Sunday, December 18, 2011

Euro Summit Intensifies Capitalist Crisis

Euro summit intensifies capitalist crisis

By Fred Goldstein
Published Dec 18, 2011 9:49 AM

The primary development at the Brussels summit meeting of European leaders was that the German capitalist government, headed by Angela Merkel, punched more holes in the sinking ship of European capitalism while attempting to throw away the life preserver.

The German proposal to “hard-wire” austerity into the European Union triumphed. At the same time, the German capitalist government ruled out allowing the European Central Bank to take on the same role as the U.S. Federal Reserve Bank, that is, to become the lender of last resort to buy bonds from failing indebted governments.

The European leaders in Brussels failed miserably in their efforts to resolve the financial crisis in Europe. That is because they are laboring under the illusion that the financial crisis can be separated from the global capitalist crisis.

The world crisis of overproduction, the inability of capitalism to grow its way out of the crisis, the steady slowdown of the world economy and the relentless rise of mass unemployment cannot be resolved by negotiation between capitalist governments or financial authorities. These negative developments arose because capitalism has reached a dead end.

The U.S. bankers, the big monopolies, the Obama administration and many capitalists in Europe wanted to emphasize the bailouts. U.S. financial institutions have several trillion dollars directly or indirectly invested in European banks. Europe is also the biggest export market for the U.S.

Also, the Obama administration wants to at least postpone any economic downturn in Europe until after the U.S. presidential election, because a downturn will increase unemployment here.

The agreement at the Brussels summit imposes an annual debt limit of 3 percent of Gross Domestic Product for each country. Most importantly, the European Commission can examine each national budget before it goes to parliament and can call for changes if the cuts are not austere enough. It can impose sanctions on countries that fail to comply. This means, of course, the poorer, weaker capitalist countries.

The nature of the so-called “sovereign debt crisis” is that the bankers and investors of the world created a government bond bubble by pushing government bond sales on the governments. In fact, Goldman Sachs is being investigated by the Greek government for its role in engineering part of the Greek debt crisis.

Government lending and bond sales account for a huge portion of easy profits for banks. In noncrisis economic times, a steady stream of fees and interest payments flows into the vaults of the financial sharks. Now that there is an economic crisis, tax revenues have fallen, treasuries have been used to bail out failing banks and the bond bubble has burst, just the way the housing bubble burst in the U.S. The investors want every government’s first priority to be paying interest on previous loans.

Both sides of the argument come from the perspective of the ruling classes. Both are for austerity. But one side wants to couple austerity with guaranteed bailouts. Neither side worries about the workers, only about guaranteeing the returns to millionaire and billionaire investors and bankers — at the expense of the working class.

The first working-class response to the Brussels summit came in Italy, as the three main labor federations — CGIL, UIL and CISL — went ahead with a three-hour national strike on Dec. 12, the first time in six years that the three had united for a joint strike. The FIOM metalworkers’ union, including many auto workers, went on an eight-hour strike. The transport workers are due to walk out on Dec. 15 and civil service workers the following Monday, Dec. 19.

These strikes are part of a week of nationwide strikes called to protest the austerity plan decreed by new Italian Prime Minister Mario Monti, who announced new sales taxes, cuts in pensions and a rise in the retirement age prior to the summit meeting. The announcement was supposed to give assurances to investors that Italy could pay its debt, but instead it has only spurred the Italian working class into action.

Hopefully, the entire European working class will unite to push back this latest assault by the capitalists of Europe and the U.S. This also sets an example for the workers here, who are suffering from austerity imposed by every level of government — federal, state and city.
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