European Union faces deepest crisis in its history

Last week’s European summit ended in tears as negotiations on the European Union budget collapsed. The usual diplomatic talk was nowhere to be seen at what will become known as the summit where the whole integration process in the EU was halted in its tracks. Maarten Vanheuverswyn looks at the conflicting national interests that are at the heart of this crisis.

Nations have no permanent friends or enemies, only permanent interests.”
Lord Palmerston, British Foreign Minister, 1846-1851

“People will tell you next that Europe is not in a crisis. It is in a deep crisis,” said Luxemburg’s Prime Minister Jean-Claude Juncker, who currently holds the EU presidency. Last week’s European summit ended in tears as negotiations on the European Union budget collapsed. Significantly, Juncker started his press conference with a glass of water. “Excuse me that I drink first. I don’t drink because I talked too much but because I have listened a lot. Others will probably be thirsty because they talked too much and listened too little.”

The usual diplomatic talk was nowhere to be seen at what will become known as the summit where the whole integration process in the EU was halted in its tracks. Jacques Chirac, the president of France, made no bones about placing the blame for the meeting’s failure on British Prime Minister Tony Blair, who he accused of “national egoism”. Blair in turn used his closing press conference to shoot back at French accusations that Britain lacked a “European spirit”, making the tart remark that “Europe isn’t owned by anybody”.

What was all the song and dance about? On the face of it, the summit’s failure was the result of disagreements over the financing of the EU budget for 2007-13. However, the budget was only one particular item on the agenda dividing the different nations participating in the summit. As The Economist pointed out:

“Arguments about the budget, although often bitter, have been a regular feature of European politics for many years. Far more profound issues are raised by the rejection of the proposed new constitution for the EU in recent referendums in France and the Netherlands. These votes, in countries which have traditionally been fundamental to the drive for European unity, raised deep questions both about the political legitimacy of the EU, and its underlying purpose. Yet, going into the summit, the budget and the constitutional questions had become linked. Seeking to bounce back from his political humiliation at home, Mr Chirac had chosen to go on the offensive against “the British cheque” – the rebate that Britain has enjoyed on its contributions to the European budget since the mid-1980s, when Margaret Thatcher insisted on having some of her money back.” (June 18, 2005)

The Constitution is dead – long live the Constitution!

To say that the recent rejection of the European Constitution in both France and the Netherlands has had tremendous ramifications is stating the obvious. Indeed, three weeks ago, the Thalys train that connects Paris with Amsterdam via Brussels, the much-trumpeted symbol of the borderless Europe that the leaders of the European Union allegedly want to build, was pushed violently off the rails. The Paris-Brussels-Amsterdam route became the fault-line for a European political earthquake. Despite the insistence of José Manuel Barroso and Josep Borrell, presidents of the European Commission and the European Parliament, that the constitution was not dead and that ratification must continue, after the French and Dutch “no” vote the constitution is now as dead as a dodo.

At least, that is what one would think after this terrible blow that has sent shivers down the spines of the European establishment. After all, for the constitution to come into force, all 25 members of the EU need to ratify it. With the recent rejection in two key countries, it would seem that the constitution is finally on the ropes. However, last year a declaration was attached that if, two years later, four-fifths of countries had ratified the constitution, but some had “encountered difficulties” (i.e., when their people have democratically rejected this reactionary piece of paper that has been rammed down their throats), an EU summit would be held to “consider the situation”. What is needed now, apparently, is a period for “stock-taking, debate and explanation”. Last year’s declaration was the basis for Juncker’s insistence that ratification must continue. Never mind that of the nine countries that have already ratified the constitution, only Spain has done so via a referendum.

