Tag Archive for euro

Another Europe is possible—another EU is not

The Communist Party of Ireland expresses its solidarity with and welcomes the decision of the British electorate, with working people having played a decisive factor to vote to leave the European Union. 
The decision of the people is a victory over Project Fear, unleashed by big business, global banks and financial institutions, with the EU and the ruling elite throughout the EU, including the Irish government, playing back-up. We congratulate those in the north-east of Ireland who had the opportunity to vote in the referendum and voted to leave. 
We call for a new referendum here in the Republic on continued membership, coupled with a halt to any further or deeper integration within the EU. We need to reassert national democracy and sovereignty. Also required is an end to the secret negotiations by the institutions of the EU and the United States regarding TTIP. 
The working people of Britain have sent a resounding message to London and Brussels, that they have had enough of the bullying, enough of permanent austerity, enough of putting the interests of big business above those of the people. This is also significant rejection of the straitjacket economics of the EU. The political and economic strategy of the EU is an affront to democracy and the ability of people to democratically decide their countries’ economic and social priorities and possible alternative direction. 
Throughout the EU, millions of workers will welcome this vote to leave, which may well mark the beginning of the end of the EU itself. Project Fear, masterminded by the EU, has been used to bully the Greek, Spanish, Italian, Cypriot and Irish people into accepting debt slavery, that there was no alternative but to bail out the banks and speculators over the rights of the people. But not only them: this strategy has been used against all working people right throughout the EU, using fear to impose the feeling that there is no alternative, using it to mask savage attacks on workers’ rights and conditions, and the further erosion of democracy and national sovereignty. 
The cycle of fear has now been broken. Working people need to take the opportunity now presented to assert their own demands throughout the EU, to assert themselves and build unity of action against these massive assaults. 
Now is the time for the mobilisation of working people to assert that there is a progressive left democratic alternative to the the plans and strategies being imposed big business through the institutions of the EU.

Vote for withdrawing from the European Union

Starry Plough

Statement by the Communist Party of Ireland

1 March 2016

The Communist Party of Ireland expresses its solidarity with all progressive forces in Britain, and in particular with the Communist Party of Britain, in the forthcoming campaign for Britain to withdraw from the European Union. In particular we call on working people in the north-east of our country to vote for leaving the EU.

A vote to leave can be a vote for a different way forward, a vote against the deepening global militarisation of which the EU is one of the driving forces—not alone within the wider European continent but around the world.

A vote to leave would also call into question the southern Irish state’s continuing membership of the EU and reopen opportunities for working-class struggle on the national level.

We should not be distracted by the fact that very reactionary and chauvinist forces, nostalgic for the days of the British Empire, are also opposed to the European Union. We support the demand for withdrawal not on some narrow nationalist grounds but rather from a working-class internationalist position. There is a need to break the unity of the European monopolies, to break the unity of the European employers’ network of control, by dividing them, which can only weaken the whole. A withdrawal by Britain could well trigger a response from working people in other member-states to campaign also for withdrawal. It would break the fear that the EU has so successfully propagated, that outside the EU lies economic disaster.

The deal worked out between the British state and the EU institutions is a further attack on the rights of workers throughout Europe, especially migrant workers, the most vulnerable section of the working class.

The struggle against the European Union is essentially a struggle for democracy and sovereignty. It is an anti-imperialist struggle, one that some formerly anti-EU forces in the north-east of our country have walked away from, retreating into an idealised “critical engagement” with imperialism.

We reject the illusions being peddled in support of these arguments. They undermine the potential for bringing unity to our people on a progressive basis. It is wrong to present the idea that the EU is a potential bulwark against attacks on workers and environmental rights. These are false arguments. The EU and the treaties since the Maastricht Treaty of 1992 have been for institutionalising austerity, consolidating the interests, influence and power of the big European monopolies specifically but also monopoly capitalism in general.

The attacks on workers in all Ireland will continue, inside or outside the European Union. Membership does not guarantee protection from attacks on workers’ rights and conditions—far from it: all the central institutions are above democratic control and are accountable to no-one, as designed by treaty.

The EU Central Bank, which is the central institution for imposing EU economic and monetary policy, is run by and for finance houses and big banks. The EU Commission is the guardian of conformity with the fiscal, political and military strategy of the EU. Attacks on workers, fiscal control and the primacy of the “market” above all else are hot-wired into the EU.

