the now neo-liberal former social democratic party, is down to 8%, from 44% in 2009, when it returned to power! The anger and fury about the cuts is now reflected in the hesitancy that ND, the traditional conservative party, and Laos, a right-wing populist force, - in alliance with Pasok behind the Papademos government - are trying to present to the public, before again surrendering to the demands of the markets. “I will not contribute to a revolution out of misery that will then burn the whole of Europe”, Georgios Karatzaferis, the leader of Laos, was quoted, trying to distance himself from the government he supports.



General strike, 7 February 2012

The former banker, Lucas Papademos, was presented in November as a ‘neutral’ technocrat, above the different parties to save Greece after the fall of the Pasok government. On taking over the job of Prime Minister, he had approval rates of 60% or more. Now his support is shattered, and the parties supporting him – Pasok, ND and Laos – have fallen from 83% combined in October 2009 to less than 45% today, with ND on 31% (from 33.4% in 2009) and Laos 5% (5.6%).


Still, the ruling class and their politicians can feel that the mood is explosive.

The failure of two years of severe austerity after decades of stagnation and crisis in Greece is now obvious. The capitalist media and TV channels openly discuss the vicious circle of cuts and further economic decline. It’s widely acknowledged now, that this policy of austerity is a blind alley and capitalist commentators now raise the idea of limiting austerity to allow some limited measures promoting growth. The Troika is more and more criticised for imposing their policies and making the situation worse.

Still no significant part of the Greek capitalists wants Greece to leave the Euro-zone, but the debate is in full swing now on what would happen if Greece is kicked out of the Euro or leaves the common currency itself. Parts of the Greek capitalists are trying to use this as a tool to demand more concessions from the Troika.




With the narrow vote of the Greek parliament last night narrowly voting through new austerity measures mentioned above to be able to qualify for the next installment of the bailout from the IMF. This looks dire for Greecea s it is. They are effectively bankrupt already huge huge unemployment and the suicide rate is shooting up in the last year.

Greek gdp fell 7.3% in 2Q 2011. Est. -5% for 2011. Unemployment est. to be at 1.2M in a country of 12M how can they pay the debt?

Answer is they simply cant. I have a feeling that the EU leadership the ruling class's in germany and France are preparing the ground now for a exit of teh Eurozone for Greece. To me the EU cannot afford to bail out Italy and spain and Greece i think they will sacrifice Greece to try and save the rest of this failed capitalist project.

As for democracy in Greece i think now its long gone. With elections called for April time but all parties manefesto's has to be passed by the IMF. If you think that is democracy having your manefesto passed by the markets first you can think again.

Its time for the greek workers to over throw their government once and for all and to refuse to pay any more of the debt. To urge the cancelation of the debt and the bringing into public ownership the commanding heights of their economy to begin to rebuild Greece under a socialist planned economy.

World capitalism teeters on the edge of disaster

More andm ore gloomy news meets us this week with the news that the world growth figures have been downscaled and world capitalsim edges ever slowly towards another global depression set to dwarf the great depression of the 30's. This is a real crisis now and one we are not getting out of anytime soon.

Only yesterday the worst-case expectation was that the UK’s Gross Domestic Product – the key measure of growth – fell by 0.1% between October and December. But today’s official figure from the Office for National Statistics reveals that the UK economy actually shrank by 0.2% in the last quarter of 2011, and is heading for recession.

Accumulated UK government debt broke through the £1 trillion mark as a dual consequence of falling tax revenues, continued support for the financial sector and higher welfare bills as a result of soaring unemployment.

Despite the ConDem’s stated intention to reduce the country’s dependence on debt, its combined corporate, public and household debt has increased to 507% of GDP and the country remains where it was in the league table of the richer nations when the crisis broke in 2007/8 – right at the top.


The world's economy is "deeply into the danger zone" because of risks from the eurozone, the International Monetary Fund (IMF) has said.

The IMF predicts the global economy will grow by 3.25% in 2012, down from an earlier forecast of 4%.

The growth forecast for the UK economy has been cut to 0.6% from 1.6%.

But the eurozone is set for a "mild recession" in 2012, with GDP expected to shrink by 0.5%, compared with a previous forecast of 1.1% growth.


