Out of the Euro-nightmare: the asymmetries of the Eurozone

14 Posted by - 22 febbraio 2014 - Blog Print This Post

Alberto Montero Soler

Professor di Applied Economics – University of Malaga
Translation by Elena Marini and Patrick Lynch
Original version


Months go by, they become years and the possibility for the peripheral countries of the Eurozone to get over this crisis without breaking up recedes further and further to the horizon.

Reality insists on showing those who stubbornly affirm that there are reforming solutions capable of facing today’s economical and social degradations that the plausibility of these solutions depends on an inescapable condition: the radical change of the institutional structure, of the rules and of the ideological line that guides the functioning of the Eurozone.

The fundamental problem is that these elements are structurally essential to the accumulation process by the big European capitalists. They also hasten, and we should never forget this, the consolidation of German hegemony in Europe and the role that Germany aspires to have in the new multipolar geopolitical scene that is under construction.

This is why we can offer at least two fundamental arguments to reinforce the thesis which states that it is necessary to break up the restrictive context imposed by the euro, if one wishes to open up the range of possibilities, leading to a way out of the crisis that will allow for the slightest chance of emancipation for the European peoples.

The first argument is that the solution to the crisis that has been imposed by the European ruling elite, applied in its own name and interest, is in itself the breach of a social pact. Austerity policies are the most evident expression of the fact that these elites are so powerful, compared to the working forces, that they can unilaterally and definitively break up the implicit pact on which European welfare states had been created, reinforced and maintained.

These elites are perfectly conscious that a precarious, de-ideologised and de-structured working class, without any class-conscience, is defenseless and does not have the necessary resistance to preserve the welfare institutions that were protecting it from the cruel commodification of fundamental economic and social needs. Those concessions that were made in the aftermath of the war, during the Fordian capitalist era, are in danger of being wiped out, because privatising the welfare state offers capital gains so large as to offset the tendency of the rate of profit to fall.

The second argument is that we cannot forget, as we seem to be doing, the nature of the European monetary integration project, from its inception and from when the economic dynamics that it promotes began to be implemented.
The fundamental problem is that the Eurozone is an hybrid that will not evolve towards a Federal State (with all the consequences that this would cause in terms of loss of sovereignty), and it keeps existing only in the context of monetary union, for the very reason that the monetary dimension (together with the free movement of capital, goods and services) is enough to create a wide market that ensures a higher rate of capital reproduction, that eliminates the risk of competitive devaluations by the various States, and that facilitates domination of some States over others on the basis of the apparent neutrality of the markets.

This is exactly why Europe –together with its most developed symbol of ‘integration’, the euro – has become solely an economics project, put at the service of industrial and financial oligarchies. What is worse is that in this process these oligarchies have co-opted the national and supranational political classes, in so doing blocking any interventionist political and economic mechanisms and impeding any reforms, except the ones that are convenient for them. Consequently, it would be difficult for the European common classes to recognize and defend this kind of project as that ‘Citizens Europe’, that once was the aspiration of the left.


In fact, many elements show why from the point of view of the European people the euro has been a failure from the very start. On one side, both the politics of structural adjustment that had been introduced during the pre-euro converging process, and the politics pursued once the euro was introduced, reduced the rate of economic growth, with a consequent impact on the creation of new jobs. On the other hand the absence of a fiscal structure of redistribution of wealth and capital, or of any mechanism of solidarity which actually confronts this issue, has hampered the reduction of imbalances in the level of well-being amongst the member States. In the end we should stress that the structural asymmetries existing between the different economies from the beginning of the project have gradually increased over the years, reinforcing the dichotomy between centre and periphery inside the Eurozone.

If we add to this the fact that the policies introduced to save the euro are aimed at preserving the interests of the European economic elite against the interests of the common classes, it reaffirms the idea that we are moving rapidly away from the possibility of seeing the Eurozone as part of a process of integration that the people of Europe could recognise as their own and see is based on their own needs.
We can conclude therefore that the euro – understood not only as a currency but also as a complex institutional web and an effective tool put at the service of the increased reproduction of capital on the European scale – is the simplest and crudest expression of neoliberalist capitalism. A capitalism that develops in the context of a single market dominated by the categorical imperative of competitiveness, and in which a vacuum of national sovereignty has developed – to say nothing of the people’s sovereignty – all in the service of a technocracy which acts politically in the favour of a European elite, without the slightest regard for the well-being of the common classes.

