The Militant(logo) 
    Vol.62/No.15           April 20, 1998 
 
 
Imperialist Rivalries Highlighted With `Euro' -- Working-class resistance, tensions over European Monetary Union deepen  

BY CARL-ERIK ISACCSSON
STOCKHOLM, Sweden - Just 24 hours after German chancellor Helmut Kohl declared his government's support for initiating the projected European Economic and Monetary Union (EMU) with 11 of the 15 members of the European Union (EU), the president of Germany's central bank again raised doubts.

Speaking before the lower house of the German legislature April 5, Bundesbank chief Hans Tietmeyer said that the ratio of government debt to gross domestic product in Italy and Belgium was too high and could "very quickly" cause conflict over monetary policy within the single currency. He refused to discuss how many countries should start the EMU, however, saying this was a political decision.

The governments planning to participate in the single currency see the "euro" as a possible economic block against rival currencies, particularly the U.S. dollar and Japanese yen. But a strong euro is virtually ruled out today for two reasons. One is because of the conflicting political and economic interests among the potential members, particularly Paris and Bonn. And secondly, because of the failure of the capitalist rulers in any of these countries to break workers' resistance to the austerity conditions the employing class needs to impose to shore up their profit margins. The starting membership of the EMU is to be formally decided May 2, and the common currency will take effect Jan. 1, 1999.

On March 25 the European Commission, the executive body of the European Union, recommended 11 states for admission into the EMU: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.

The governments of the United Kingdom and Denmark have a treaty with the EU to also stand outside the common currency for now. The Swedish social democratic government announced last year it would not participate either in the Exchange Rate Mechanism (ERM) or the EMU at the beginning. At first Swedish officials argued that the EMU project was too shaky, and later shifted to saying that it has too little popular support in Sweden.

The commission stated that the remaining EU member, Greece, had not met the criteria for EMU membership.

In addition to these recommendations, the European Commission published a so-called convergence report on how well the EMU criteria was met. This report particularly targeted Rome, which has a public debt of more than 120 percent of the Gross Domestic Product (GDP), double the target of 60 percent; and Brussels, which has a similar debt. But the commission said it had assurances by these governments that the figure would be considerably decreased in the years ahead.

Another criteria discussed in the report was currency stability. Finland and Italy had not participated in the ERM, considered a criteria for EMU membership, for two years. The commission stated that their currencies had been stable enough the last two years to waive this requirement.

Athens has announced harsh austerity measures it says will make possible a bid to enter the EMU and the common currency by the year 2001. In mid-March the Greek government applied to participate in the ERM, and was taken in after devaluing the national currency, the drachma by 14 percent. The Greece government announced it would further deregulate markets there and privatize companies and banks.

German finance minister Theodor Waigel welcomed Athens into the ERM, but emphasized that the proposed austerity measures must be carried through.

After an informal meeting in York, England, with the finance ministers of other EU states in mid-March, Waigel said there should be no doubt about the stability of the new currency. He insisted that the meeting of heads of government within the European Union in early May should issue a special stability declaration. "We have to have guaranties that every country fulfills what they have promised in their convergence plans," Waigel said.

On March 25 the European Monetary Institute (EMI), the forerunner of the European Central bank, also issued a "convergence report" that gave approval to a start of the common currency as recommended by the European Commission.

The commission had refuted accusations that several governments had manipulated their figures to meet the criteria. But at a press conference March 25, EMI chief Wim Duisenberg said the budget deficits for the 11 states slated to enter the EMU, which now average 2.4 percent, were partly the result of one time measures and budget trickery like the "Euro tax" in Italy. This must now be replaced by more sustainable and long-term measures, Duisenberg said. He demanded further austerity measures to reduce public debt and achieve more "labor flexibility."

Tietmeyer presented a Bundesbank convergence report at a press conference March 27. He expressed doubts whether Rome and Brussels could reduce their public debt, and demanded that these governments make further commitments to do so.

Austerity measures spark protests
With unemployment figures hovering around 12 percent or higher in Germany, Italy, and France, further austerity measures are spurring social protests. Tens of thousands of unemployed workers and others are taking part in monthly demonstrations across Germany demanding jobs. According to the organizers, these protests are to continue until the federal elections on September 27 this year.

In France, street protests and occupations of unemployment offices by jobless workers have been an important feature in politics over the last six months.

In mid-March, tens of thousands marched through Milan, Naples, and Palermo, Italy, demanding government action to provide jobs. And workers in Greece are holding a series of strike actions against the government's latest attacks on the unions there (see article on back page).

Worries that further austerity measures could provoke social explosions are expressed in the big-business press. The March 26 International Herald Tribune ran the headline "Calls for a more `social' Europe put leaders on spot."

