Only by rolling back democracy and breaking working class resistance can the Eurozone be made to function, explains Reuben Bard-Rosenberg

Euro cracked

In June of this year, as millions of Italian workers struck against a grand legislative attack on their rights, the Labour Minister Elsa Fornero demanded a “change in attitudes”. “Work is not a right”, she asserted, “it has to be earned, including through sacrifice”.

In making this demand, Fornero spoke not only for herself, or for Mario Monti’s unelected neo-liberal government, but for an entire European political class that has decided to bludgeon its way through the economic crisis by attacking ordinary people’s living standards.

Eurozone on a precipice

Monti’s reforms were passed. Yet Europe’s economy continues to stand upon a precipice. In Spain, as in Greece, unemployment stands at 25%. In Portugal 16% are without work, and in Italy, unemployment is 11% and rising.

These numbers offer an insight, not only into millions of personal tragedies unfolding across the continent, but also into the dysfunctional state of the Eurozone’s economy. Meanwhile, perpetual panics about the ability of governments and major financial institutions to remain solvent continue to fuel doubts about the survival of the single currency itself.

For its part, Europe’s governing elite continues to spin the crisis as though it were part of some grim morality tale – the outcome of Mediterranean laziness, of overly generous pay, and of fiscal irresponsibility; a problem that can be resolved through “sacrifice” and “restraint”.

This story ignores not only the destructive impact of contintent-wide austerity, but also the structural imbalances which are fuelling the problems of unemployment and of public and private debt.

The key problem for Europe’s heavily indebted economies is that – in a continent saturated by cheap German exports – they cannot sell what they are able to produce, either in their domestic markets or abroad. Since the beginning of the century, wages in Germany have stagnated – and even fallen – despite rapidly increasing productivity. This has meant a bigger and bigger gap between what Germany is able to produce and what it is able to consume – with the excess output flooding into the markets of southern Europe.

Against this combination of rising productivity and falling wages, the economies of southern Europe have found it nigh-on impossible to compete.

Real compensation per employee, 2000= 100

Real compensation per employee, 2000 = 100

Deflator Private Consumption.Source: Ameco Database

Typically, a country faced with such a crisis of competitiveness may devalue its currency, so as to make its exports cheaper. Such an option is of course not open to countries such as Greece, Portugal and Spain, whose currency is the Euro.

Neither can these countries easily go down the Keynesian road of raising government spending and reducing taxation so as to boost the domestic market for their output. At least officially, members of the Eurozone are compelled to keep government deficits to below three per cent of GDP.

Attacks on living standards

Instead Europe’s leaders have opted for grim path of deflation. Europe’s stuggling economies are to be made competitive through a gargantuan, and perhaps impossible, effort to force down wages and working class living standards.

This is the context in which Fornero demands that workers make “sacrifices” in return for the simple right to work. This is the context in which Ireland has slashed its minimum wage rates, and in which the Spanish government recently announced that public sector employees would see their pay slashed by an enormous 25%.

This deflationary approach is of course less than straightforward to implement – not least in countries in which workers are organised, and some form of bourgoies democracy exists. In the 1920s Britain faced a similar situation to many of Europe’s economies today. Its goods could no longer compete on the world market. And like members of the Eurozone today, it could not devalue its currency, which was fixed to the gold standard.

As such the Tory government opted for a policy of forcing down wages. It didn’t work. Amongst other things, the power of organised labour stopped the government and the bosses cutting wages as much as they wished.

In his history of the gold standard, the economist Barry Eichengreen makes a point which is crucial for understanding the political behaviour of Europe’s current political elite: namely, that the gold standard could only function effectively while the working class remained utterly excluded from political power:

“The spread of unionism.. the extension of the franchise and the growth of parties dominated by the working classes” meant that governments were no longer completely free to pursue whatever policies they deemed necessary to the maintainence of the gold standard, without regard for the impact of such policies on unemployment and living standards. As the masses burst onto the political scene, “issues that had previously remained outside the political sphere, such as the determination of wage levels and employment suddenly became politicized”.

Austerity or democracy

This would appear to be a lesson that today’s Eurocrats have learnt well. For in seeking to preserve the Euro, and to do so on the back of falling living standards, they have worked tirelessly to diminish democratic power, and remove the management of economic affairs from any popular political control.

This is a tendency that is truly personified by Mario Monti – the Italian Prime Minister who has never stood for elected office, parachuted in by European elites to pursue the kind of “labour market reforms” that no elected government could carry through.

This embrace of undemocracy is exemplified too by the fiscal austerity pact – deemed necessary for the Euro’s survival – by which elected governments will effectively be compelled to cut spending during periods of recession regardless of what they, their parties, or their voters want. It is visible too, in the sheer volume of repression being deployed in Spain and elsewhere to counter those workers and youths who are protesting against the devastation of their living standards.

If the Euro has any future, then, it is an oligarchic future. Whether it survives the present crisis remains to be seen. But what is abundantly clear is that Eurozone, as it is presently organised, offers no future to the continent’s working class.

Reuben Bard-Rosenberg

Reuben Bard-Rosenberg is a socialist activist and radical folk music promoter.