If the 2008 economic crisis was a turning-point for the European Union, leading it into an extreme situation, the 2020 debacle might lead to its almost complete break. After Brexit and a deep and long depression, the centrifugal forces which were hardly controlled during the 2014 crisis, only at great cost, through crushing the Greek people and sowing austerity, will turn even more incontrolable with each passing day.
The 2008 crisis had a very serious political effect. The idea that european capitalism was more “humane” and “social” was torn to pieces, with the force of the savage cuts, and the so-called “welfare state”-tiny in many of the EU countries- was demolished without hesitation, to rescue the big banks and big businesses.
The idea of european political unity, and “solidarity” between member states, was another myth that completely vanished. The establishment of the euro currency and its subsequent crisis led to a period of increasingly sharp national confrontations, which were more evident in each passing european summit. The summit that took place on the 23rd of April is a clear example.
Is it going to be different now?
Many media outlets, as well as the socialdemocratic leaders- both the old guard and the new left formations that have inherited their discourse - repeat that this crisis is “an opportunity to build a genuine European Union” and that everything “can be made different” from now on.
They try to fool us with arguments such as “it is not a financial crisis because it is caused by the pandemic and not the banks”, or “ we have learnt the lessons from the past”, “cuts are useless” and “ we need to spend all money needed for no one to be left behind”....
But reality does not match these words. For the majority of the population, this crisis is going to be, and is already being, a worst nightmare than the 2008 crisis. The plans and actions of the european bourgeoisie, headed by Germany, have not changed at all: its priority is to safeguard the interests of big capital and after that is everyone for themselves, as long as the bill is paid by the working-class and future generations..
The figures do not leave any doubt about the depth of the crisis. Christine Lagarde, European Central Bank (ECB) president, has said that in 2020 the eurozone economy will shrink, best case scenario,9%, although the fall can reach 15% of the GDP. Deutsche Bank (DB) has stated that the contraction will be double what it was in 2008 (-4.5% of the Eurozone GDP then). We have seen a 3.4% decrease in the first quarter and a further 11.4% is predicted until June.
Furthermore, the GDP contraction will hit the engines of the european economy at full force, with all the consequences that entails. The IMF forecasts a GDP contraction of 7% in Germany and 7.2% in France (with a 10% fall in the second quarter), whilst the perspectives for south european economies are even bleaker: -10% in Greece, -8% in Portugal, and Italy and Spain reaching up to a 12% fall .
Regarding the end of the crisis, a DB report predicts that the Eurozone GDP will not reach its 2019 level until the end of 2021. Other reports, such as Unicredit, are much more grim: the production level will be 4% inferior in the end of 2021 than in the same period of 2019.
A social shattering in an already battered terrain
The social effects of this crisis are being brutal. Deutsche Bank states that “eurozone unemployment will increase by 7% to reach a figure of 15-20%”. In less than two months, more than 30 million workers from the 5 biggest European economies have been affected by temporary or partial suspension of their employment. According to Financial Times, a fifth of the active population of Germany, France, United Kingdom, Spain and Italy have been laid-off or suffered processes akin to lay-offs. France is at the lead with almost 10 million workers in this situation, followed by Italy with 7 million and Germany with 5 million.
In the Spanish state, where more than 4.1 million workers have been laid-off (ERTE), according to various reports-such has the ones published by Funcas and the Adecco Group- the level of actual unemployment can reach between 35 and 40%, not the official 14.4%. It is the highest level ever recorded: the previous record, from the last recession, was 27%.
The debt piles up, preparing the next crash
Far from being corrected, the imbalances left by the last crisis have not stopped increasing. The public purse has been overloaded with the bank bailout bills , and the state budgets are facing this storm in worse conditions than before. The conditions for a new debt crisis are now more than ripe. The EU's joint debt, which was 60.7% of the GDP in 2008, is now around 80% of the GDP, and it is probable that it will reach120% by 2021.
Eurozone’s third and fourth economies are now in the hot seat. A crash or suspension of debt payments by Italy or the Spanish State would have even greater consequences than what happened with Greece in 2009. Italy’s public debt is 134.8% and its forecast to reach 150% this year and 160% in 2021. In the Spanish state, it will go over 100% in 2020 and will reach 117,8% in 2021.
As in 2008, a portion of the public and private debt is rated as “junk” if there is a peril of non-payment. The risk insurance premiums of the weaker countries, such as Italy and the Spanish State, are already suffering the biggest increase since June 2016. Goldman Sachs estimates that the aggregate debt of all “the companies which have lost the confidence” of the credit rating agencies, in Europe, is around 150 000 million euros!
Massive debt and paralysis of production: the perfect recipe for a new financial crisis.
The farce of european summits
The social and economic crisis has sharpened the tensions between the european bourgeoisies, which came to light in the summit called to coordinate the health policy response to the pandemic and the economic plan to face the economic crisis.
Instead of an “united response” and a rational use of all the technological and industrial potential available in Europe to fight off coronavirus, we have witnessed a death struggle between the various EU member states, competing to buy health supplies and a veritable commercial sabotage between them. Whilst the german government has forbidden the export of essential medical equipment to Italy, the french government did the same regarding the sending of masks to Spain and Italy. A ghastly spectacle- when official reports of COVID related deaths in the continent reach 100 000 people dead- which reflects the decadence of european capitalism.
