Crisis in the Eurozone. Costas Lapavitsas
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EU project, not only in its economic and political dimensions but also as the fundamental theme of Europeanist ideology, was increasingly dependant on the realisation of the EMU. It was indeed the first time in history that a currency common to more than 300 million people living in seventeen different countries was created from scratch, without a unified state behind it. In highlighting the rationale of this enterprise – its sources of strength but also its intrinsic limitations and contradictions – the analysis proposed by Lapavitsas and his RMF colleagues in the following chapters is crucial.
Let us note first that it is no coincidence if this analysis is initiated by one of the rare Marxist economists who has been working for a long time on issues of monetary theory and contemporary finance. Indeed the euro can only be understood in the context of an increasingly financialised capitalism, both as an expression of this now dominant trend and as a powerful tool leading to its further expansion. The euro is a project of world currency, functioning both as a reserve currency and as a means of circulation and payment, designed to compete with the US dollar. And this imperial type of ambition could not have been carried by any national currency within the EU, including that of the most powerful economy, Germany. But neither could it have been accomplished by the currency of a unified European super-state, because European capitalism does not exist except as a convergence of national economies, of nationally defined spaces for the accumulation of capital, or to put it another way, of national social formations, each of which is shaped by its specific configuration and balance of class forces.
The solution to the ‘neither ... nor’ oscillation, which epitomises the nature of the European project as a whole, lies in the famous stability pacts, generalising in the entire eurozone the founding principles of what Habermas at his best had very aptly called ‘Deutsche-mark nationalism’: an independent central bank, absolute priority given to fighting inflation, strict budgetary discipline and a whole culture of procedural approaches neutralising political choices under the cover of sound and virtuous technocratic management. What is at stake here is much more than some particular tradition whether cultural (supposedly ‘Protestant’) or political (that of the Federal Republic emerging from the ashes of an irrevocably defeated project of imperial expression), or even the simple expression of the leading economic role of Germany within the EU. These conditions, which inscribe neoliberalism into the genetic code of the EMU, are actually necessary prerequisites of the project of a world currency in the highly particular, indeed unique, circumstances mentioned above. This is why they provided the terrain for a voluntary strategic convergence of the dominant classes of Europe while at the same time giving to Germany a properly hegemonic role – although never politically explicit – ‘always-already’, as if it were wrapped up in some ‘post-national’ and generally ‘European’ form of legitimation.
The consequences of this are far-reaching. One of the most essential achievements of the demonstration of Lapavitsas and his collaborators lies in their analysis of the way in which a polarisation between a ‘core’ and a ‘periphery’ emerges out of the very structure of the EMU. The general idea, and the terms themselves, are of course familiar to any reader of the rich Marxist and radical literature on combined and uneven development, the gap between the ‘metropolis’ and the ‘periphery’ and spatial inequalities of a systemic type. But now we have a systematic demonstration of the specific way this applies to the area of the most developed countries of European capitalism. The various reports included in this book show how the loss of competitiveness of the periphery (the now famous ‘PIGS’: Portugal, Ireland, Greece, Spain), as the result of higher inflationary levels and rise in nominal labour costs, was just the flip side of the export prowess of Germany and other core countries, with the deficits of the first group mirroring the increasing surpluses of the second. This whole mechanism has been hugely amplified by the sheer existence of the common currency, resulting in cheap credit, both for private agents and for states, and by securing high credibility for this public and private debt bonds in the international markets. Who could dare to think that there was the slightest risk of default from a country part of such a strong and successful world-currency zone as the eurozone?
The success lasted a few years, boosting the overall financialisation of economies internationally, ‘bubbles’ of all kinds in the periphery (especially in real estate, banking and credit-fuelled private consumption), accompanied by export performances and gigantic lending flows from the core. Rising social inequalities, environmental destruction, weakening of the productive capacities of the ‘losers’ – this unpleasant downside remained backstage, obliterated by the success story of the new single currency bringing prosperity and stability to all. It was the moment of the triumph of the Europeanist ideology: a Greek or a Portuguese pensioner, with a few hundred euros as a monthly income, felt part of the club of the rich and mighty, on an equal footing with her Northern European counterparts. ‘Europe’, at last, meant something more concrete, and symbolically binding, than remote bureaucratised institutions, deprived of any popular legitimacy. As Marx famously wrote, quoting Shakespeare, money is ‘the radical leveller that … does away with all distinctions’. 2
With the start of the 2007–8 downturn, repressed reality took its revenge, dissolving the fetishism of the single currency and euro-euphoria. It would be foolish, of course, to blame the euro as such for the crisis, which is of international proportions and has deep roots in the contradictions of the existing mode of production itself. But the euro, and more generally the entire mechanism of the EU, is of paramount importance in explaining the specific form the crisis took in this area of the world, and in the strategies adopted by the dominant groups to confront it. To put it differently, the pre-existing divergence between the euro-periphery and the core started now looking like an abyss.
Despite its low growth rates in the early years of the new millennium, and the 2009 downturn, the German economy proved resilient, whereas the PIGS plunged into continuous recession, with Greece once again the ‘weak link’ of European capitalism, experiencing a 1930s-type Great Depression. But this pattern is not the outcome of the blind interplay of pure economic forces. Every step of this descent into the depths has been mediated by the entire set of EU institutions, with the IMF playing only a secondary, and relatively lenient, role. With the transformation of the banking crisis into a sovereign debt crisis, the nightmare took hold in the peripheral states. Every EU summit, every round of negotiation between debtors and creditors led to a long series of ‘bailouts’ accompanied by draconian ‘memoranda’, endless austerity packages and ‘shock therapies’ fully conforming to the standard IMF models previously applied to the South, with entire countries placed under regimes of ‘limited sovereignty’. The crisis of the eurozone opened the way for ‘disaster capitalism’ moving now westwards, to the edges of the Old Continent which has become a laboratory of policies which will eventually be implemented, if only in a modified and possibly softer ways, elsewhere.
It is only now that the full power of that blend of hybrid supranational, but still interstate, authoritarianism and of institutionally embedded neoliberalism, which constitutes the DNA of the EU, can be fully apprehended and understood. And this process could not leave the ideological realm untouched. The dark side of Europeanism has now come to the surface: blaming the losers, the ‘lazy’ and ‘profligate’ southerners, has now become the conventional wisdom of the mainstream media and politicians. It is crucial however to stress here that the revival of these racist stereotypes should not be understood as a return to the past, even if it draws heavily from an old Orientalist stockpile. This intra-European neo-racism is rather the purest outcome of the newly polarised reality created by the internal logic of so-called ‘European integration’, the realities of which were already quite familiar to the inhabitants of the European Mezzogiorno constituted by the former Eastern Bloc countries.
The reader will find in the following pages a clinical step-by-step analysis of this process, fully confirming the scenarios presented in the first RMF report (March 2010) on the effects of the austerity policies. She will also find an uncompromising critique of the illusions created by all the supposedly ‘left’ variants of Europeanist ideology, which converge in their disregard of the real mechanisms operating within the EMU and its institutional framework. On paper, of course, it is perfectly possible to show that a single unified European entity, undertaking full fiscal and monetary responsibilities, could easily tackle issues such as the Greek sovereign debt. A European Central Bank with the backing