Not one of the capitalist leaders of teh ruling class know how to solve this crisis and prescribe more austerity to deal with this sinking us further and further into misery . While the rich get richer the poor get poorer. The contradictions and failings of world capitalism are becoming increasingly clear for all to see now.

What we marxists argued at the time of the 2008 financial crash and after there is no way out of this crisis as there is little fat on the bone left to play with. With china's economy slowing and having a knock on affect in South America and Africa where it had been investing heavily wil be scaled back leading to recessions and even longer term depressions in other parts of the world. No where will escape this i feel and unless this rotten system of greed over peoples needs is brought to a end where the wealth of the working class is expropriated for the benifits of the 1%.

It is time society was re organised and the worlds resources planned for the needs of the planet and its people which can all be met if wealth was shared out equally. In a socialist planned society

Lost in Euroland

This latest article posted on www.socialistworld.net is anotehr in the line of top in depth analysis of what is going on inside the Eurozone and the organisation of a deepening economic crisis by the week.

Robert Bechert, CWI

As the eurozone crisis develops, its political and institutional leaders are becoming increasingly desperate as they look for a way out. The latest postponement, amid increasing friction between the French and German governments, of a decision on the eurozone’s next steps is an indication of the crisis’s seriousness. Here, in an analysis written for Socialism Today (November 2011 issue), monthly magazine of the Socialist Party (CWI England and Wales), Robert Bechert examines both the crisis and the test it poses for the left.

"The Euro should not exist (like this)"
"Under the current structure and with the current membership, the euro does not work. Either the current structure will have to change, or the current membership will have to change." (UBS Investment Research, 6 September, 2011)

This blunt statement, at the start of a widely circulated report by a leading Swiss bank, brutally summed up the fundamental character of the ongoing crisis in the eurozone. Despite a series of emergency meetings and agreement of rescue plans this crisis continued to deepen, threatening not only the European economy but also to dramatically worsen the already deteriorating world economic situation, and help trigger a dreaded “double-dip” recession. That was the reason US Treasury Secretary Geithner attended an EU finance ministers meeting in mid-September. European governments faced a potentially massive crisis with no easy way out, as long as capitalism remains.

Desperate attempts are being made to patch up a “solution”, although how long any deal will last is a different question. Within 24 hours of a plan surfacing at the mid-October G20 finance ministers meeting Angela Merkel’s spokesperson was warning against “dreams currently doing the rounds” that everything will be solved at the following week’s EU summit, and then a decision was formally postponed to October 26 at the earliest. At the G20 meeting one minister warned of a “world of pain” if no solution was found, something which millions are already starting to suffer as the crisis hits them.


Angela Merkel, German Chancellor

The widely perceived helplessness of the governments and EU institutions, the fact that repeatedly they are seen to be lagging behind events and incapable of putting forward a solution has only added to the spreading popular fears of what lies ahead.

This is not an abstract crisis. The eurozone disarray is adding to the misery facing many workers and youth across Europe. Living standards are falling as inflation is rising, alongside increasing unemployment in many countries. Cuts in services and wages are widespread. In Greece, currently the worse hit country, the vast bulk of the population is plunging downward into a deep economic and social crisis and facing a huge drop in living standards. The London Financial Times estimated that “planned tax increases and spending cuts for 2011 are equivalent to about 14 per cent of average Greek take-home income – or 5,600 euro for every household ... (measured on) a per-head basis, the total 2011 austerity package is worth 2,200 euro” (18 October, 2011).

Europe is on the edge, facing the possibility of a sudden crisis, especially a banking and financial meltdown that could paralyse much of the ‘real’ economy.

A wake-up call
As popular fears grew, governments in and outside of the eurozone rapidly became aware of potentially devastating impact that an event, like a sudden Greek default, could have. ‘Contagion’ would spread throughout the international financial system. After looking over the abyss of what a new banking crisis and/or a country leaving the euro would mean, the main eurozone countries drew back and agreed to make another attempt to defuse the situation.

