The euro on a knife edge: Are the Greeks to blame? What is the left position on the euro crisis?

On October 19 and 20, 2011, Greece will be stopped by the latest in a series of general strikes against austerity. Above and below: Workers march on October 19. All photos by WFTU International.

By Dick Nichols, Barcelona

October 19, 2011 – Links International Journal of Socialist Renewal/Green Left Weekly – “Bloody Greeks—corrupt and lazy, born cheaters who think the world owes them a living. Why should the hard-working taxpayers of the euro zone core economies like Germany have to fund billion-euro rescue packages for those scoundrels?” That’s the vicious tone of Germany’s tabloids and conservative politicians towards Greece’s galloping public debt crisis and the Greek people’s protests against the austerity programs imposed on them by the European Union, European Central Bank and the International Monetary Fund (the “troika”) as the price of bail-out funding.

In Australia, columnist Paul Sheehan offers his September 14 Sydney Morning Herald readers a cruder version of this caricature. Not only are the Greeks (whose “national sport is cheating”) bludging off German taxpayers, they’re devaluing Aussie superannuation payouts (see “Throw out cheating Greece before the rot cripples rest of the world").

But Sheehan’s “solution”—to cut off the gangrenous limb to save the euro and “the rest of the world”—finds very few supporters in Europe. That’s because Greece can be “thrown out” of the euro, but its 350 billion euro debt and tottering banking system can’t be “thrown out” of the European and world economies.

In Germany, the Rosa Luxemburg Foundation has answered the German tabloid version of Sheehan’s slanders with some simple facts:

Average hours worked (before the crisis struck): 44.3 for Greek workers, as against 41 for Germans. Since the crisis fewer Greek workers have had the chance to prove they aren’t lazy—the troika’s austerity policies, including cuts of 80,000 public sector jobs, have helped boosted official unemployment to 15%.

Greek wages: 73% of the European average, with 25% of workers earning less than 750 euros [A$1015) a month.

Holidays: Greek workers have a right to 23 days a year—as against 30 days for German workers.

Pensions: The average is 617 euros [A$830] a month: two-thirds of Greek pensioners have to survive on less than 600 euros a month.

Tax evasion: Yes, it’s pretty common in Greece, especially among the self-employed, but the culture of tax evasion was the work of Greek capitalists and rich: Greek shipowners, for example, pay no company tax at all. No wonder the popular reaction has been: “If the fat cats don’t pay tax, why should we?”

Budget deficit: It’s true that Greece ran large public sector deficits even in the boom years up to 2008. But that was because it was much more convenient for the conservative government to borrow on money markets at very low rates of interest than to get the rich and corporates to pay their share of tax.

Transparency: Yes, the Greek government lied about the size of its budget deficits in order get into the euro. But this was not a purely Greek sin.

In the words of Citi chief economist Willem Buiter: “What Greece did was just an exaggerated version of the deliberate data manipulation, distortion and misrepresentation that allowed the vast majority of the euro area members states to join the Economic and Monetary Union, including quite a few from what is now called the core euro area. The preventive arm of the euro area, the Stability and Growth Pact, which, if it had been enforced would have prevented the Greek situation from arising, was emasculated by Germany and France in 2004, when these countries were about to be at the receiving end of its enforcement.”

Greece: Europe’s weakest link

Come the 2008 financial crash, the vicious cycle began for Greece: easy credit disappeared, the interest rate on debt started to climb and the already inadequate tax take collapsed, in turn widening the deficit and increasing the need for Greek debt to find buyers.

 At the same time, also as a direct consequence of the crash of 2008, private bank debt across Europe was shifted onto public sector balance sheets, with the taxpayer bailing out the banks and bank deposits guaranteed.

Yet in Europe it was decided, under German pressure, that bank deposit guarantees would not be backed by the European Union (through the European Central Bank) but by the individual member states.

This lack of a common, shared mechanism to issue European debt (“Eurobonds”) exposed the weaker, more indebted European states to the doubts and speculative raids of players in the government (“sovereign”) debt market.