We do not accept that the EU is the source of, or has the potential for, progressive social and economic change, either at a transnational or the national level. EU laws, directives and institutions are designed to prevent and block change at the European and the national level. The Lisbon Treaty of 2009 consolidated the power and ideological influence of big business over the policies and the institutions of the EU. It enshrined the primacy of EU directives (i.e. laws) over national laws, in effect making illegal any progressive alternative economic or social policies. As far as the EU is concerned, there will be no way back to any serious democracy at the national level.

The anti-democratic nature of the EU and the absolute power of European big business over it will be further consolidated with the adoption of the Transatlantic Trade and Investment Partnership (TTIP).

The Communist Party of Ireland calls for the broadest coalition of progressive forces to campaign for British and also for Irish withdrawal from the European Union.

One law for Germany and another for the rest

greece_grexit_eu_ap_img

The same mantra has dominated German politics and the German media for many years now. It is reflected in many ways but at its core remains the same: any German blame for the social and economic devastation wrought on peripheral countries in the euro zone is denied; all others are at fault, and only one country did everything right. According to the Deutsche Bundesbank (the German central bank), in conjunction with the latest data on the nominal gross domestic product from the Federal Statistical Office, the German current-account surplus reached a new record in 2014: it now stands at 7.4 per cent of GDP. It was already incredibly high in previous years: 5.7 per cent in 2010, 6.1 per cent in 2011, 7.1 per cent in 2012, and 6.7 per cent in 2013.

The current-account surplus has never been so high, not even in the days preceding German reunification. West Germany’s surplus, which exceeded 4 per cent in the second half of the 1980s, was considered to be extremely high. However, the resulting pressure from the foreign exchange markets led to an appreciation of the German mark against the US dollar and to readjustment within the European Monetary System. This in turn devalued West German foreign assets, which had been accumulated through trade surpluses—a mechanism that no longer exists within the monetary union.

The current-account surplus of 7.4 per cent creates a major macro-economic imbalance inside and outside EMU. It is higher than the (arbitrarily set) limit of 6 per cent of the “macro-economic imbalance procedure” (MIP), which is part of the so-called European semester, which is an absurdity in itself.

The limit set by the MIP is asymmetrical: deficit countries within the EMU need to adhere to a rule that limits the deficit to 4 per cent of their GDP. If the deficit becomes bigger than 4 per cent, the EU Commission will push for a reduction of the deficit. The surplus countries, on the other hand—presumably at the behest of Germany—have to face sanctions only at 6 per cent. On top of that, three-year averages of balances are considered, meaning that for single years the result can exceed or fall below the limit (if compensated for in other years) without the Commission intervening. However, given the fact that the German government expects the surplus to increase again in 2015, a violation of the treaties is undeniable.

The logic of the balance of payments necessarily requires that the sum of all current account deficits equals the sum of all current account surpluses. There is no logical reason why a country with a foreign trade surplus should be given preferable treatment. According to this rule, a surplus country can have a surplus of 6 per cent with countries that a have a deficit of, say, 5 per cent. The surplus would not be a problem for the surplus country, but the deficit would be a problem for the deficit countries. The asymmetry is not only unfair, it is an absurdity.

There is no doubt that long-lasting external deficits can be harmful to an economy. But the same is true for surpluses. Without surpluses, deficits would not exist. If deficits create problems, surpluses create exactly the same problems.

Apart from this, the varying size of economies plays an important role. The current -account balance as a percentage of the GDP of a relatively big country, such as Germany, is significantly bigger in absolute terms than the same percentage for a small country. A German surplus of more than 7 per cent does not lead to 7 per cent deficits in other countries but to much bigger ones. If, for example, there were only two countries, say Spain and Germany, a German surplus of more than 7 per cent would cause a Spanish deficit of almost 20 per cent. It is not altogether clear why the asymmetric MIP rule was agreed upon. There is certainly no logical reason for it. Apparently it was clear from the moment of its creation that the German current-account balance would move well above 4 per cent, so that, from the German viewpoint, a higher percentage was required in order to avoid a reckoning by the EU Commission. Most probably, the hope had been that the German balance would fluctuate below 6 per cent; but this has proved wrong. By 2011 the three-year average hit the 6 per cent limit only slightly, but since 2012 the net balance has grown well above it.

