Contribution of Yiorgos Vassalos in the event “Crisis and the European Union” organised by Antarsya UKPosted: April 1, 2014
Of all the imperialist centres, the global crisis of capitalism that started in 2008 hit harder the European Union. This is surely due to its very special institutional architecture but also due to the status of the Euro as a young currency that quickly ascended as the second global currency since 1999. Euro was the first global currency not backed by a specific powerful State but a hybrid organisation, the EU, which is something between a federation and an intergovernmental alliance; the Euro was not even backed by the entire EU, as you know very well here in Britain.
Financialisation and the extensive use of credit was globally the way capitalism chose to circumvent its last big crisis in the 70s and finance was the sphere in which the current crisis was triggered. But indebtedness in the EU had special characteristics, since during Euro’s first steps, starting in 2002, all member countries could borrow with almost the same interest rates as Germany. This served industrial and financial capital in the most industrialised EU nations but also the dominant classes in the internal periphery of the EU, since ruling classes could profitably shift from manufacturing to more services and transport-centered business. But in times of crisis access to cheap credit had to be cut while the question of who will finally pay the debts came to radically shake the institutional balance in the EU. Elites decided to save the broken “too big to fail” private banks socializing the losses of the financialised capitalists. Richer countries could bail out their banks with their own tax payers’ money (the UK, Germany, France, Belgium, etc.). But this was not the case for peripheral countries like Greece, Ireland, Spain, Cyprus, etc. Plus it was not only local banks that needed to be saved but also the banks of the economic core of the EU that had given big loans to these countries and would otherwise suffer big losses. Richest countries accepted to foot part of the bill of the poorer ones but only under the condition that democracy in these countries would get ridiculed and citizens’ control over decisions ruled out while transforming them into cheap labour camps.
The reaction of the EU in the crisis was to accelerate a movement towards a bureaucratic – autocratic federalisation with no democratic basis. This is the political tool needed to advance a triple recipe for overcoming of the crisis from the point of view of the ruling classes:
– Reduce labour cost
– Retain capitalist control over financial institutions
– Relax protection of the environment and destroy welfare state in order to create new profitable markets for capital
EU economic governance
Since 2010, the EU started implementing a series of reforms in order to centralise economic policies in Brussels. New legislation like the Six Pack on economic governance – built on the text of a political agreement called the Pact for the Euro (2011) – was passed in 2012. The Six Pack did two things: 1) it made penalties to countries violating deficit limits much more automatic, thus providing a tool that can force member states into much more radical and quick cuts in welfare and public services. 2) It set a brand new framework of macroeconomic surveillance that gives Brussels the right to intervene in many economic policy fields. The most important tool is capping the evolution of labour unit cost in relation to the GDP. This should not increase by more than 9% for Euro Zone countries and 12% for non-Eurozone countries in three consecutive years. What is effectively banned through this rule is redistribution of the GDP from capital to labour through wages.
The Six Pack on economic governance was followed up by the Two Pack that actually obliges all member states to submit their draft budgets to the Commission and accept its amendments on them in case they are in excessive deficit (which is the case for the majority of member states). So, the unelected bureaucracy of Brussels acquires one more tool to impose cuts. The Commission has also the right to ask members states in difficulty to request the Troika’s “help”. So, the ECB doesn’t need any more to threaten governments with cutting liquidity to their banks as it did in the cases of Portugal and Italy: the Commission can now formally ask a country to enter the mechanism, and the latter doesn’t have many margins to refuse.
With the most recent revision of the so-called EU cohesion funds, the EU can also freeze them if countries don’t follow the economic policy recommendations of the Commission. Cohesion funds are supposed to be a redistributive mechanism from richer to poorer countries, albeit still very marginal, since it concerns a very small percentage of GDP. In reality, they just offer more profitability opportunities for corporations without changing the structure of economies in a more sustainable direction. But even this tool is now put under economic policy conditionality.
The Treaty on Stability, Convergence and Economic Governance – which the UK luckily didn’t sign – obliges all countries to integrate a 0.5% structural deficit limit in their primary legislation and puts the EU Court of Justice as their watchdog. The next step EU leaders want to implement is the following: the economic programs submitted every year by member states to the Commission, even before their draft budgets are there, would, once agreed with the Commission, take the form of a binding contract whose violation may be sanctioned by the EU Court of Justice.
Since 2010, the EU imposed a de facto mechanism (first the EFSF then the ESM) to effectively subjugate elected governments and practically run itself their economic policies through the Troika. In the meantime it put in place all this architecture described above that applies to all member states and secures Brussels’ primacy on socio-economic policies in the long term.
Now, it looks like the UK government doesn’t need the EU to impose cuts. But let’s say that you had the possibility to change the government if you wanted and you could through elections. Now, even for the UK the straightjacket of unit labour costs is there even if the tools to enforce it are not as strong as for Eurozone countries. In the latter, even if a political force of the radical left comes in power, which is highly probable with Syriza in the next months, it would very difficult to follow pro-labour, pro-welfare state, pro-public investment expansionary policies without coming into an all-out conflict with the EU. Result: Syriza already affirms that it will not challenge the policy of striving for budget surplus, since its priority is to avoid in all-out conflict with the EU.