After the November 2009 default of Dubai’s sovereign fund, the market and the rating agencies started to look for the next likely candidate: Greece came into the frame as the weakest link in the chain of euro economies.

This was the context in which the Greek government—with the economy deep in recession, private investment at a standstill, major exports (shipping and tourism) down 15% and depositors shifting their money into Swiss and German banks—approached the EU-ECB-IMF troika for a bail-out package.

The austerity measures imposed as the price of receiving funding from the newly established European Financial Stability Facility were described by ratings agency Fitch as the most draconian ever imposed on an advanced economy.

They have had disastrous consequences. Greek gross domestic product has been shrinking faster and faster, by 2% in 2009 and 7.6% in 2010. Since the crisis broke in 2008, it has fallen by 15% and Greek finance minister Evangelos Venizelos expects negative growth to continue for 2012.

Over the year to March 2011, 65,000 companies went bankrupt and private consumption fell by 18%. Tax revenue also collapsed: first quarter 2011 revenue was 7% below first quarter revenue for 2010. Also, the 50 billion euro privatisation fire sale dictated from Brussels is sure to rake in much less than projected.

The end result is that Greece's budget deficit is now poised to leap as high as 8.2% of GDP, more than the 7.4% target set by the finance ministry at the time of the second troika bailout package in July. Some economists believe the deficit could hit 10% of GDP by year’s end.

Public sector debt, which stood at 127.1% of GDP in early 2010 rose to 143% by the end of 2010. By the end of this year Citi group expects it to reach 167%.

Clearly, the Greeks, least of all Greek workers, pensioners and students, are not in the least responsible for this catastrophe—they are being scapegoated by those in Berlin, Brussels and Washington who are.

What would a Greek default mean?

What next? If Greece was forced out of the euro, what impact would it have—on Greece and the rest of Europe?

An impending reintroduction of the drachma would see a run on the Greek banks, as people raced to get their money out before the introduction of a currency that would instantly devalue against the euro. Willem Buiter predicts, “The Greek banking system would be destroyed even before Greece had left the euro area.”

Defaulting on loan repayments would invite also retaliation from foreign investors and banks, cutting Greek access to foreign funds. At the same time the price of imports would increase, potentially creating a situation of “stagflation” (combined recession and inflation).

According to Buiter: “The bottom line from Greece from an exit is … a financial collapse and an even greater recession than the country is already experiencing—probably a depression.”

A study by UBS economists Stefane Deo and Paul Donovan concludes that the cost of the euro break-up would be “horrendous”: “For a weak economy like Greece to leave the euro zone, it would cost citizens between 9500 and 11,000 euros in the first year, and 3000-4000 euros per subsequent year.”

 Then there is the likely impact of a Greek default on the euro and the European banking system. A Greek exit would focus market attention on the next candidate with sovereign debt problems. Depositors would shift their savings into the safer “core” euro zone and out of the vulnerable “periphery”. Potential investors would shy away.

This funding strike and flight of deposits would create financial instability, and increase the chance of a recession in the Mediterranean and Eastern European euro periphery.

Exposed European banks, especially in France and Germany, would face bankruptcy, especially as it is impossible to judge the value of much of many of the financial instruments they still count as “assets”. (New IMF chief Christine Lagarde described Europe’s banks as “undercapitalised”.)

Germany and France would then face the choice that former US treasury secretary Hank Paulsen faced exactly three years ago when confronted with the moribund Lehman Brothers—let them fail or bail them out. And since the vulnerable European banks are “too big to fail” a variant of the US taxpayer-funded Troubled Assets Relief Program (TARP) would have to be put in place.

If a Greek default was followed by a cascade of other countries defaulting, leading to the end of the euro or its reduction to core economies, even the strongest economy, Germany, would lose out.

The value of the euro reflects the average of labour productivity across its European member economies. A new deutschmark (or even a “core area” euro) would have a higher value than the existing euro, and would undermine export competitiveness when the German economy is more dependent on export income than ever.