Jean-Claude Juncker

Officially, the EU leaders claimed to have reached a deal on the constitution at last week’s summit. The same Mr Juncker who acknowledged that Europe is now going through a very serious crisis, claimed that the constitution is still alive and might still come into force. How does he square this contradiction? The argument goes that the document was a carefully balanced compromise and could not be amended, despite the negative verdicts of the French and Dutch voters, who he claimed had been “confused” and “ill-informed”. Hence he announced that there would be a pause in the ratification process, “to allow a broader debate among European citizens”. In other words, think again, people of France and the Netherlands! Although most European leaders would like to see the French and Dutch vote again on the same constitution, this is unlikely as this would put President Chirac and Dutch Prime Minister Balkenende in a very difficult position in their own countries. However, as The Economist commented, “it is clear that in Mr Juncker’s mind – and he was supported in his arguments by the presidents of the European Commission and the European Parliament – there can only be one acceptable outcome of this debate: eventual ratification of the constitution.” (June 18, 2005)

Democracy, you see, is a dangerous thing. From a bourgeois point of view, it is all well and good to have people cast their vote as long as their fundamental interests remain untouched. As a wise man once said: “The oppressed are allowed once every few years to decide which particular representatives of the oppressing class are to represent and repress them.” In June 2001, for example, there was the spectacle of Ireland holding a referendum on the Nice treaty, but to the government’s embarrassment voters rejected it. That did not stop that same government from holding the same referendum again, thus artificially pushing through a “yes” vote.

Things are no different with the European Constitution. Initially, government officials were very confident that they would easily get away with the constitution so why not have some referendums giving it at least a semblance of democracy? Nobody was really interested in this constitution anyway and with a massive propaganda campaign in the mass media no real difficulties were to be expected. Things turned out differently, however, because the bourgeois in Europe underestimated the seething resentment of their own population. After the electoral disasters of almost every ruling government party in the European elections (see European elections confirm polarisation between the classes), they should have known better. It is one thing to control the media and use it to disseminate a non-stop stream of propaganda; it is another thing to keep control of what people really think after the increasingly blatant attacks on their living standards, pensions, social security, etc.

Delaying tactics

The crux of the problem is that the French and Dutch “no” vote may well have set a precedent. Referendums in Poland, the Czech Republic, Denmark or Britain would probably lead to further rejections. Hence Luxemburg will likely cancel its referendum planned for July 10, while Britain, the Czech Republic, Denmark, Ireland and Portugal will probably do the same thing. The leaders are afraid of their own people apparently. Again we can quote The Economist:

“... EU leaders had assumed that potential non-ratifiers would either be small countries, such as Denmark or the Czech Republic – whose arms might be twisted into voting again – or a more sceptical country such as Britain. If it were not to invite an even bigger raspberry, a new vote would have to be on a text that had been revised or qualified in some way ... Yet if renegotiation and a second vote are unthinkable, so is the option of chucking France out. Unlike Britain, France has always been politically (and geographically) central to the EU. Like the Netherlands, France is one of the six founders, and also one of the 12 that have joined the single European currency, the euro. An EU without France is simply unimaginable.” (June 2, 2005)

What is the way forward then? Enter the army of lawyers and technocrats located in Brussels who earn good money finding ways out of a crisis like this. One option that was tentatively put forward would be to cherry-pick certain aspects of the constitution and get those through the back door. In this way that nuisance of the referendums could be avoided. The difficulty with this option is that some key regulations like the abolition of some vetoes (which has always been a hindrance for the bigger countries that don’t want to be blocked by the smaller ones) would still require treaty amendments – and coming to an agreement suitable for all has become harder than ever in the divided European Union of today. Still, there is little doubt that EU lawyers specialised in the art of chicanery will sooner or later, if only temporary, come up with a clever “legal” way out.

For the time being, it looks like the European leaders have decided to postpone any real decision on the matter. The one agreement on the summit may have been a resolution on the ratification process for the constitution but because of its vagueness the statement boils down to a mere declaration of “good intentions”. Member states are supposed to have the freedom to define their own tempo in ratifying the constitution. The November 2006 deadline for ratifying the charter has been abandoned and an “evaluation” will be made instead. Those who want to go faster are allowed to do so. Those who want to go slower will be free to do so as well. Above all, the text says, a period of reflection will be needed to win back the “confidence of the citizens”. In other words, nothing has been solved and all underlying contradictions will only come back with a vengeance in the future.