This has been so nakedly scandalous, for everyone to see- 72% of Italian people believe that the EU has done nothing to help them- that the EU commission president, Ursula von Der Leyen, had to say that “it is just for Europe to offer a sincere apology to Italy”. Facing the health crisis, Italy had to reach out to China, which is filling the void left by the other powers. According to press reports, by the 15th of April China had provided almost 4 000 million masks, 38 million protective gowns, 2.4 million infrared thermometers and 16 000 ventilators to European Governments.
In the economic sphere, there is a lot of talk that the EU needs to adopt “bold and ambitious” measures, “exceptional action to face exceptional circumstances”, but this is, once again, nothing more than propaganda.
In March, the ECB gave the green light for a 750 000 million euros investment to buy sovereign public debt. They are trying to avoid an uncontrolled upward trend in the cost of debt, but they are not meeting with much success. ECB has now taken another step, by accepting “junk bonds” in its debt buying programme until September 2021. But these measures do not solve the underlying problems, they will only cover them up, worsening its future consequences. Evidently, no measure was taken against the speculators and the big banks, which are the real culprits of a financial bubble that does not stop growing thanks to public money. To ease the bankers troubles, ECB has reduced the requirements regarding how much fixed capital banks have to hold (the cushion to avoid a crash), therefore “freeing” their money to “go into business”.
The 9th of April Eurogroup meeting has agreed an “anti-crisis shock plan” valued at 540 000 million euros. In spite of all the fanfare surrounding it, and its masquerade as a community effort in favour of the european project, reality is very different. All the demands by Pedro Sánchez, Costa, Conte and Macron in favour of a “Marshall Plan”, “coronabonds” and “solidarity” were firmly rejected by Germany and the Netherlands, which refuse to take up its share of the consequences of the crisis and are trying to come up ahead by defending their national companies and interests. Of course, a decision about a new post-pandemic rebuilding economic fund was delayed.
Moreover, it must be underlined that the 540 000 million euros will be only available in the form of loans and need to be returned, and have a main objective: to rescue the big companies and their balance sheet, not to save the people, jobs and social services.
The programme breakdown is as follows: the European Stability Mechanism (ESM) will make 240 000 million euros available to the States, with an upper limit comprising 2% GDP of the target country, and it will make this money available on condition of “adjustment” and fiscal stability plans- that is to say, more cuts and austerity. Using Spain as an example, the credit for health spending “without being conditioned to adjustment measures” can reach 25 000 millions.
200 000 million more will be loaned by the European Investment Bank to companies, which will have a 25 000 million guarantee by the states- which means that if the companies do not pay up, we will have to pay for them. And another 100 000 million will be earmarked to finance temporary furloughs (job suspensions), lay-offs and contracted hours reductions, meaning, more measures to benefit the companies and that the states will support with a further 25 000 million in guarantees.
Lastly, the European Chiefs of State Summit, on the 23rd of April, has given its stamp of approval to this package, which will not be in place until the beginning of June. It is an unmistakable triumph for the german bourgeoisie, which will remain in control of EU policy: it will follow the post-2008 line, with adjustments, austerity and cuts, but at a bigger scale, whilst it energetically rejects the “coronabonds” and any Rebuilding Fund that entails the mutualisation of the debt or “non-repayable” budget transfers to the south countries.
For a socialist Europe
The root beneath the confrontations in the european summits is the increasing duel between the interests of the various national bourgeoisies, developing in the frame of a deep financial and economic crisis.
When the ruling class of the peripheral countries, and partly France too, demand the “mutualisation of the debt” (coronabonds or in other forms), they intend to export their problems to the door of german capitalism. They can wrap it in nice words: “solidarity”, “europeism”, “civilisation”, but there is no honour amongst thieves.
One thing for the german bourgeoisie is to contribute sporadically, giving credits if they are given guarantees, but they will never accept to be burdened with the debt of eurozone’s most fragile countries, especially when Germany will end the year with a 4.7% GDP deficit, compared with the 2019’s 1.4% superavit. Any small concession will be given on the condition that Germany can reinforce its hegemonic role within the EU, but it will not stop protecting their companies in the coming fierce struggle for every share of the world market.
Since the 2008 crisis the EU’s centrifugal tendencies have increased even further- with Brexit being the best example- prodded not only by the protectionist trends and economic nationalism but also by political factors. People’s belief that their lives and future would be better inside the EU has plummeted. On the other hand, all of the various european bourgeoisies have unanimously decided to focus their speeches in patriotic and jingoistic nationalism as a barrier to social protests and the class struggle.
It is the ruling class who feeds and legitimises the reaction. The only thing the far-right does is to loudly defend what the “democratic bourgeoisie” and the socialdemocratic leaders of all stripes say behind closed doors. The argument that the rise of ultra-right “populism” in Europe will force Germany to concede in the eurobond and rebuilding fund question has absolutely no basis.
In the last decade, Europe has lived through enormous mass strikes and protests, revolutionary crisis- such as in Greece, defeated due to the betrayal of Syriza-working class and industrial struggles which have paralysed France for months, mass youth demonstrations against climate change and historical mobilisations of and for working-class women. We have seen the birth of new reformist left parties which failed in their aim to reform capitalism, whilst authoritarian and bonapartist trends grow in many States and the far-right gains ground in a landscape of ever increasing social and political polarisation.
The current situation starts to resemble the 1930’s more and more everyday: the class struggle will give no truce, but it will intensify. Now, more than ever, the only means to end the current system’s exploitation and barbarism is through working-class struggle and the raising of a socialist alternative. Sooner or later, after the lockdown and quarantine ends, the european working-class will be in the forefront of the battle and will be the key to triumph and start building a Socialist Federation in Europe and the world.