That appreciation would be amplified as speculators sought the “safety” of the new currency as the other post-euro currencies fell in value.

A new deutschmark or “core euro” would follow the recent path of the Swiss franc. Last week the Swiss National Bank began to try to hold down its rapid appreciation because it is hurting Swiss industry.

These facts of life explain why the European lead powers Germany and France, far from adopting the Sheahan “throw the bastards out” approach, are doing everything they can to keep Greece in the euro. They are supported in this by Barrack Obama, who sent US treasury secretary Timothy Geithner to last Friday’s meeting of European finance ministers to stress the urgency of the situation, and demand united action.

The question then is—if the euro crisis is so serious, why are the European powers finding it so hard to agree on a common solution?

That will be the subject of the second part of this article.

Part 2: Europe taking world economy over the cliff

By Dick Nichols

Speaking in Rome on September 15, Lorenzo Bini Smaghi, Italian executive board member of the European Central Bank (ECB), said of the design of the euro: “The assumption was made—largely theoretical—that there would be no crises.”

Oh, indeed. And now, with Europe and the world showing every sign of dipping into a recession that will further stress the common currency, what is to be done?

In immediate terms, the crisis of the euro is driven by the risk that “peripheral” European economies starting with Greece will default on their public debt repayments and send French and German banks chock-a-block with that debt to the wall, or at least drive them into a growth-killing credit crunch to survive.

This precipice looms much clearer:

• Key indicators reveal a turning point in production and trade. The Chinese purchasing managers’ index showed manufacturing shrinking for a third month in succession, while the World Trade Organization revealed that goods trade in the second quarter of 2011 was 0.5% less than in the first (the first fall since mid-2009).

• On September 22, world stock markets crashed by around 4% and were down 20% since beginning of year. A September 23 statement by G20 treasurers and central bankers committing “to a strong and coordinated international response to address the renewed challenges facing the global economy” failed to spark recovery.

• The International Monetary Fund’s Global Financial Stability Report revealed that “nearly half of the €6.5 trillion stock of government debt issued by euro area governments [roughly 5% of annual world production—DN] is showing signs of heightened credit risk.” The 10 biggest US money market funds have taken fright, reducing their short-term lending to European banks to the lowest level since late 2006.

The IMF’s World Economic Outlook estimated that a full-blown credit crunch arising from the default of the most indebted European economies would knock 3.5 percentage points off growth in the euro area and 2.2 percentage points in the US. That sort of downturn in a country like Spain would add an extra 2-3 million to its 5 million unemployed.

Europe is the epicentre of this latest phase in the global crisis. Yet, even the vicious feedback loop between slowing growth, rising sovereign debt and looming bank insolvency clear to view, economists, politicians and governments are locked in wrangles over which crisis symptom to tackle first and with what medicine.

Their disputes about the right mix between monetary (interest rate) and fiscal (budget) policy has been hugely complicated by the issue of whether Greece should be allowed to default and leave the common currency. Would that provide relief for the rest of the euro area or just intensify the crisis?

That’s the increasingly nasty sort of lesser evil choice being faced. Despite the September 23 joint statement by G20 finance ministers the differences on how to treat the crisis remain sharp.

When German federal president Christian Wulff insisted in August that euro economies and institutions like the European Central Bank have to “stick to the rules”, was he thinking about the economic destiny of Greece and its people or the interests of German bankers and exporters?

Strange ‘cures’

As in all capitalist crises the looming slump has three intertwined aspects: it is a debt crisis, a crisis of the banking and finance system and a crisis of investment.

However, this particular crisis was unleashed following an unprecedented build-up of debt. Because this debt has since been shoveled across to public budgets, the overriding concern has been to reduce it as quickly as possible. Hence the stress by late 2009 on winding back public budget deficits.

Yet the unfolding Greek disaster shows that the “tackle debt and deficit first” approach (applied there by the “troika” of the European Central Bank, European Union and IMF) is not only socially sadistic (see the Green Left Weekly article by Afrodity Giannakis), but plain counterproductive.