In recent weeks warning signs were flashing. Rumours flew around about the condition of the banks. Many are facing a critical situation which is why the European Central Bank (ECB) has again taken steps to prop some up. While the early October collapse and subsequent nationalisation of the Belgian-French Dexia bank took the headlines for a few days, it was hardly mentioned that simultaneously two smaller banks, Max in Denmark and Proton in Greece, were also nationalised.

At the same time as UBS published its views on the Euro, the chief executive of Bosch, the world’s largest auto parts supplier, warned that the eurozone has entered “an extremely critical situation”. While the German owned Bosch had full order books now “in 2008-09 we experienced how fast these orders can melt away” (Financial Times, London, website 7 September, 2011).

The worsening world economic prospects are deepening the European crisis, not just in the eurozone but also in Britain. As Wolfgang Münchau wrote “The most disturbing aspect of the eurozone right now is that every crisis resolution strategy depends upon a moderately strong economy recovery” (Financial Times, London, 5 September 2011)



Wolfgang Münchau

The CWI had warned before the euro’s launch that it would not lead to unity, but would breakdown as result of clashes between the rival national capitalisms and, in the absence of a workers’ alternative, strengthen nationalism. (See box)

In fact, the euro has created a Frankenstein monster. The Greek crisis has brutally revealed this truth. At one time markets expected a Greek “managed default” and there were voices inside the stronger eurozone countries that Greece should be thrown out. The German transport minister Peter Ramsauer told Die Zeit in mid-September it would “not be the end of the world” if Greece were kicked out of the single currency. But the growing realisation that this meant the prospect of massive collateral damage across the international banking system has forced other governments to act.

For now discussion of forcing weaker countries, like Greece, to leave or the possibility of stronger countries, like Germany, deciding to quit the euro has stopped, although this can reappear in the future. The failure of Belgian-French owned Dexia was a wake-up call. One reason for Dexia’s collapse was its exposure to Greek government debt estimated at 39% of its equity capital. But this was not unique amongst banks, this summer the comparable figure at Germany’s second biggest bank, Commerzbank, was 27% (Wall Street Journal, 31 August, 2011). Dexia’s collapse was a warning that it would be extremely expensive to maintain a financial firewall around Greece should it suddenly default.

A more drastic haircut?
With spreading fears of both the “health” of banks and impact of a Greek collapse, banks once again turned to the ECB as a “safe” place to invest, rather than lend to other banks, and for short-term funding. But it is not just a question of Greece triggering a crisis, unexploded financial bombs litter the European landscape. The European Bank for Reconstruction and Development has just cut back the forecasts it made in July for 2012 economic growth in central and eastern Europe - in Hungary from 2.8% to 0.5%. Not only does this bode ill for Hungarians but also it threatens Austria’s banks, which are heavily exposed to Hungary.

The new drive to attempt to stem the crisis was behind the pressure in October to force Greece’s creditors to accept more of a “haircut”, a reduction in the amount of their loans they will actually get back. In July’s rescue deal an average 21% was agreed in July. At that time the French government, fearing the impact on its own banks, rejected a 40% cut, however by mid-October figures of 40% to 60% were being discussed such was the seriousness of the situation. This, governments hope, would avoid a formal default and allowed a managed restructuring that would prevent a sudden crisis. But even with this figure it would not be the rich who really paid, the banks would attempt to offload the cost onto taxpayers and customers.

Nevertheless banks resisted any increased losses. German banks, in particular, were bitterly complaining. Andreas Schmitz, head of BdB (German banking federation) warned that politicians should not declare “war” against banks (Bild.de website, October 15, 2011). The next day Schmitz accurately summed up the current reality of the crisis when he said that the October 15 anti-bank protests were “a diversion from the fundamental problem: that we can no longer finance our welfare states”. (Financial Times, London, website, October 16, 2011). Of course when Schmitz spoke of “we” he meant the capitalist system and its ruling classes.



Andreas Schmitz

Really, a poker game is going on as the different countries and financial institutions struggle over the size of the “haircut”, the roles of the ECB and EFSF (European financial stability facility), how the EFSF will be funded, the role of funding from outside the EU and other issues. Relations between the French and German governments have become strained. While there is enormous pressure to reach an agreement, even if there are doubts as to how long it will last, the risk of “accident” causing a disaster is ever present.