With this ambitious project the EU is now trying to respond to the question of who is paying for failing banks. But first of all it shields banks from the prospect of default or real nationalisation under democratic control.
When a bank is considered problematic by a special body of the ECB the following steps will be followed:
- Look for other banks that can take it over
- Save it through a bail-in of stakeholders and depositors including SMEs, professionals, public organisms and States. Big corporate players will de facto have more information and capacity to move their money out before the bail-in.
- National bail-out
- In case that’s not enough bail-out through the ESM.
I haven’t looked at the implications that this will have on the British “big 5” banks, but within the Eurozone this will certainly facilitate the concentration of the whole continental financial sector in a few German, or French banks and perhaps a few from a couple of other countries, which will be even bigger-to-fail. All decisions will be taken by an ECB body with each country voting according to its capital in the ESM. This gives 25% of votes to Germany and 21% to France, while 6 countries out of the 17 hold 85% of the voting rights.
Bail-in will probably be able to cover some of the failures of big banks in the core countries but it will certainly not be able to cover the ones in peripheral countries. So, tax payers will continue footing the bill one way or another. In around twelve years’ time a fund is supposed to be created through banks’ contributions that will be available for bail-outs, but that’s a very long time in an uncertain future.
Radically limiting the size of the speculative sphere which makes up the majority of banks’ assets would reduce the risk for banks (and the cost of eventual bail-outs), but EU legislators still try to find new ways to make the wage workers who are the ones contributing most to tax revenues to pay for the banks. Of course, nationalising under democratic control would be the best way to radically shrink the speculative bubble. But this would never cross the EU’s mind, unless as a bad dream.
Constitutionalism without democratic legitimacy: a new concept of sovereignty
The banking union is one of the manners with which wealthier nations acquire more institutional rights in governing the EU economy than the poorer ones.
Net contributors in cohesion funds and States with lower deficits enjoy an increased “moral” legitimacy to talk within the different European institutions. The size of the corporate sectors of each country in global markets also counts. Only countries with a bigger number of corporations having an important global role have a saying in, for instance, global trade policies and influence negotiations like the TTIP, which is right now underway.
W. Schäuble but also official Council documents say it clearly that national sovereignty is taken away. But the democratic sovereignty safeguarded by most constitutions is basically implemented at national level. What elements of democratic sovereignty do we have at EU level? If we are frank, we need to stop talking about what is called “the democratic deficit” in the EU jargon and say clearly that the political system of the EU is not a democratic one. Only one of the three institutions is elected and that’s the weakest one, the Parliament. The unelected, bureaucratic and corporate-dominated Commission has the monopoly of legislative initiative and the parliament has to negotiate its legislative amendments secretly with the Council of ministers, which is itself the field par excellence of secret diplomacy.
Citizens cannot change the individuals in the top of the EU institutions through elections and barely influence who will be appointed. The Lisbon Treaty rule according to which each political group has to present a candidate for the Commission’s presidency is a joke, since there’s no obligation for member states to name as president the head of the first political group but only “take elections results into account”. The European citizens’ initiative (ECI) provision according to which 1 million citizens in at least 7 countries can propose EU legislation has proven to be just a fig leaf. In the first successful ECI, unions and CSOs have gathered nearly 2 million signatures asking the EU to declare water a human right and stop Troika-led privatization plans. The Commission still refused to present a legislative initiative. The bitter reality is that citizens have no tools to influence EU policies. The EU leadership is even completely immune to street demonstrations and strikes contrary to what can be often observed in the national level.
Democratic control is simply not included in the elements determining the new “shared European sovereignty” that EU leaders have in mind. You can see it in their texts talking about how to achieve legitimacy. Democratic control is never mentioned – only discipline to laws that are not by the way adopted in a democratic way. A text of the ECB even states that since contracts can be enforced and intellectual property rights assured in a certain area, then political union is already there. From our part we can say that this is surely not a democratic political union.
For Antarsya, as a coalition of Marxist organisations, democracy is not something eternal and unchanged in time. Either it spreads to the economic sphere and changes class nature or it disappears going back to openly oligarchic forms. And this is what is happening now unless we manage to achieve big political changes in the age of revolts and revolutions that is opening ahead of us. The EU is the basic way in which the financialised corporate classes, the new form of the dominant bourgeoisies are organising their political oligarchy and autocracy in Europe. That doesn’t mean that dissolving the EU automatically improves the situation in any case, but it does mean that the EU should be seen as a weapon in the hands of the class enemy and not as something that can be reformed and taken over by subordinate classes.