National antagonisms to the fore

The bone of contention at the summit was essentially about money. At the moment, Britain gets two-thirds of its net contribution to the EU budget paid back as a rebate. This was the stick Chirac tried to use to hit Britain as he demanded the abolition of the rebate, claiming that otherwise Britain would not pay its share of the cost of enlarging the EU. However, as Blair was quick to point out, the country is still the second-largest net contributor to the budget. Blair countered the argument by opening the can of worms also known as the common agricultural policy (CAP). Britain has a small farming sector and farms get more than 40% of EU spending through the CAP, hence the rebate would be justified. Thus Blair said that it could only be scrapped on condition that the whole of the CAP be reformed – something Chirac, whose country benefits a great deal from the policy, obviously refused to consider.

The fact that president Chirac launched a frontal attack on Britain’s rebate can only partly be explained as a diversionary tactic he used after the constitution fiasco in France. Whatever the different reasons are for the collapse of the summit, the real causes are to be found in the fundamental economic contradictions that exist between the EU member states. These have been exacerbated over the years by the prolonged economic crisis throughout Europe. On top of that, different member states are also pursuing contradictory foreign policies. The Iraq war, splitting the Union right in the middle, was only the most obvious example of this.

As Roberto Sarti and Fred Weston wrote last year:

“These growing political tensions eventually erupted into an open conflict between the major powers, and within the European Union itself. As recently as only two or three years ago some form of compromise was usually reached. We would observe a period of bargaining over different points of this or that Treaty or Pact that would end up in some sort of compromise. One country or other would give up its “principles” in exchange for some monetary compensation elsewhere. This is no longer possible.

“This gives us an indication of how “diplomacy” will work in the future. We will no longer see the velvet glove. Rather, there will be threats and open clashes in a situation where the strongest countries will use all their strength, with good or bad manners, to prevail over the others. Just as US imperialism has been behaving like an uncontrollable bully around the world, so France and Germany will attempt to use their weight within the EU to bully and cajole the weaker members of the EU into accepting their policies.” (EU Constitution debacle, The real nature of EU exposed)

This is now unfolding before our very eyes. Following the collapse of the talks, Chirac described Britain’s stance on the budget as “pathetic and tragic”. Now we have the spectacle of European leaders hurling recriminations at each other who are supposed to convey a message of unity around the “European project”.

At a stroke the EU has been transformed from an organisation of supranational ambitions to something as weak and vacant as the interwar League of Nations. Yesterday the Italian welfare minister, Roberto Maroni, renewed calls for a referendum on whether the country should abandon the Euro and reintroduce the lira. And even before the “no” votes in France and the Netherlands, Stern, a German news magazine, reported that Hans Eichel, the German finance minister, and Axel Weber, the Bundesbank president, had discussed the break-up of monetary union with independent economists. This was immediately played down and German political and business leaders quickly stressed their commitment to the euro. However, these kinds of reports, in the frenzied political atmosphere after the French and Dutch rejections of the EU constitution and after the collapse of the summit, are bound to heighten doubts about the single currency’s long-term future.

How could it be otherwise? The weaker economies in particular have suffered from the adoption of the common currency. In the past they could get out of an economic crisis by resorting to devaluation. Now this is impossible so each government has to seek a solution at home, which inevitably means a policy of savage deflation and unemployment. In that sense, the words of Maroni are merely the recognition that the Euro has put severe limits on the policies of the Italian government and the ruling classes of Europe in general.

After all, the EU is not a federal state, and there is no prospect of it becoming one. It simply cannot function in the same way as the United States, which, in the event of a crisis, can channel funds from the centre to any state which finds itself in difficulties. The same goes for a federal state like Canada, where the federal government underwrites the debts of the poorest provinces. In the European Union, all the burden of a recession must be borne by each member state unaided. The intention is to compel each government to maintain “sound finance” through the good old method of cutting public spending and selling off state assets.