Dangerous to leave
Fearing the consequences of a break-up of the current eurozone or an abrupt Greek default the stronger EU powers are debating possible new structures to tighten controls over economically weaker countries as a price to provide financial support.

While “Eurobonds” would appear to be a logical capitalist solution for the ruling classes to attempt, they would run up against the growing popular opposition in all countries to the idea of underwriting other countries’ banking debts. This is not simply as a result of nationalist campaigns against, for example, Greece. Falling living standards in most countries and the bitter understanding since 2007/8 that much of the bailouts will actually end up in the hands of the banks and finance markets also fuel the opposition.

In answer to this opposition to financing other countries’ debts there are proposals to set up new structures to impose controls on eurozone countries. How effect they would be is another question. In 2003 the euro’s original Stability and Growth Pact (SGP) was ignored because the two largest powers, France and Germany, broke its conditions. In an attempt to escape political pressures for flexibility, the Dutch Finance Minister Jager, while supporting the German economics minister Rösler’s idea of a European Stability Council that could impose sanctions, said that its decisions should be made by “academics and experts – but no politicians” (Spiegel Online, 22 August 2011).



Jan Kees de Jager, Dutch Finance Minister

However such measures will only back fire, already in Germany there is resentment at what is referred to as the EU moving towards a “transfer union”, meaning a permanent movement of funds from the richer to the poor EU countries, although in reality much of these payments end up back in the banks of the richer countries.

The tensions inherent within the eurozone will increase, especially in this period when there is no immediate prospect of sustained economic growth.

Events this year have posed the question about the eurozone’s future, whether all the present members will remain? As the UBS report (see box) shows there would be substantial economic and political costs and dangers involved in leaving the zone. This is the Frankenstein factor, the eurozone countries have created a system which is imposing huge costs on some economies and strangling others, but which is very dangerous to leave.

However, while these costs can delay such a break, tensions could mount that will force a brutal shakeup. This is why, despite the massive overheads, there are discussions both about the possibility and methods of break-up of the current eurozone, both “weaker” countries leaving or of Germany pulling out. In Germany there is a kind of undercover debate within the ruling class because, while leaving the euro would remove the need for it paying towards the weaker eurozone countries, this would, at a stroke, cut its “home” market from 332 million to just under 82 million. At the same time German exports would be undermined by a new currency that would probably initially soar in value.

A living struggle
Alongside the mounting euro crisis and national difficulties, there is rising anger amongst workers, youth and the middle class as the effects of the crisis bite deeper. This is the reason for the unpopularity of most European governments, the mass demonstrations and strikes in a series of countries.

A new stormy period has begun and sharper struggles will develop. While determined struggle, the threat of resistance or a very serious economic or social situation crisis can force governments to make temporary concessions, generally the ruling classes will be forced by the crisis of their system to, at best, hold down living standards. That is the meaning of Andreas Schmitz’s statement and the reason why ruling classes will be forced to attempt to push attacks through.

Faced with serious opposition, governments will tend to move to use more authoritarian methods. These will vary according to the situation in each country, but in the worse case scenario the ruling classes will even look to dictatorial measures.



Today, Greece is facing a social and economic disaster and its ruling class is not confident of what will happen. This is the background to the report last May in the German mass-circulation newspaper Bild, that the CIA were speaking of a possible coup in Greece in the event of severe unrest developing. This is unlikely in the near future, but in a situation of continuing turmoil such an attempt cannot be ruled out. The Greek military have done this before, the last time they staged a coup was in 1967 and they ruled for 7 years. But a new coup, in a time of deep crisis, would not automatically be a repeat of the last colonels’ regime.

Such a development is not inevitable, but depends on the character and policy of the opposition movements, particularly what the workers’ movement does.

In some sense it is a race between the left and the right as to who will lead the opposition to the eurozone’s polices. Already in a number of countries, it has been right populists who have, in the absence or weakness of the left parties, made electoral gains by combining taking up some social issues with nationalist based anti-EU and anti-migrant slogans. In Greece overwhelming opposition to the cuts and the country’s downward spiral has created a potentially revolutionary situation but, so far, there is no mass based genuinely socialist force that can give concrete direction to the movement.