The reason lies in the aversion of all schools of mainstream economic policy to seriously addressing the root cause of the recession—the collapse in fixed investment (which for Europe between the first quarter of 2008 and the second quarter of 2011 was more than the collapse in growth as a whole).

Even if debt were temporarily tamed and the financial system stabilised, without a recovery in investment the slump and unemployment will continue—and in turn unravel the effort to wind back debt and fix the finance sector.

However, important “players” in Europe are focused on a different enemy. The hard money school in control of the German Bundesbank fears that inflation could still re-emerge to undermine the euro—especially given the vast increases in money supply that have been unleashed over the past three years.

For it a strong euro is essential to controlling inflation and restraining wage claims, and so maintaining European (especially German) competitiveness. This school includes former ECB executive board member Jürgen Stark, who recently resigned in protest at its purchases of Spanish and Italian debt.

Supporters are fighting to block measures that most in Europe (including German big business) regard as the absolute minimum needed for containing the present threat to the euro, including adoption by the Bundestag of expanded funding and powers for the European Financial Stability Facility (to run bail-out operations) and a European version of the US Troubled Assets Relief Program (to rescue banks and financial institutions).

Even where there is agreement on these measures—as with Bundesbank president Jens Weidmann—it goes with the demand either that the policing arm of the euro area, the Stability and Growth Pact, be applied in earnest or that member states’ budgets be controlled by a restructured EU.

As for the broadly supported proposal to create European debt instruments (eurobonds), for Weidmann these “in and of themselves would actually be rather counterproductive to solving the fundamental problem that led to the outbreak and spread of the sovereign debt crisis”—fiscal indiscipline. (German neoliberal economist Hans-Werner Sinn describes eurobonds as “a little piece of socialism” that “doesn’t belong in our economic system”.)

This school of thought also likes to claim that if other European countries behaved like Germany, boosting efficiency and competitiveness and controlling wage growth, they could repeat Germany’s massive export successes.

This argument conveniently ignores some simple truths: not only that Germany’s trade surpluses within Europe have required other economies to run deficits, but that if growth in the whole world is slowing, winning the export competition increasingly becomes a zero sum game.

This is specially so given that the last three years have seen a rise in the protectionism of tit-for-tat “currency wars”.

Also, within the euro area, with devaluation excluded by definition, the main way to increase export competitiveness would be by further driving down wages and welfare spending—and cutting domestic consumption.

Greek default thinkable?

On Greece, for the hard money school, departure from the eurozone is not only thinkable, but probably necessary. The challenge is to organise as orderly an exit as possible.

Without mentioning the country by name, Dutch PM Mark Rutte and his finance minister Jan Kees de Jager have put the issue like this: “Whoever wants to be part of the eurozone must adhere to the agreements and cannot systematically ignore the rules. In the future, the ultimate sanction can be to force countries to leave the euro.”

Economist Nouriel Roubini, well known as one of the few who foresaw the 2008 meltdown, is also in favour of Greece leaving the euro, but for its own good—like a painful but necessary divorce that’s preferable to remaining in a loveless marriage. Greece’s situation is compared to that of Argentina when it tried to peg the national currency to the US dollar in the 1990s—doomed to stagnation and breakdown. Roubini says:

The only issue here is not whether Greece’s real Gross Domestic Product … will be lower by 30%, as that outcome is sealed either way; rather, the issue is whether that result should be achieved over 5 or 10 years via an ever-deepening recession and depression triggered by massive deflation; or whether it should be achieved overnight via exit from the euro. The latter option—exit—has the benefit that economic growth and employment growth will resume right away.

Solutions?

Such “choices” from widely differing schools of economic thought starkly dramatise the poverty of mainstream economic policy in the face of the slump. All hope against the evidence that some combination of debt relief and easy monetary policy will get private investment going again.

Yet the problem is not one of lack of funds (profits in the US are above pre-crisis levels), but that the individual capitalist firm has no reason to invest. Given massive excess capacity in industry and very weak consumer demand why would they?

