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Vol. 75/No. 46      December 19, 2011

Berlin seeks control over
indebted EU governments
(front page)
Capitalist governments across Europe are franticly seeking a way to slow the crisis gripping the eurozone and the rest of the continent, the wobbling of area banks burdened by extensive holdings of government debt they cannot sell, as well as the downturn in manufacturing production and trade in Europe and around the world.

In preparation for European Union crisis summit meetings December 8-9, German Chancellor Angela Merkel, accompanied by French President Nicolas Sarkozy, issued an ultimatum demanding “fiscal unity,” which means centralized EU control—de facto German control—over national budgets, forcing austerity on those mired in debt, with automatic sanctions to give the plan teeth.

Germany is the strongest European economy and the main beneficiary of the eurozone setup. The protectionist EU provided Germany with expanded export markets and investment opportunities. Merkel is proposing “reforms” to maintain its domination.

The more heavily indebted governments, including Italy and Spain, as well as France, are clamoring instead for the European Central Bank to print more euros in order to buy up their increasingly shaky government bonds.

Treasury Secretary Timothy Geithner is shuttling across Europe, pressing the interests of U.S. imperialism.

The real source of the crisis lies in a decades-long slowdown in production, employment and trade, a process endemic to the workings of the capitalist system, including the historic tendency for the rate of profit to fall.

In Europe, the crisis is exacerbated by the contradictory economic relations within the eurozone—a setup in which 17 countries with sharply different levels of productivity and development share one currency.

The monthly Markit survey of world manufacturing trends reports that production contracted in France, the Netherlands, Italy, Ireland, Spain, Greece, Poland, the United Kingdom, Austria and, for the first time in years, Germany. Production fell in China, Brazil, Japan, Korea and Australia as well.

Banks in Europe and throughout the world are issuing advice to investors outlining what to do if the euro comes apart. “The Irish punt and Italian lira would sink 25% against a new German mark,” the Wall Street Journal predicted December 3, “while the Spanish peseta would lose 50% and Greece’s drachma, 80%.”

The euro has only been in existence for nine years. The fear is spreading that it won’t make it to 10.

On Nov. 30 the Federal Reserve Bank cut the rate for loans of U.S. dollars to essentially insolvent European banks.

This increase in the amount of U.S. currency in circulation amounts to printing more dollars, with its inevitable effect—fueling inflation in the U.S. and elsewhere. The Wall Street Journal pointed out the Fed’s action is no solution: “Central bank injections: pain killer, not cure.”

Many commentators pointed out that Germany will go to the wall whether the “fiscal union” is adopted or not. “Either Germany finds itself more on the hook for Ireland, Portugal and Greece’s problems or, if a deal doesn’t happen, that’s damaging for Germany’s export economy,” Jerry Webman, chief economist with Oppenheimer Funds, told the New York Times.

Forty percent of all German exports are to other eurozone nations. Germany estimates that in the last two years alone, membership in the eurozone has boosted German export profits between $70 billion and $80 billion.

Merkel, Sarkozy and other bourgeois spokespeople call for brutal attacks on the continent’s working class as the answer to their crisis.

They often point to blows delivered to working people in Ireland as a model. Round after round of cuts—with more planned for 2012—have targeted health care, social programs and benefits for children. Salaries of public sector workers have been cut by 20 percent. Official unemployment has hit 14.5 percent. It would be much higher, but 40,000 Irish workers have left the country.

The campaign by the German rulers to humble governments across the continent in defense of their profits is provoking anti-German nationalism across the region.

Leaders of French political parties from the left to the right have denounced German “diktats” in the name of French nationalism. Jean-Luc Mélenson, the presidential candidate backed by the Communist Party, accused Sarkozy of “capitulating” to Merkel.

It is yet to be determined whether Merkel’s “reforms” will succeed in forcing obeisance from weaker European regimes, as they forced the fall of elected governments in Italy and Greece. And if they are successful, it will only kick the can down the road.

The European Union was hailed, especially by liberals and bourgeois socialists, as the harbinger of “peace and prosperity.” Today eurozone “prosperity” is crumbling and a future of escalating national conflicts is as clear as day.  
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