Unfortunately the response of the official leadership workers’ movement has been limited, with most of the pro-capitalist trade union leaders only organising any action when they have been pushed from below. Even when actions are organised the trade union leaders try to restrict them to symbolic actions and strive to avoid them becoming a step in a serious struggle.

European left
There is a reluctance within the trade unions and in many left parties to challenging the EU or euro itself, something sometimes justified by pointing to the EU’s right wing nationalist opponents. Rather than explaining that the EU is not a step towards socialist internationalism but a club of capitalist nations run in the interests of big business and the big powers, the largest grouping of European left parties, the European Left Party (ELP), talks of a “refoundation” of the EU without mentioning any break with capitalism and, by implication, supports the continuation of the euro.

The UBS report warns of the wider possible consequences of a massive crisis and eurozone breakup. There would not only be huge disruption but the growth of national tensions and conflicts. UBS is not alone in warning of the “some form of authoritarian or military government, or civil war”. In mid-September the Polish Finance Minister warned the European Parliament, in a “personal” comment, of the dangers of new wars in Europe. Later he was asked to explain this and he said that while war is not likely “within a four-year legislative time frame ... Not in the months ahead, but maybe over a 10-year time frame, this could place us in a context that is almost unimaginable at the moment.”

While not immediately posed, future conflicts between states cannot be ruled out if the working class is not able to impose its own socialist solution to the crisis. But the EU, a complete capitalist institution that is effectively run by the major powers, is not a vehicle for either socialist change or democratic socialist planning.

The ELP, whose strongest parties are DIE LINKE (Left party) in Germany, the Parti Communiste (PCF) in France, Left Bloc in Portugal and Izquierda Unida (United Left) in Spain, puts forward a number of individual policies that socialists support, although often these are vague, loose formulations. However it does not link these together into an overall anti-capitalist, socialist programme.

This approach was seen in DIE LINKE’s three demands on what the German government to argue at the October 15/16 G20 finance ministers’ meeting. They were worldwide strict regulation of “Finance Casinos”, a tax on financial transactions and a coordinated conjunctural programme. However, these proposals cannot be fully implemented under capitalism and, while DIE LINKE also mentioned its call for public ownership of the banks, its approach was one of simply demanding measures that could be taken within capitalism.

Naturally Socialists argue for individual demands that can immediately improve the conditions of working people and the poor. But such campaigns have to be accompanied by an explanation that such demands can only provide temporary improvement and that, especially in this time of crisis, a socialist transformation of society is required. Without this explanation they are attempts to run this system in a ‘better’, ‘fairer’ way, efforts that will ultimately fail.

The speculators’ grip
A key factor in the development of this crisis has been the massive pressure from the financial markets. Since the break-up of the post Second World War Bretton Woods currency system and the deregulation of finance there has been a huge explosion of the finance markets, alongside a similar growth of all forms of speculation in commodities, property and spread betting on anything that moved, or didn’t. The figures are simply mind-blowing and are hard to grasp. In the EU finance transactions were, in 2010, 115 times the EU’s 12,300bn euro GDP (Austrian Institute of Economic Research, Financial Times, London, 18 August, 2011). All the political leaders bow to these markets, often their official statements are directed simply to the markets.



Naturally the question of how to break the grip of this speculative market’s grip over nearly all aspects of life is a burning issue. It cannot be ruled out that different capitalist nations, or groups of nations, may attempt to isolate themselves or place some controls on these markets, in effect states clipping the speculators’ wings in the wider interests of the capitalism as a whole. But this would be no long term solution. For example an attempt to go back to a system of fixed exchange rates would not, in the medium or longer term, prevent currency crises or forced devaluations.

There is now growing support for a tax on financial transactions (a ‘Robin Hood’ or ‘Tobin’ tax). This is now the official policy of the EU’s Commission, seen by them as a useful political gesture and a way of raising funds. But while socialists would not oppose such a tax it would leave untouched the basic power of the huge financial and trading institutions that runs these markets.