Only a massive boost to public investment can get growth and employment moving.

This is exactly what China did when faced with the 2008 crash—its core stimulus package aimed at infrastructure and housing has seen 30% growth in the country in three years (while in the US and Europe GDP is still to reach 2008 levels).

Neither Weidmann’s economics nor Roubini’s economics are a solution. A working-class and pro-people response to the slump—based on the idea that the bankers should pay for their own crisis—would:

• increase public expenditure on socially and environmentally useful production

• bring the banking system under public control in order to fund this and to organise debt restructuring (as has been done successfully in Iceland—against the advice and desire of the EU)

• restructure the tax system, so that big capital and the rich pay their share

• reduce the working week with no loss of pay.

What should be the policy about leaving the euro (which could become a question of practical politics quite quickly)? That will be subject of final article in this series.

Part 3: What left position on the euro crisis?

By Dick Nichols

What stance should the European left take towards the euro and its galloping crisis?

The issue, which began as a theoretical discussion among radical economists in late 2009, has increasingly acquired practical political urgency: left parties are being challenged to define their position in the face of rising popular resentment at governments forking out billions in taxpayers’ euros in bail outs of banks and indebted “Club Med” countries.

The most immediate result has been the growth in influence of right-populist and xenophobic parties like the True Finns (PS), the French National Front (FN) and the Dutch Party for Freedom (PVV).

The latest illustration of the dilemma for the left was the October 6, 2011, vote in the Dutch parliament on the expansion of the European Financial Stability Facility (EFSF), opposed by only the PVV and the radical left Socialist Party (SP).

Ewout Irrgang, SP representative on the parliament’s finance committee, said that the party would only reconsider its opposition if the banks were prepared to take a 50% “haircut” on their holdings of Greek bonds and contribute directly to the EFSF.

By contrast, the PVV—supposedly an ally of the Dutch government—won’t support any rescue packages for Greece unless the country is first kicked out of the euro.

In the September 29 vote in the German Bundestag, Christian Democratic Union (CDU) chancellor Angela Merkel succeeded in hauling her recalcitrant allies in the Christian Social Union (CSU) and Free Democratic Party (FDP) into line in support of the EFSF. With the Social Democratic Party (SPD) and the Greens, the vote was 523 to 85.

The 76 MPs of Die Linke (the Left Party) voted against the package as simply another bail-out of the banks.

Die Linke looked isolated, but that is misleading. Polls show 60% of Germans opposed to funding further bailouts, and moves towards a “eurosceptic” Tea Party-type formation are well under way, led by the former head of the Federation of German Industries Hans-Olaf Henkel, and former Bundesbank board member Thilo Sarrazin.

Within the European left, the debate over how to relate to the euro crisis crosses old battle lines: for example, partisans for leaving the common currency can be found among the communist parties and also organisations with a Trotskyist background.

And while the question of leaving the euro arises most immediately in the indebted “periphery” like Greece and Ireland, left supporters of euro exit are also prominent in “core” countries like France.

Nikonoff and Lapavitsas

The big challenge for the left is what exactly to counterpose to neoliberal, capitalist Europe (“Brussels”), with its relentless drive to make working people pay for the debt and bank crisis through higher unemployment, reduced wages and stripped-back welfare.

Most importantly, is leaving the euro necessary to building a real fight back, without which any talk of an alternative is just hot air?

In France, Jacques Nikonoff, former president of the anti-neoliberal campaign network ATTAC, argues in his book Let’s leave the Euro! that “a left policy is impossible with the euro”. That’s because the European elites, especially Germany’s exporters and bankers, designed the currency as a global reserve competing with the US dollar and set up the European Central Bank (ECB) with an anti-inflation charter biased towards higher interest rates and, hence, an overvalued exchange rate.

The result has been depressed exports, increased imports, downward pressure on wages and accelerated offshoring of firms. Only Germany, the country that has most squeezed wages, has won out.

What about the objections that leaving the euro and adopting a new and devalued French franc would lead to ballooning debt, increased inflation and higher fuel prices, and be the first round of a tit-for-tat war of devaluations?