There’s a sharp contrast between the new competences the EU has acquired for intervening into national socio-economic policies and its non-responsibility for the repercussions of these policies in human rights. Almost all articles of the European Social Charter and the Charter of Fundamental Rights have been violated in the Troika countries, especially in Greece: from the right to a full-time payment above the poverty line to collective negotiations and the right to strike. Civil rights like the freedom of assembly are constantly put into question. But there’s no institutional way to take action against these violations. According to article 7 of the Treaty on the European Union, a country that doesn’t respect fundamental rights can loose its voting rights but this provision has never been activated. Violations are a direct result of the implementation of EU programs but the EU just can’t be held accountable. Only national governments can, but are politically protected by the EU establishment on that respect. The Commission is proposing a new pre-article 7 procedure on rule of law violations, in which it interprets the rule of law by excluding in practice human rights’ protection and examines exclusively whether justice is independent in a systemic way. As if formal independence of justice per se could guarantee the respect of human rights. In addition, even repeated cases are not enough to substantiate a violation, but have to acquire the form of systemic dependence from executive power.
The EU will soon become member to the European Convention of Human Rights. Still, no one will be able to go against it in court. It will choose itself when to enter a conflict when a member state is accused and EU law is involved. In case it does, victims of violations will have to face both the member state in question and the EU in courts. The conclusion is that even the traditional bourgeois meaning of “rule of law”, including respect for human rights, is withered in the EU.
Transnational corporations structurally influence all main EU institutions. They participate in expert groups of the European Commission making the drafts of EU legislation. Expert groups with the vast majority of their members representing corporate interests designed the Euro, the main lines of the Lisbon Agenda, which aimed to turn the EU into the most competitive economy in the world, and more. Corporate lobbyists are often the last people whom ministers see before entering important negotiations in the Council. They even write parliamentary amendments to the Commission’s legislative proposals.
Among the twenty thousand lobbyists in Brussels there’s only one representing unions for every sixty representing corporations. The latter make up 70% of all lobbyists in Brussels. If the Commission has the “quasi-monopoly” of legislative proposal, they have the quasi-monopoly of influencing the Commission.
The impact of every piece of legislation to the competitiveness of corporations needs to be evaluated in impact assessments and any negative effects avoided. The European Round Table of industrialists is asking for a moratorium in the application of any legislation that is not favourable to the growth of corporate profits. Competitiveness is the 1st priority of the EU, carved in stone in the Treaties. And they clearly mean the global competitiveness of European corporations. This legitimises big business to have the first and last word in all legislation and policies prepared at EU level and implemented in the member states.
In the TTIP negotiations corporations are practically the only ones consulted and kept informed on the process. If the TTIP is adopted they will have the right to claim billions from states in private arbitrage courts.
Thus, it is clearly impossible to change the stated strategic aims and working culture of the EU institutions and make them serve society at large and working people.
The evolution of the relation of the EU with the Extreme Right and Fascists
A source of legitimisation for the EU has been that it was portrayed as a bulwark to the rise of “the two extremes” including the extreme right. In 2000 there was a big EU campaign against the participation of FPÖ to the Austrian government. This campaign failed. Ever since, many extreme right parties have participated in governments, including with the Social Democrats in Slovakia in 2006. In Greece in 2011 it was precisely the EU that imposed for the first time since the fall of the dictatorship the participation of a racist and anti-Semite party, LAOS, to the government which was not even necessary in order to have parliamentary majority.
Recent events in Ukraine provide the final proof that the EU is not going to fight the rise of the extreme right and even openly Nazi and Fascist political forces, but only fuel it. In its final stage, the Maidan movement took an armed form and Fascist parties clearly called the shots into it. The EU gave all its political support to the first government in Euro since the end of WW2 that includes around 7 openly Nazi ministers. It is of paramount importance that all Left organisations loudly call this government illegitimate. Bashing, in the same time, Putin’s authoritarianism shouldn’t be seen as a burden in doing so.
Within the EU the far right will increase its possibility of setting the agenda and continue to shifting political discourse to the right.
An internationalist rupture with the EU is necessary
Antarsya puts forward a program of cancelation of the Troika’s debt, nationalisaton of the financial system, energy, basic transport infrastructure and more under workers’ and democratic control. This is the only way to stop social disaster, guarantee dissent living standards for everybody, save public health and education. But we can’t do any of these without simultaneously issuing a new national currency, itself under democratic control. That means radically changing the current central bank model. That means immediately exiting the Euro. It also means not applying the bulk of EU Treaties and legislation. This will inevitably put us in an all-out conflict that can only result in the exit of Greece from the EU.
We think people shouldn’t be afraid of this prospect and that this is the way to go for all European countries. Different socio-economic conditions don’t allow the simultaneous construction of the political subject – the movement – that can overthrow current policies and install radical left governments based in popular movements in most EU countries. History also tells us that this has never happened. In the best case scenario change will be possible in a small groups of countries.
We need to break these weakest links of European capitalism and call other peoples to join us in demonstrating that a different policy is possible. We can then build – step by step – an alternative model of integration based on principles of working people solidarity and social emancipation.
We need to deny the propaganda that portrays all anti-EU positions as nationalist and reactionary. Border controls can be reinstalled for capital, but not for workers. Building an internationalist socialist alternative today necessarily goes through crushing the EU institutions and building an alternative model in Europe in rupture with them.