If we agree that for these classes the creation of the euro can be regarded as a failure, the question that immediately arises is what can these classes do – at least those of the peripheral countries who are the most subject to the politics of economic adjustment – in the face of a future that seems so devoid of hope and in which the possibility of change through solidarity is blocked by ever-tightening chains. The answer to this question depends on what particular view you have of the current crisis, of the forces that maintain it, and of the possibility of change in political and economic relations inside the Eurozone that could reverse the current situation or, on the contrary, consolidate it.


In my opinion the crisis currently presents two factors difficult to reconcile and which help to maintain and strengthen the status quo. 

The first factor is financial and revolves around the problem of general indebtedness which, in the case of most of the peripheral countries, began as a problem of private debt and which became public debt with the intervention of the States, that ‘socialised’ the debts originated within the private financial system. The levels of both the private and public debt are so high that it makes it impossible for them to be completely repaid, something we must be aware of, as it has serious practical consequences. For this reason, and because without their own currency some member States are experiencing rates of debt growth much higher than GDP rates, the weight of debt is unbearable and it becomes a time bomb that sooner or later will detonate.

The second factor is real, and materialises in the differences in competitiveness between the central and the peripheral economies. These differences are, among other factors, the cause of the crisis, and the basic problem is that not only are they not diminishing, they are actually increasing. Furthermore, the view that the reduction of the external unbalances among the peripheral economies inside the Eurozone is an indication of the fact that we are in a transitionary phase leading to an exit from the crisis is clearly skewed, because it does not fully appreciate the enormous repercussions of the period of stagnant economy on imports.
The link between these two aspects of the crisis is assured by the dominant positions of the central countries over the peripheral ones and, undeniably, by the position achieved by Germany in the Eurozone.

Its position is relevant not only for its economic weight, but also because of its political control over process of institutional change in the Eurozone, developed under the pretext of being the only solution to the crisis, but which actually act to reinforce German dominance.

If we add to this the unique nature of Germany – characterised by its chronically weak internal demand and, as a consequence of this, by the recurring excess of national savings, and the strength of external demand for its goods which is at the root of its continual commercial surplus – we will have the proof that what seemed a virtuous circle of growth for the whole of the Eurozone turned out to be a yoke for the peripheral economies. These have become the privileged outlet for the financial flow through which Germany put to use its excess of internal savings and commercial surplus, recycling them under form of external debt taken by the peripheries.

In this way Germany transformed its role as a creditor into a quasi-hegemonic position of dominance allowing it to influence politics to its own ends. This implies that any cooperative solutions to resolve the crisis are automatically rejected, while on the other hand reinforcing the competitive solutions between economies, whose imbalances in terms of competitiveness have already been shown as unsustainable in such a diverse and asymmetrical context as the Eurozone. So it is as tragic as it is discouraging to witness the appeasement with which the governments of the Eurozone periphery take on and apply politics that worsen the pre-existing structural differences and, because of this, only accentuate the differences in productivity and well-being between the centre and the periphery, without allowing for the slightest hint at a solution.

The processes of internal deflation not only reduce the consumers’ purchasing power: they also increase the real weight of internal debt, both private (because of the deflation of salaries) and public (because of the differential between the growth rate of the GDP and of public debt). This situation is worsened by the fact that any appreciation in the euro exchange rate becomes an erosion of the spurious competitive benefits coming from deflation of salaries.
So, because of this, we must talk of a journey towards the abyss of underdevelopment.

This is the reason why, if radical structural changes are not made (which would always imply mechanisms of redistribution of wealth), the Eurozone will confirm itself as an asymmetric zone for the accumulation of wealth, in which the peripheral economies will be condemned to extricate themselves in zero-growth equilibrium – using an economic euphemism – or, in the worst of cases the Eurozone itself will end by fully or partially collapsing.

