wsws : Euro aid package inaugurates offensive against working class

lusephur

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Euro aid package inaugurates offensive against working class
13 May 2010

Last weekend, European leaders and finance ministers agreed to a rescue package for the euro which inaugurates the most comprehensive offensive against the working class since the end of World War II. This offensive must be repulsed by the combined resistance of the European working class.

On Friday evening, the leaders of the euro-zone countries met in Brussels to formally pass the €110 billion package for Greece drawn up during the week. But a two-hour dinner then turned into a six-hour crisis meeting.

Two days beforehand, a general strike in Greece had clearly shown the scale of the resistance to the austerity measures being introduced by the Greek government. The financial markets, which had seen massive profits garnered through speculation on a Greek sovereign default, were then gripped by panic. On Thursday, America’s Dow Jones stock index at one point plummeted by up to nine percent.

This increased the pressure on the European governments to provide debt guarantees not only for Greece, but also for all other deficit-ridden euro countries. President Obama picked up the phone personally to convince German Chancellor Angela Merkel to abandon her opposition.

In a night session, the heads of state and government leaders then established the foundations for a comprehensive financial package that was then further elaborated at another summit meeting on Sunday. It was to be finalised in the early hours of Monday morning, before the Japanese markets opened and the wave of speculation against the euro resumed.

The members of the euro-zone, the European Union and the International Monetary Fund set up a fund of €750 billion to be used if necessary to refinance the debts of those euro-zone countries facing payment difficulties. In addition, the European Central Bank (ECB) purchased government bonds from highly indebted countries to curb the rapid increase in interest rates.

The leaders and finance ministers presented this huge financial package as an indispensable measure to rescue the currency union, and as an aid to highly indebted euro area countries. In reality, it is a financial gift to the international banks and investment funds. It is, in the language of official politics, meant to “calm down the markets” and regain their “trust”. Speculators, who have earned vast sums by betting against the Greek government’s debt and the euro, are to have all their risks underwritten at public expense.

For this reason, the stock exchanges celebrated the new rescue fund on Monday with an enormous upsurge in prices. After last Thursday’s panic, they now had assurances that the European governments stood on their side and had declared war on the working class.

The extent of the powerful wave of speculation against the euro was made clear by Jochen Sanio, head of the German financial supervisory board Bafin, speaking to last week to the budget committee of the Bundestag (parliament). Sanio spoke of a “war of aggression by the speculators, against the euro zone”, which involved “crazy sums” running into tens of billions. In the case of Greece, speculators exploiting CDS (credit insurance) were able to reap about 500 percent profit in three to four months.

These record profits are also reflected in the balance sheets of the major investment banks. The Deutsche Bank recorded a pre-tax profit of €2.8 billion in the first quarter of 2010, a return on investment of 30 percent. In the same quarter, Goldman Sachs, for the first time in its history, reported a profit on each day of trading, on most days amounting to $100 million.

The working class will now pay for these huge sums of money in the form of welfare cuts, wage cuts and unemployment. With the new euro rescue package, the European governments have placed themselves completely at the mercy of international financial capital. If they do not drastically reduce their budget deficits, the next wave of speculation will inevitably follow. If the financial guarantees are then called upon, the holes in the state budgets will grow, demanding even greater austerity measures.

Experts therefore agree that the euro rescue package is only the beginning of a massive European-wide austerity program, which will spell the decimation of the European welfare state. This shows the real character of the European Union as a tool of the banks and the most powerful sections of the European bourgeoisie.

The Financial Times commented on the package: “Most of the European Union is living beyond its means.... Many Europeans have come to regard early retirement, free public health care and generous unemployment benefits, as fundamental rights. ... Yet if Europeans do not accept austerity now, they will eventually be faced with something far more shocking—sovereign debt-defaults and collapsing banks.”

In Germany too, many economists demanded tough austerity measures. The leader of the so-called “economic wise men”, Wolfgang Franz, said the rescue package had merely extinguished the “fire in the Euro-house”, now it was time to “clean up”. Economics expert Kai Carstensen said radical austerity plans were called for in the euro countries. “If they do not all reduce their debts, the problems will be even larger in three years,” he said.

What began in Greece—lowering wages by 30 percent, the reduction of pensions and benefits, mass sackings in the public sector—is now a model for all Europe. Opposition to these measures must be organised across Europe. Workers in all European countries must support Greek workers and unite together with the international working class.

This requires a complete break with the social democratic parties and trade unions which declare that there is no alternative to slashing state budgets and offer their services to finance capital in order to implement these cuts. In Greece, the social democratic PASOK has taken up the task of enforcing a drastic austerity program. In Spain the socialist head of government Zapatero announced public service wage cuts immediately after the euro rescue package was announced and in Portugal his socialist colleague Socrates is pursuing a similar policy.

In Britain, the Tories and Liberal Democrats, with the support of the Labour Party, have just taken over the government in order to push through a drastic austerity program. In Germany, after the state elections in North Rhine Westphalia, consideration is once again being given to the participation of the Social Democratic Party (SPD) in government, in order to impose a new round of austerity measures. The Greens have also supported the bank rescue packages and the related austerity measures. Christian Democratic Union (CDU) right-winger Roland Koch, who is being discussed as a future finance minister, is already calling for strict austerity measures and the abandonment of all reforms in the education system adopted in recent years.

The trade unions in all of these countries play a key role in suppressing resistance against the cuts, dividing workers and diffusing opposition. They enjoy the support of a host of petty-bourgeois organisations that formerly described themselves as “left” and today strictly reject a revolutionary perspective.