The EU grinding to a halt

In order to come to grips with what is happening now, it is important to bear in mind how exceptional the period of the last fifty years was. At present, the idea of war between the European powers has receded in the consciousness of the masses in Europe. Yet a hundred years ago the anarchist Kropotkin pointed out that “war is the natural condition of Europe”, which, historically speaking, was a hundred percent correct. It was only the peculiar balance of forces arising from the Second World War that put war between the major European powers off the agenda. That era of “peaceful cooperation” based on the massive post-war economic boom is rapidly coming to an end. The tensions that now exist between different member states of the European Union in another period would have already led to war. In the past, even more innocent bust-ups like the recent one between Chirac and Blair could easily have provoked a war. This is obviously not the case today – and diplomacy will probably be pushed again in the next few months – but it is clear that something fundamental has changed in the relationships between the different European nation states.

As Alan Woods wrote in A Socialist alternative to the European Union:

“The Common Market was established as an attempt by the European bourgeois to overcome the narrow confines of the nation state, with its limited market. Historically the nation state played an essential role in developing capitalism, which served in the first instance to protect and develop the home market. However, with the development of communications, technique, science, multinational companies, and the world market, the productive forces came into conflict with the limitation of national state boundaries as well as private ownership of the means of production. Capitalism and the nation state from being a source of enormous progress became a colossal fetter and impediment to the harmonious development of production. This contradiction reflected itself in the world wars of 1914-18 and 1939-45 and the crisis of the inter-war period.

“The development of world trade in the post war period allowed the capitalist system to overcome this contradiction, at any rate partially and for a temporary period. The separate national markets of Britain, France, Germany, and the others, were far too small for the giant monopolies. The Common Market was created in an attempt to overcome this limitation. The big monopolies looked forward to an unrestricted regional market of hundreds of millions, and beyond that to the world market. On the basis of the economic upswing, the European capitalists were largely successful in establishing this glorified customs union, where the abolition of tariffs between the countries of the Common Market and a common tariff with the rest of the world served to develop and stimulate world trade.”

After the Second World War, Europe lay in ashes. Its weakness was the main factor that led to the setting up of the European Common Market, also known as the European Economic Community. European nations like France and Germany, which was totally ruined after the war, had to establish a political and economic counterweight against the USA and Japan. On their own, the separate European powers were not able to compete effectively with the economic domination of America and Japan, which had emerged strengthened out of the war. It was necessary to pool resources and arrive at an agreement to share a common market, first in steel and coal, then in other products. This was a tacit recognition of the fact that under modern conditions, the nation state has turned into a reactionary fetter on the development of the productive forces.

Although the broad analysis worked out by the Marxists has been proved to be correct (as the present crisis demonstrates), the expansion of the European Union from the original six countries to 25, and the integration of their economies has gone far further than we originally anticipated. This was mainly due to the development of world trade and the general upswing in world capitalism in the period 1948-74, from which they all benefited.

All this was predicated on a high rate of economic growth. This gave rise to a significant development of the productive forces for a time. In this context, the closer integration of the economies of the main European powers was in the interests of all of them. As late as 2004, ten more countries, mainly Eastern European, joined the European Union. More than ever the illusion was created of an irresistible movement in the direction of a united Europe. Nevertheless, the internal contradictions remain and will inevitably emerge in a period of economic downswing. The present crisis will probably stall the process of enlargement of the EU. Politicians are openly doubting whether further enlargement is a good idea, and it looks unlikely now that a country like Turkey will receive full EU membership.

It is unlikely that the EU will break up completely because of the need to defend their markets against the USA and Japan. They have to stick together since they have no alternative. The European capitalists are forced to hang together, in order not to end up hanging separately. All that is left to them will be a series of bilateral agreements and shifting alliances, with Germany looking ever more to the East, and France moving closer to, then moving away again, from Britain and the weaker European states in an attempt to balance the growing power of Germany. Such a situation by definition would be very unstable and pregnant with all kinds of explosions.

Logic of its own

The common thread uniting all the EU countries is that they all have to deal with an economy that is going downhill. Everywhere there is too much capacity: there is too much steel, too many cars and even the disgusting spectacle of too much food they have to throw away. It is necessary to cut back, to close down, to cease production, and, particularly in the case of the heavily subsidised farmers, even to pay people not to produce! Factories are closed down as if they were matchboxes; millions are put out of work; whole communities are thrown into disarray.