The problem is that these radical reforms not only are not top of the list on the European agenda but are actually systematically blocked by the German veto.
In fact, I think it is clear that at this moment there exists, in the bosom of the Eurozone, tensions between the interests of the European economic and financial elite and those of the common people over the whole of Europe, more sharply felt than the common classes of the peripheral states; tensions between the interests of Germany and other central States and those of the peripheral States; and tensions between the solutions to the crisis imposed by certain elites (and States) and the more basic economic logic, expressed in the fundamental macroeconomic identities which summarise the interrelations between private sector, public sector and foreign accounts. All of these tensions, duly managed by those who hold the power in the different sectors in which these tensions are expressed, serve to consolidate an asymmetric Eurozone (with effects that have already been discussed) dominated by Germany.


These tensions, in conclusion, enormously reduce the possibility of an exit from the crisis, guided by the common classes, which is not a break-up, as outlined at the beginning of this article. The political problems that present themselves are clear, when one considers that the only ones who are accepting the possibility of this unilateral departure (an euro-exit to be precise) are the nationalist far-right parties, who have instrumentalised a growing feeling of popular dissatisfaction with the euro. Compare this to the left-wing, which keeps demanding the possibility of reforms that go directly against the interests of those people that used for their own ends the potential of imperial economic domination, allowed by the euro.

From this point of view it would be opportune to cease to view the euro a simply a currency and to see it more as a weapon of mass destruction which is destroying not only the well-being of European peoples, but also that European brotherly feeling among these peoples that was created with such great effort.
The problem of credibility becomes even more serious for the left-wing when, in order to promote the vital reforms, they call to action the ‘European working class’, so that it may serve as the front-line in the transformation of the nature of the Eurozone itself. The problem is that now as never before the condition of the working-class in Europe is so deteriorated as regards conscience and identity, while the wage relations continue to be the angular stone of the capitalist system. As Ulrich Beck wrote recently, we suffer the tragedy of finding ourselves in revolutionary times without a revolution or revolutionaries. There is nothing. 

Despite all of this, the horizon would be clearer if the left were capable of giving a believable response to the question that they refuse to consider, and that, despite them, may appear sooner or later on the European stage (concretely, in Greece): what could a left-wing government do which came to power in a sole country on the periphery? Would it have to hope that in the rest of the Eurozone the objective conditions which would allow its reforms would arrive, knowing full well that this would take the unanimous vote of 27 States? Or should it use the range of possibilities which history has allowed them to open and to campaign for the exit of their own country from the euro?

It is not easy to give an answer to this question: however avoiding it makes no sense. For this reason it is necessary to admit – for a start- that in the context of the euro there is no room for effective reform policies which could act on behalf of the common classes. Actually, I would dare to assert that in this situation there is no room for politics, because politics has been kidnapped by the institutional system developed to provide an official credibility to a currency behind which there is a lack of any type of constructive project to form a political community that could bring together the peoples of Europe. It turns out to be an absurdity to appeal for constitutional reform when the necessary conditions that allow for the full implementation of these type of processes would mean a break with the institutional, economic, political and legal conditions imposed by the euro. A community can renew itself through constitutional reform only if it does so without preconditions imposed from outside, which damage the interests of the same common class which are appealing for this constitutional change.

In other words, a break with the euro a necessary, but not sufficient, condition for any attempt at emancipatory social reform to which the left might aspire. For this reason, claiming a revolution in theory and, at the same time, trying to keep the single currency and the institutions and politics, which are consubstantial in this Europe of Capital, until the right conditions arise to allow reforms, is a contradiction in terms, lacking any credibility in the eyes of the common classes, which appear to have locked on to the enemy with greater accuracy than the left itself.

Until this contradiction is understood and resolved, and both the political and economic debate move forward together, both proposing a radical break; until a euro exit is perceived not only as a problem, but also as a solution to this situation of dependence by the economic periphery (a solution which could offer them the possibility of restructuring and finding their own path to develop the means of production and of dissemination of well-being in a more autonomous form, less dependent on the relations with the global economy); until the fear of breaking the chains of the euro does not cease to bind us, a fear which arises from the lack of absolute certainty about a future life outside the euro (the same fear that bound those who denied the possibility of a break-up with the gold standard after the depression during the 30’s in the last century); until all this occurs, I can only predict, unfortunately, a long period of social and economic unrest for the people and the workers of the European periphery.

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