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Vol. 75/No. 47      December 26, 2011

EU summit: Berlin takes
reins, presses austerity
(front page)
A feverishly anticipated European Union Summit, dubbed in the business press buildup as “10 days to save the euro,” took place Dec. 8-9. While the hype had kicked off a temporary two-week rise in world stock prices, the gathering of European rulers failed to do any more than possibly postpone the splintering of the European Union and full reckoning of the capitalist economic and social crisis.

Germany’s rulers successfully bludgeoned the indebted countries of Europe to accept tighter control over their budgets, accompanied by demands for stepped-up austerity measures.

The European Central Bank—which indebted governments and bankers holding their debt had beseeched to open up its vaults and make extensive purchases of distressed government bonds, leading to devaluation of the euro, to reduce the pressure—announced “steady on the course,” no shift in policy.

This was the “latest in a string of much-ballyhooed summits at which they repeatedly promise big reforms to their rules to save the single currency,” the Economist wrote Dec. 10.

“Global investors drove down stocks, bonds and the euro,” the Wall Street Journal wrote after markets opened Dec. 12, the first business day after the summit. “Greece still teeters on the brink of default, and yields on debt of Italy and Spain are near unsustainable levels.”

This broad consensus on the summit by the “market”—the financial press’s term for the capitalist class—is that it barely scratched out a short breathing spell for the relentless economic crisis tearing apart the eurozone.

Moody’s Investment Service announced Dec. 12 it is considering downgrading the credit ratings of a number of eurozone countries. The agency added that the lack of any decisive move at the summit to release substantial funding increases the likelihood of “multiple defaults by euro area countries” that would involve “exits from the euro area.”

Moody’s also announced it was placing eight Spanish banks on the list for possible downgrades, on top of announcing last month that 87 other banks across Europe faced similar review.

Over the last year, depositors in Greece have withdrawn some $53 billion in deposits from the nation’s banks, equal to 17 percent of the country’s gross domestic product.

Berlin, the continent’s dominant power and main exporting nation, took the helm as the driving force for summit decisions, bullying indebted nations and others, including France, into supporting its proposed mix of “intrusive” control of other nation’s finances, deep austerity and refusal to allow the European Central Bank to massively increase the euro supply.

Anatole Kaletsy, editor-at-large for the London Times, said, “German policy is trying to achieve in Europe the characteristic objectives of war: the redrawing of international boundaries and the subjugation of foreign people.”

All governments present at the summit except the United Kingdom’s buckled under to Berlin’s demands, just as the rulers of Greece and Italy did in November, when they removed their elected leaders and installed “technocratic” regimes to push deeper attacks on working people.

Seeking exemption from a proposed financial transactions tax, British Prime Minister David Cameron alone voted against the summit pact.

At the conclusion of the meeting, French President Nicolas Sarkozy refused to shake his hand.

Production in virtually every European country, including Germany, has declined in recent months. New orders taken by eurozone companies have contracted for the last four months, meaning manufacture will continue to shrivel as demand dries up.

In the 10 weaker eurozone economies, the number of people out of work has doubled since the outset of 2007. It has tripled in Ireland and Spain.

The opening of 2012 will bring big challenges for Europe’s rulers. Eurozone member states need to repay over $1.1 trillion in government debt, with the bulk of it due in the first six months. European banks, which are locked in a dance of death with their governments, hold massive amounts of their debt, with $665 billion due by June.

“European bonds, once freely traded and viewed as risk-free,” the New York Times wrote Dec. 7, are now “semi-poisonous hot potatoes.”  
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