In every single member state of the European Union, the government is slashing state expenditure. By what means do the European capitalists propose to reduce unemployment? By lowering taxes that only benefit the rich; by slashing social benefits and unemployment benefit to force the jobless to accept low-paid employment; by removing all restrictions on sacking workers (“labour flexibility”); by promoting part-time and “hamburger jobs” with no protection and low wages, at the expense of real jobs.

Back in 1992, the Maastricht treaty was not about European unity, but merely served as an excuse for carrying out an attack on living standards and cut public spending. The real reason was the burning need to reduce the very high public debt which is absorbing a disproportionate amount of the wealth of society and has become a monstrous ulcer gnawing at the bowels of the system. The public debt of Italy now amounts to 105 percent of their Gross Domestic Product (GDP), and that of Belgium has reached a staggering 130 percent of its GDP. This cannot be sustained. The interest repayments on these debts swallow up a great part of the national budget and hang like a Sword of Damocles above individual governments, which now have very little room for manoeuvre. Without these repayments, most of these countries would have a budget surplus.

Instead, the tough Maastricht criteria were a recognition of the fact that if Europe continues with its present ever-growing deficits and public debt, there will be an explosion of inflation. Hence, from a capitalist point of view, the only option is to put the burden for this entirely on the shoulders of the working class of Europe. However, every action has its reaction, and the attempt to go back to the “classical” period of capitalism will provoke an unprecedented upsurge in the class struggle.

In the last few years there has already been an enormous increase in social contradictions, a widening of the gap between rich and poor, and the beginnings of a profound change in the consciousness of all classes. Just one month ago there was a massive general strike in Greece, in Spain the Aznar government has been kicked out and even the normally quiet Netherlands were rocked by massive demonstrations last year, not to mention the wave after wave of trade union struggles in France. Even Germany has seen big movements, such as that of the metalworkers. Italy has witnessed a series of localised bitter strikes and several general strikes.

We are thus entering into an entirely new period in history, a period far more similar to the years between the two world wars – a period of convulsions and crises. At the end of the day, like conditions will produce like results. The recent strikes and demonstrations are only a sign of things to come. Every one of the European countries is faced with a crisis on the economic, social and political plane, which they will have to deal with sooner rather than later.

For a Socialist United States of Europe!

Anyone interpreting the above lines as an anti-European position, however, would be mistaken. Socialists are not against a united Europe. We are one hundred percent in favour of unity, and we fight against the nationalist and racist poison that is creeping into the debate. The key question is: unity on which basis? It is necessary to approach this question very concretely and to look at the present discrepancy between theory and practice.

In theory, the “European project” looks very nice and logical. The problem is that the capitalist system is anything but logical. Take for example the Euro. In the abstract, the idea of a common European currency makes a lot of sense. It saves a lot of money, streamlines trade, facilitates long-term economic planning and investment decisions and eliminates a whole series of unnecessary and wasteful operations. However, in practice, on a capitalist basis, it is proving to be a disaster. At this moment all the national currencies are locked into a rigid system. No national government is allowed to alter the agreed exchange rate and to get out of a crisis by devaluing its currency. If a country like Italy were to hold a referendum tomorrow about going back to the lira, a lot of people would undoubtedly support this and for a very simple reason: people can see that since the introduction of the Euro, prices have gone up by leaps and bounds. So the question of the Euro cannot be dealt with in the abstract. Who is introducing it and why is it being introduced? Everybody with eyes to see can see how its implementation is being used to carry through attacks on living standards.

Yes, we are very much in favour of a united Europe since the nation state has outlived its historical role and is now only a fetter on further development. But do we want the present capitalist body that is alien to the mass of the people that live within its borders? There is a very good reason why people look with suspicion on the “bureaucrats in Brussels”. They feel that this body is not theirs. It is under the control of the major European imperialists, in particular the German, the French capitalists and their junior partners such as Italy and Spain. The present road is a dead-end and can offer no solution to the mass of the workers, peasants, unemployed, pensioners and small business people