Similarly simply leaving the euro would not solve the problems of Greece or other countries. Socialists opposed the introduction of the euro and today support breaking its grip and that of “Troika” of the EU, ECB and IMF that are effectively dictating what the Greek government should do. The key question in Greece is breaking with the capitalist system, without this living standards will fall for some time whether or not it stays with the euro.

A socialist task
Socialists would not oppose leaving the euro but would firm link it to a socialist, not state capitalist, policy of bank nationalisation. In a single country breaking from capitalism a state monopoly of foreign trade and exchange controls would be necessary as a defence from the international markets until similar movements spread to other countries. These steps, as part of a policy to bring the commanding heights of the economy into democratically run public control and ownership, would allow a start to be made in planning the use of economic resources for the benefit of all. Without such a socialist policy the results of leaving the euro would be along the lines spelled out in the UBS report, namely a cut in living standards.

Much of the population opposition to the EU is based upon the way it is run, the privileges of its bureaucratic elite and the way it is run it the interests of the big countries and companies. Socialists however, while fighting nationalist oppression and EU diktats, do not oppose the EU or the euro from a narrow, nationalist standpoint. The unification of the whole of Europe would be an enormous step forward. But this cannot be achieved on a capitalist basis. The existing EU institutions, like the EC, the ECB and so on, are clearly agencies of the capitalist ruling class, incapable of surmounting capitalist limitations.

The task facing socialists is to argue for a socialist internationalist alternative, a voluntary socialist confederation of European states, to the pro-business EU. Without this there is the danger that opposition will take a nationalist direction.

This divisive turning point in EU has opened up new period of sharper struggles, will provide an opportunity to rebuild the workers’ and socialist movement, but not as an end in itself but in order to build the forces that can fundamentally change society, end the chaos and instability of capitalism and really make poverty, fear a thing of the past.

Europe in turmoil – A socialist analysis
June 18, 2005
The current crisis is a vindication of the analysis of the Committee for a Workers’ International (CWI) that the European capitalist classes are unable to unify Europe to construct a capitalist ‘United States of Europe’, as even some Marxists outside the ranks of the CWI believed.


The EU ‘project’ for greater economic and political integration was rooted in the pressure on the European capitalists from competition from US imperialism and, more recently, from China. This drove them towards increased collaboration and led to illusions that this would result in a politically unified Europe. This trend, along with the process of globalisation of the economy and growth of multi-national and trans-national corporations, illustrated how the productive forces have outgrown the limitations of the national state and to a certain extent have even outgrown continents. The big companies increasingly look towards the world market rather than simply their national or regional base.


Yet, at the same time, this process has its limits and comes up against the insurmountable barriers of the separate nation states and the national interests of the capitalists. In the aftermath of the referendum these factors have reasserted themselves, exposing clearly a clash of interests. Some thought that the process of EU integration and EMU represented the point of “take off” for a unified capitalist Europe.


The CWI consistently argued that this was not the case. Our analysis explained that although the process of integration of the EU went a long way, further than even we originally anticipated, at a certain stage a recoil would take place. This would result in renewed national antagonisms and conflicts between the various national states. This process of unravelling would worsen in the event of a serious economic crisis, recession or slump.


The end of the euro?


The introduction of EMU and the euro was a political and economic gamble by the capitalists, pushed through in the teeth of some opposition from their own side, during the triumphalist wave which followed collapse of the Berlin Wall. Initially the Bundesbank opposed the introduction of the euro but was compelled to accept it in the light of the political pressure of the capitalist politicians who supported its introduction. The stability pact was introduced as a ‘safety net’, which was intended to prevent governments resorting to “profligate spending”.


Yet, the whole idea of the euro was tailored to a situation of continued growth of the European economies, with no real account taken of what would happen in the event of a slowdown, stagnation or recession. The mood expressed in the referendums and recent workers’ struggles also reflects dissatisfaction that the economic growth, jobs or higher living standards promised with the introduction of the euro have materialised.


The ruling classes attempted to impose an economic union in the absence of an existing political union. As we explained at the time, this has never succeeded in the past. Without a political union, moving towards the establishment of a unified nation state, an economic union or currency could not survive indefinitely.


