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 controlde facto German controlover 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 eurozonea 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 Greeces drachma, 80%.
The euro has only been in existence for nine years. The fear is spreading that it wont 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 effectfueling inflation in the U.S. and elsewhere. The Wall Street Journal pointed out the Feds 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 Greeces problems or, if a deal doesnt happen, thats damaging for Germanys 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 continents 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 cutswith more planned for 2012have 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 Merkels 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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