When we say that the idea of European unity on a capitalist basis is a reactionary utopia, this is not a mere rhetorical way of putting something straight. It is utopian because it cannot be carried through to the end. What unity is there at this moment? The existence of deep conflicts of interest between the capitalists of the different national states, which in essence are competing for markets and spheres of influence, has now come out into the open. To the degree that the European establishment has succeeded in achieving greater integration, this merely signifies a greater degree of domination of the banks and monopolies over the lives of the peoples. It is therefore not only a utopia, but also a reactionary utopia. There is absolutely nothing progressive about it:

“As a matter of fact, the only time a united capitalist Europe was achieved was under Hitler. The Nazis succeeded temporarily in “uniting” continental Europe under German domination. The reactionary nature of such a “union” requires no further comment. But it must be understood that under capitalism, the antagonism between the different ruling classes is such that any union must necessarily mean the domination of one power over the others. We see the elements of this at the present time. Over a period of decades, Germany succeeded in achieving by economic means what it failed to achieve in two world wars – uniting Europe under the domination of German imperialism. This is the essential thing to grasp about the so-called European Union. Behind the façade of unity, all the old contradictions between the national states continue to exist and in fact are intensifying.” (Alan Woods, A Socialist alternative to the European Union)

So-called lefts who have illusions about the “progressive nature” of the EU (usually put forward as a “friendly alternative” to the United States) stubbornly overlook the fact that part of the reason for the EU’s existence is also for the purpose of continued exploitation of the former European colonies in Africa, the Caribbean, etc. The only difference is that this is joint exploitation, as opposed to the old one-to-one relationship of a colony to its imperial masters. This time the plunder is carried out through the mechanism of trade, as opposed to the direct robbery perpetrated under military rule. The ex-colonies are used as a source of cheap raw materials. In the period of economic upswing, the capitalists of Europe also needed cheap labour so they encouraged the immigration of a large number of workers from the former colonies in Africa, Asia and the Caribbean. Now, in the downswing, they can no longer be used so they have to get rid of them. Instead they have become the scapegoats for mass unemployment and the target for the demagogy of right-wing politicians. Racism is the inseparable twin of imperialism and the domination of one people by another.

Opposition to the Europe of the banks and monopolies does not mean that we must support the kind of “national independence” advocated by the nationalist opponents to the European Union. The policy of national self-sufficiency has failed everywhere where it was tried, and must inevitably fail in the modern epoch when everything is dictated by the world economy. The attempt to build “socialism in one country” led to a disaster in Russia and China, although they were both mighty economies based on the resources of sub-continents. What future could there be for small states like Britain, France, or even Germany in isolation? The idea of combining the economic resources of Europe – and the whole world – is a progressive aim and is the only serious way out of the present crisis of humanity. The two main obstacles which are preventing the further development of industry, agriculture, science and technique on a world scale are private ownership of the means of production and the nation state. Only by eliminating these obstacles can society break the shackles that fetter its development. Thus, the real alternative to the capitalist EU is not “national independence” but the Socialist United States of Europe.

Let us end with the not generally known words of old Engels:

“Finally, fraternisation between nations has today, more than ever, a purely social significance. The fantasies about a European Republic, perpetual peace under political organisation, have become just as ridiculous as the phrases about uniting the nations under the aegis of universal free trade, and while all such chimerical sentimentalities become completely irrelevant, the proletarians of all nations, without too much ceremony, are already really beginning to fraternise under the banner of communist democracy. And the proletarians are the only ones who are really able to do this; for the bourgeoisie in each country has its own special interests, and since these interests are the most important to it, it can never transcend nationality; and the few theoreticians achieve nothing with all their fine ‘principles’ because they simply allow these contradictory interests – like everything else – to continue to exist and can do nothing but talk. But the proletarians in all countries have one and the same interest, one and the same enemy, and one and the same struggle. The great mass of proletarians are, by their very nature, free from national prejudices and their whole disposition and movement is essentially humanitarian, anti-nationalist. Only the proletarians can destroy nationality, only the awakening proletariat can bring about fraternisation between the different nations.” (Frederick Engels, The Festival of Nations in London (To celebrate the establishment of the French Republic, September 22, 1792) in Marx and Engels, Collected Works, Volume 6, page 6.)

June 20, 2005

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