So Germany is in blatant violation of EMU regulations. The simple truth is that Germany’s mercantilist economic model is based on undercutting its trading partners, so that it accumulates surpluses while creating deficits and debt everywhere else. Only a deterioration of German competitiveness (through rising wages) and declining surpluses vis-à-vis its trading partners can help to overcome deflation and stimulate economic growth in all countries inside EMU. It does not seem likely that this will happen in the foreseeable future: the collective fear of facing the truth is insurmountable.

Yet politicians like Wolfgang Kauder, leader of the CDU-CSU group in the German Bundestag, can tell Der Spiegel that “if Greece wants more money from its European partners it must pass reforms. Perhaps it helps to realise that it is not the European bail-out policy that has driven Greece into misery but the failure of their own elite.”

If it is the Greek elite that is responsible for the cataclysm in Greece, why is it that the Troika’s infamous memorandums since 2010 (the memorandums of understanding, according to the wording of the IMF) literally spell out the policies that a country has to abide by, including a reduction in wages, pensions, and social welfare.

A great example of German denial was provided by the former chief economist of the EU Central Bank, Jürgen Stark. In the Financial Times of 11 February he wrote: “The truth is that, in contrast to many eurozone countries, Germany has reliably pursued a prudent economic policy. While others were living beyond their means, Germany avoided excess. These are deep cultural differences and the currency union brings them to light once again.”

Along the same lines, the Süddeutsche Zeitung wrote a few days previously: “It is often noted that Greek wages fell sharply because of the crisis. But the truth is that labour costs during the first ten years of the euro rose by nearly 20 per cent in Greece, while they decreased in Germany. Although Tsipras’s populism suggests otherwise, the Greeks brought most of their problems upon themselves.”

A wage increase of 20 per cent in ten years is not a problem in itself. There is nothing excessive or irresponsible about this, given that wages increase in line with productivity plus the inflation target of 2 per cent set by the ECB.

The truth about all this is that the inflationary use of the word “truth” in Germany comes on top of the complete denial of Germany’s devastating role in the European Monetary Union. The newly discovered love for what is euphemistically called “the truth” in the German media only serves to distract attention from the manifest failure of German economic and financial policies and their devastating consequences.

However, the media’s new love affair with “the truth” did not fall out of the sky. The myths about German innocence and Greek irresponsibility need to be intensified as the contradiction at the heart of the euro zone becomes more and more obvious to all.

Taken from http://www.people.ie/news/PN-128.pdf

State and finance in financialised capitalism

Definitely worth reading this analysis of contemporary capitalism, class and the State by Costas Lapavitsas.

State and finance in financialised capitalism

Costas Lapavitsas is a leading Professor of Economics at the School of Oriental and African Studies, University of London, and also sits on the National Advisory Panel of Class.

The structural problems within the UK and other mature economies were brought to the surface during and after the crisis of 2007-9. This paper argues that these problems are inherent to contemporary mature capitalism and have to do, primarily, with financialisation. The exceptional rise of finance in terms of size and penetration across society, the economy and the policy process, is apparent to all. The rise of finance is a sign of a fundamental transformation of mature capitalism within commercial and industrial enterprises, but also banks and perhaps most strikingly, within households.

The period of financialisation, lasting from the 1970s to the present day, has also wrought profound changes to the social structure of contemporary capitalism. It has been a period of extraordinary income inequality, wiping out all of the gains that came in the period following the Second World War. This paper notes that the ability of the rich to extract enormous incomes has been associated with the financial system. Inequality is a characteristic feature of financialisation.

Financialisation has been marked by the ideology of neoliberalism, promoted by universities, think-tanks and a variety of other institutions. Neoliberal ideology ostensibly treats state intervention in the economy with extreme suspicion, but the reality has been very different. The financialisation of mature economies would have been inconceivable without the facilitating and enabling role of the state.

Intervention by the state has taken several forms, including handing a dominant role to central banks to offer vital support to the financial system by providing liquidity and through their ability to influence interest rates. The state has also offered guarantees to bank deposits, boosted the capital of banks out of tax income and implicitly guaranteed bank survival through the ‘too big to fail doctrine’. Finally, the state has fostered financialisation by altering the regulatory framework of finance. The critically important role of the state was demonstrated at the point of the 2007-9 crisis as the state rescued banks and prevented the collapse of the financial system.