"The risks are enormous," Ralf Dahrendorf, former head of the London School of Economics, told the Tribune, "because once everybody is inside the single currency, they will relax again, and my own view is that the stability pact is nonexistent.... The scenario could be that between 1999 and 2002, at least one of the major members will either have to or will wish to leave [the] EMU because of domestic social and political needs that are overriding, and it could all begin to unravel."

Proposed cuts in farm subsidies
The European Commission on March 18 proposed austerity measures within the EU in a seven-year budget proposal for the period 2000-06. This included lowering the guarantied prices within the EU Common Agricultural Policy (CAP) on meat, grain, and milk by up to 30 percent.

The commission also proposed that regional support only go to the poorest regions and for fewer purposes. Agricultural subsidies make up about half of the expenses of the EU budget, and regional support is about a quarter. The annual EU budget totals some $100 billion. On the income side, member countries pay a maximum of 1.27 percent of their GDP to the EU budget. The commission has not proposed any change on the income side, and is not expected to do so until after the German federal elections in September.

Earlier reductions in EU subsidies have brought about protests by farmers in Greece, Italy, and other member countries around the Mediterranean.

The commission's proposals were sharply criticized in Germany. Gerd Sonnleitner, chairman of the farmers organization, called the plan to reduce the guarantied prices on farm products "a big provocation," and Finance Minister Waigel threatened to block future EU decisions if Bonn is not allowed to reduce its payments to the European Union budget.

Germany is a net payer of more than 20 billion marks ($10.8 billion) to the EU budget. The governments of Sweden, Austria, and the Netherlands are also net payers to the EU budget, and are joining Waigel in his criticism.

During the 1980s then-British prime minister Margaret Thatcher, negotiated for London a rebate on its payments. This has now become an issue of dispute with the other net- payer states.

Spain is a net receiver of 12 billion D-marks, Greece of 8 billion D-marks, Portugal of 5.5 billion D-marks, and Ireland of 4.7 billion D-marks. None of these regimes wants to receive less, and none wants to pay more.

The European Commission proposal is officially promoted as a way of financing the enlargement of the European Union into eastern and central Europe. Membership negotiations with Cyprus, Estonia, Poland, the Czech Republic, Hungary, and Slovenia began March 30-31 this year.

At the same time, all of the EU agricultural ministers stated opposition the proposed cuts in the CAP subsidies, as they currently stand. The foreign ministers leaving the meeting to discuss EU enlargement were met with protests by farmers.

Dispute over Cyprus, Turkey
At a meeting of EU foreign ministers in Edinburgh, Scotland, in mid-March, the question of Cyprus being among the applicants for membership in the European Union became a point of tension. Athens won the promise in 1996 that Cyprus would be invited to membership negotiations if the Greek government gave its approval to a customs union between the EU and Turkey. Since the early 1980s, the Turkish government has applied for membership in the Union, but has never been given serious consideration, especially due to opposition from the governments of Greece and Germany.

Relations between Ankara and the European Union have been frozen since it became clear that Turkey was not among the six countries that were to be invited to the first round of membership negotiations, but Cyprus was. The island of Cyprus is militarily occupied and divided. The Greek-backed government ruling in the south is the one being considered for EU membership; Turkish forces occupy the northern portion of the country.

Paris has demanded that negotiations should include delegations of Turkish Cypriots and Greek Cypriots. As relations between Germany and Turkey have worsened, Paris has become the big power in Europe that has objections to the exclusion of Turkey from the enlargement of the European Union. French president Jacques Chirac wanted to postpone membership negotiations with Cyprus until Greek and Turkish Cypriots could unite in a common delegation. Athens, on the other hand, threatened to block membership negotiations for the other five applicants if negotiations with Cyprus didn't start March 30-31.

A compromise was worked out in Edinburgh. The foreign ministers unanimously stated that negotiations should start with a divided Cyprus as planned, but there was no agreement on whether a divided Cyprus could become a member of the European Union. They also declared that they were for a united Cyprus.

After a meeting with the Turkish Cypriot leader Rauf Denktas during a visit to northern Cyprus March 30, Turkish foreign minister Ismail Cem declared, "The Greece Cypriot administration is paving the way for another war on the island."

The government in southern Cyprus has imported a substantial amount of weapons over the last few years. The most recent order was for Russian antiaircraft missiles, which will be delivered later this year. They are supposedly to protect an air base close to Paphos in south western Cyprus, where jet fighters from Greece are to be based in an "emergency." During a recent visit to the United States, Greek foreign minister Theodore Pangalos said Athens will defend the regime in southern Cyprus if Turkish forces destroy the missiles.

Carl-Erik Isacsson is a member of the metalworkers union in Sodertalje, Sweden.  
 
 
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