Nikonoff replies that there should be a partial default on debt, as with Argentina (2002) and Dubai (2009), that a fuel price compensation fund should be set in place, and that a war of competitive devaluations is excluded because other countries would remain in the euro.

Also, any similarity with the FN leader Marine Le Pen’s proposal to leave the euro is illusory. Proof that Le Pen isn’t serious is that she proposes a 6-8 month negotiation period for exit—during which time capital flight would cripple the French economy.

By contrast, Nikonoff states that the political basis for exit could only be the victory of an electoral alliance committed to that course, followed by a referendum on leaving the Treaty of Lisbon. That would be followed by ending the independence of the Bank of France, nationalising banks and insurance companies, imposing capital and exchange controls, and devaluing the franc and making it non-convertible.

The door would then be open to the cancellation of austerity plans, an increase in the minimum wage and unemployment payments, the introduction of a sliding scale of wages, as well as the definitive closure of the bond market.

Within the Trotskyist tradition, economist Costas Lapavitsas of London’s School of Oriental and African Studies has been the staunchest advocate of euro exit. In “A left strategy for Europe” (in Socialist Register 2012), he says: “Much of the continental Left is still in the grip of Europeanism, and is concerned to develop strategies that have a European rather than a socialist character.”

Lapavitsas argues that “exit is an important component of a radical Left strategy that could annul austerity while restructuring economies in the interests of labour”. He also outlines a positive chain reaction arising from euro exit along lines similar to Nikonoff’s.

For Lapavitsas, the central error of both “ardent” and “reluctant” left Europeanists is their inability to grasp that there is no simple technical and/or institutional solution to the debt crisis. If the creditors agree on debt reduction (as in the case of Greece) the reduction will be paltry, if the debtors impose debt reduction, the resulting chain of bank collapses will lead to a crisis of the European and world economies.

The remedies advanced to avoid this—amounting to the ECB and/or EFSF issuing eurobonds to fund member states and themselves—would devalue the Euro as a reserve currency (and be opposed by the German ruling class). In any case, they would not solve the problem of bank recapitalisation, which requires not just extra liquidity but actual spending by government (as in the US$700 billion Troubled Assets Relief Program)—increasing public deficits and the pressure for cutbacks.

Lapavitsas argues that, given the likelihood of an ongoing vicious circle of low growth and rising debt “continued membership of the eurozone would be put on the table, partly by core countries, and partly by defaulting peripheral countries themselves.”

He concludes:

There is no need for such a strategy to lead to isolationism and nationalism provided that the European Left regained a modicum of confidence in itself and in its historic arsenal of socialist ideas. Indeed, the danger of a nationalist backlash is likely to become worse as long as the Left continues to disappoint working people…A strategy that confidently detached itself from the failing project of monetary union would provide a basis for solidarity among European people.

Within Europe’s communist parties euro exit is supported by the Communist Party of Greece (KKE), which calls for “disengagement from the EU and cancellation of the debt with people’s power”.

Husson’s reply

Lapavitsas' position was developed as answer to French radical economist Michel Husson. In his reply Husson says “there is a very big risk of giving a left legitimacy to populist programs … which combine a xenophobic discourse with an analysis that makes European integration the exclusive source of all economic and social evils”.

He stresses:

To make out that leaving the euro could in itself improve the relationship of forces in favour of the workers is at bottom a fundamental error of analysis. It is enough to consider the British example: the pound sterling does not form part of the euro, but that does not protect the population from one of the most brutal austerity plans in Europe.

Husson insists:

the competitiveness of a country rests on material elements: productivity gains, innovation, industrial specialisation, etc. To think that manipulating foreign exchange rates can be enough to ensure competitiveness is largely an illusion. The economist Jacques Sapir, who has worked out a plan for an exit from the euro for France, recognises that inflation ‘will force regular devaluations (every year or every 18 months)’ in order to maintain a constant real foreign exchange rate. That amounts to accepting an endless round of inflation-devaluation.