When the “project” was on track the capitalists ignored the lessons of history. Now faced with today’s crisis, newspapers like the London Financial Times belatedly can warn that such contradictions cannot be reconciled indefinitely.


In an article which seriously questions the sustainability of the euro, Wolfgang Münchau pointed out: “All large-country monetary unions that did not turn into political unions eventually collapsed. The Latin Monetary Union of 1861-1920 collapsed partly because of a lack of fiscal discipline among its members – Italy, France, Belgium, Switzerland and Greece. A monetary union set up in 1873 between Sweden – which included Norway at the time – and Denmark failed as political circumstances changed. By contrast, Germany’s Zollverein, the 19th century customs union that developed into a monetary union, succeeded precisely because of the country’s political unification in 1871.” (Financial Times, London, 8 June 2005).


There is a vast difference between a federal state, such as the US, which can distribute funds to local state governments in a relatively easy fashion on the basis of an agreement and the EU. The distribution of resources or funds cannot be done in the same way, in a Europe composed of different nation states, as the current struggle over the EU budget shows.


The current EU crisis has revealed that the monetary union, rather than leading to a political union, has resulted in a political fracture between the national states. Partly, this is what lies behind the current spat over the EU budget, which was triggered by Chirac’s challenge to Britain’s rebate. This is a dangerous ploy, from the point of view of the French ruling class, because it has allowed Blair to raise the whole issue of the Common Agricultural Policy (CAP) in retaliation. France currently receives over 20% of farm subsidies from the CAP, which is a purely political decision to maintain support for the French bourgeoisie and Chirac amongst French farmers.


Chirac is attempting to use these issues to turn the underlying class vote of the referendum into a nationalistic conflict over the EU budget. Blair, dressed in the political gown of Thatcher, is also attempting to present himself as the nationalistic defender of Britain over the EU rebate. The German Chancellor, Gerhard Schröder, is aligning with Chirac, while his opponent in the forthcoming elections, Angela Merkel, from Christian Democratic Union (CDU), tends to support Blair. While some compromise on the budget is eventually likely this conflict illustrates the new increased national tensions and contradictions which are set to emerge in the coming months and years.


While an immediate collapse of the euro or the EU is not the most likely short term perspective, the sharp increase in political and economic tensions between the representatives of the various ruling classes will intensify. The conflict of interests is now driving the capitalists of Europe towards the establishment of a looser federation of national states which is contrary to the dominant tendency of the recent period.


However, the onset of a deep economic recession or slump or world financial crisis will sharpen these conflicts further and could provoke a relatively rapid collapse of the euro. The withdrawal of Britain from the ERM in 1992, on ‘Black Wednesday’ shows how diverging national economic conditions can drive the capitalist class of a country to break from a currency or monetary agreement. Although there are differences, and it will not be repeated in exactly the same way, the euro can break up, with one or more country withdrawing or even being expelled from it.


Even before the French and Dutch referendums, the question of the sustainability of the euro in the face of diverse growth and inflation rates was beginning to be discussed amongst capitalist’s strategists. At one private meeting, on May 25, involving the German Finance Minister, Hans Eichel, and Axel Weber, President of the Bundesbank, a representative from Morgan Stanley (an investment bank) Joachim Fels, expressed concern about the sustainability of the euro. According to the Financial Times even the extreme pro-EU lobby group, ‘Centre for European Policy Studies’ published a report in early June that raised the prospect of a collapse in the euro. (8 June, 2005).

(Extract from a 2005 CWI statement written at the time of an earlier crisis after a draft EU constitution was rejected in referendums in France and the Netherlands)

Extracts from UBS study “Euro break-up – the consequences”:
The economic cost for a “weak” country leaving the euro
The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak euro country leaving the Euro would incur a cost of around 9,500 to 11,500 euros per person in the exiting country during the first year. That cost would then probably amount to 3,000 to 4,000 euros per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

The economic cost for a “stronger” country leaving the euro
Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around R6,000 to 8,000 euros for every German adult and child in the first year, and a range of 3,500 to 4,500 euros per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over 1,000 euros per person, in a single hit.

The political cost
The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war.