With the aid package adopted over the weekend, the attacks on the working class take on a pan-European form. Several regulations governing the monetary union—such as the prohibition of mutual financial assistance and the independence of the European Central Bank—have been abandoned. If a government does not meet its savings targets, all the others are directly affected. This will significantly exacerbate tensions within the European Union.

The working class must prepare politically for the coming class struggles. It must break with the political parties and organisations that support the rescue packages for the banks and the associated austerity measures, and with the unions and the many petty-bourgeois organisations which stoke up nationalism to divert attention from the class issues. The conflict is not between Germans and Greeks, or Europeans and Americans, but between the international working class, on the one hand, and capital and its political lackeys, on the other.

Opposition to the attacks must be organised at all levels. The only alternative to a future of poverty, repression, unemployment and growing national tensions is the unification of the European working class on the basis of a revolutionary socialist program: repudiation of all debts, the socialisation of banks and major companies under the democratic control of the working class, the confiscation of speculative profits and a high level of taxation for large incomes and fortunes.

The progressive unification of Europe is only possible on the basis of such a revolutionary socialist program in the form of the United Socialist States of Europe. The International Committee of the Fourth International is the only political tendency worldwide which advances such a perspective. We call on workers, students and critical intellectuals to study our program, read the WSWS and join the ranks of the International Committee.

Peter Schwarz

It started with the PIGS and, would you believe it, the same formula is to be applied to the rest of us now.

The propaganda says that we southerners are a bunch of lazy, good-for-nothing welfare queens.

Let's look at the numbers. From Vicente Navarro (a regular at Counterpunch):

What is striking is that this liberal dogma, repeated by the news and persuasion media, has very little empirical evidence behind it. It is easy to show that the root cause of the problems experienced by countries with major difficulties is not their excessive public expenditure. In fact, in all of them (Greece, Portugal, Spain and Ireland), public expenditure as a percentage of GDP is below the mean for the Europe of the Fifteen, the group of most developed EU countries to which they all belong. The same happens with public social expenditure as a percentage of GDP, also below the EU-15 mean. You have an identical situation with public sector employment. The percentage of the population working in the public sector in all these countries is below the mean for the UE-15 (see Navarro, V. (ed). La situación social en España, Vol III. Biblioteca Nueva).

And as for the supposedly exuberant salaries, the figures show that, taking the wages of workers in the manufacturing sector as a point of reference, all these countries have salary levels below the mean for the EU-15 (even lower, in fact, than would correspond to their level of wealth) (see V. Navarro, Marta Tur and Miquel Campa, La situación de la clase trabajadora en España, at www.navarro.org, Economía Política section). In contrast, business and banking profits are among the highest, as well as tax fraud. All this data shows that their problems are not due to “excessive” public expenditure or “exuberant” wages.

For which reason there is a much more credible explanation for the origins and causes of the financial and economic crises that is marginalised and ostracised in the news and persuasion media and forums in Spain and the EU. The current crises are the direct consequence of the liberal policies promoted by the European establishment that have provoked a vast polarization of income and the creation of major inequalities. The cited countries have the greatest inequalities in the EU, in a continent where inequalities have grown enormously. Income from work as a percentage of total income has fallen massively, and with it demand, one of the most important causes of the crisis. The other cause of the crisis is the lack of credit, also the result of income polarization with the exuberant rise in capital gains, which were predominantly invested in speculative activities (such as real estate and the development of high-risk instruments) that created bubbles, provoking the major problem of the lack of credit when they burst.



His solution:

The solutions are plain to see. We need to stimulate demand in these countries, as well as all the EU, on the basis of income redistribution by increasing the purchasing power of the popular classes, counteracting low wages (which are the cause of low productivity) and a vast expansion of public expenditure that aims to create jobs, precisely the opposite of the policies being brought into play by the EU. No one has ever come out of any depression or great recession in the 20th century (like the current one) without a massive expansion of public expenditure and the growth of debt. The Great Depression was resolved with the New Deal and the large increase in public expenditure during World War II. In Europe, the reconstruction of economies destroyed by the Second World War was based on massive public fiscal and social investment, facilitated by the Marshal Plan. To believe, today, that we can come out of this huge recession without a similar increase in public expenditure throughout the EU is to ignore the lessons of history. Cutting public expenditure is writing a suicide note. In fact, if it were not for its cuts in public expenditure, Spain would already be out of the recession.



Full text here

Original Spanish here

And this solution is not new, in fact it was the economic solution to the observable flaws in capatilism, particularly laissez faire capitalism, seen by Hyman Mynsky, an economist not many heard of until Lehman Bros crashed and suddenly the world was awash with 'The Mynsky Moment'
Mynsky was an economist in the 70's and his approach was, instead of shoving cash at the banks in the hope that they would pass the wealth downwards in a trickle down effect which, as we have seen, is not gonna work, the banks are not obliged to do anything with this money. Instead Mynsky proposed, (and i'm keeping this as simple as possible) that the goverments in such times as these, actually create employment, gives jobs to those not working, be it sweeping the streets, building roads (improved infrastructure is always a boon for business) child care, teaching, police, army, construction of affordable housing etc. In creating these jobs, the money will flow upwards, to the services which will be required by these areas. people who were once on thepoverty line, can now buy more shopping, use more public transport, or even buy private transport, open bank acounts etc, all of which will result in financial transactions which will involve taxation (vat), will create more employment and not result in the bottleneck that a top down financial flow creates.
 
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