Husson concludes:

There is almost no experience of a devaluation which did not result in increased austerity, which in the last analysis hits the workers. For devaluation to be a means for putting in place another distribution of wealth and another type of growth, the relationship of social forces would already have to have been profoundly transformed.

As for the complementary measures proposed by partisans of euro exit, “all these measures should be imposed even before any project of exit".

Husson does not rule out Greece leaving the euro, but insists on the subordination of such a move to the building of popular resistance to austerity, with a special focus on a citizens’ review of the debt..

This analysis is supported by the balance sheet of the 2002 Argentinian debt default and devaluation done by Marxist economist Claudio Katz for an October 2010 conference in Athens against the EU-IMF “bail-out package”.

He writes:

In the first place, the prevalence of widespread, ongoing struggles allowed the impact of the adjustment to be limited. Thanks to these mobilisations a large part of the decline in wages caused by the crisis was recovered over the course of the following decade. The government made important concessions, employment improved, poverty declined and democratic rights were significantly expanded… However, even in these conditions of mass struggle the resulting debt restructure “was not used to into introduce people-oriented policies of a radical break with neoliberalism. A less financial and more industry-oriented model was set in place, which mainly favoured the local capitalist class.

What Europe-wide alternative?

The two European left parties that have most stressed a Europe-wide counter-attack against austerity are Die Linke and the Portuguese Left Bloc.

In May 2010, the Left Bloc produced a working document called On the crisis and how to overcome it. Its starting point was that “the left must argue for national alternatives which are also European” and that “unless Europe is rebuilt by means of an employment pact overruling the Growth and Stability Pact’s clauses and institutions, as well as the Lisbon Treaty, there will be no European policy to react adequately to the crisis and there will always be European policies to make it even worse.”

The Left Bloc alternative focuses on reversing the attack on wages, working conditions and social welfare; increasing tax revenue “to deal with the debt snowball and the financial markets” by attacking tax avoidance and making capital pay its share; a policy of industrialisation aimed at exports combined with promotion of employment-creating, high-quality public services; and, at the European level, regulation of financial markets (with taxation of financial transactions, a rise in the share of state banking and capital control to curb speculative attacks).

In June this year, Die Linke’s euro crisis working group produced a more detailed proposal along the same lines.

The document includes a comprehensive set of measures to tackle the debt and banking crises, contain speculation, restructure the banking system and fund Europe’s crisis-hit economies. Taken together, such measures point to the need to refound Europe, by overturning the frameworks established at Maastricht and Lisbon.

Conclusion

Earlier this year, the scientific committee of ATTAC Germany wrote: “At this stage it is crucial to work for mobilising the working people across Europe for a joint struggle … rather than having now a premature and technical debate around the currency.”

This comment addresses the core issue. The European left presently lacks the strength to advance its agenda, either in Europe or at the national level. Indeed, the danger for left European projects is that the association with “Europe” is so hated by working people that they will act and vote out of hatred for the actual Europe rather than hope for a refounded Europe.

“Europe”, the level of government furthest from people, means the authoritarian, unaccountable and bureaucratic imposition of poverty or the robbery of hard-earned euros. When elected national governments meekly do “Europe´s” bidding that hatred is intensified.

That threat can only be turned around on the back of increasing Europe-wide struggle. The question then becomes: what demands and forms of organisation have a chance of mobilising that struggle?

The 700-strong October 1 European Conference Against Austerity in London settled on five points: resistance against austerity policies and cuts, a radically progressive tax system and capital controls, nationalisation and democratic control of the banking system, the renunciation of illegitimate debt and an alternative economic and political strategy embodying a green approach to public spending and job creation.

The coming months in Europe will tell us how strongly working people will rally to those slogans.

[Dick Nichols is the European bureau correspondent for Green Left Weekly and Links International Journal of Socialist Renewal. A shorter version of this series first appeared in Green Left Weekly. For more information on sources and statistics in this article, contact eurodesk@greenleft.org.au.]