Sunday, June 03, 2012

June in the European crisis: showdown in Athens, showdown on the Rhine

This promises to be a dramatic month in the European crisis. The Greek election of June 17 will be a major event. There will be a formal EU summit at the end of the month. French parliamentary elections are on June 10 and June 17.

Welt Online is reporting on a new plan to strengthen the institutions of the euro: F. Eder/A. Ettel/J. Hildebrand/S. Jost et al, Der Geheimplan für ein neues Europa 03.06.2012; Florian Eder/Dorothea Siems/Matthias Kamann, "Der europäische Superstaat durch die Hintertür" 03.06.2012.

The basic story they tell is that EU leaders are looking at the fairly dramatic drop in the value of the euro the last couple of weeks, the increasingly high likelihood of the "Grexit" (Greek exit from the euro) and the escalation of the banking crisis in Spain and realizing that another stopgap solution like they've pieced together with increasing frequency over the last two years isn't enough. The "informal" EU summit May 23 tasked José Manuel Barroso (Commission President), Mario Draghi (ECB President), Jean-Claude Juncker (Chairman of the Euro Group) and Herman van Rompuy (President of the European Council) with coming up with a longer-term plan. Apparently "roadmap" is one of the latest management fad term for Big Ideas, so the three presidents and one chairman are expected to present a "roadmap" addressing four areas: political union, fiscal union, banking union and the "structural reform", the last being the buzzword for lowering salaries and wages, weakening labor unions, undermining protections for workers, and gutting government services that don't directly benefit the One Percent.

Cartoonist Yannis Ioannou pictured how it works with reference to Greek elections in this 05/07/2012 image):

Angie brings her Panzers (tanks) to Brusselanmen Square to persuade Greek voters

Displaying their conservative bent, Welt Online calls the "structural reform" the "most harmless" point of the three. As if. From the perspective of the One Percent, that's how the world looks.


They also report that German Chancellor Angela Merkel is strongly backing the reform plans, which in itself should be an alarm signal that she expects them to empower her to further wreck the European economic and political systems. "Merkel forderte eine echte politische Union und warb damit, diese bringe auch stärkere Zugriffsrechte mit sich, um Schuldenländer zur Haushaltskonsolidierung zwingen zu können." ("Merkel supports a true political union and along with it asks that this also includes a stronger right of intervention in order to compel debtor countries to consolidate their budgets.")

Since there are no concrete plans on the table yet, and since the eurozone crisis is at another boiling point which could worsen conditions in a major way before the planned EU summit late this month, this may turn out to be hot air. Knowing how Angie has approached this whole crisis, if her reported position is correct, all she wants out of this is more power for Germany to squeeze other EU countries into lower living standards and into destitution if necessary to protect Germany's current exporting advantages in the euro and the convenience of German banks.

Her whole approach is delusional. But that doesn't mean it can't do far more damage. Angie's approach to crisis is to come up with a firm position and try to cram it down the throats of her partners and opponents. At the moment, it's becoming hard to tell the difference between those two groups. But she also favors "bet the farm" plays, which the Germans describe by the French phase of playing va banque. Given Germany's economic clout in Europe, the EU and the eurozone, her my-way-or-the-highway approach has won out again and again, most significantly in recent months with the heads of government agreeing to her fiscal suicide pact, the main item of public contention between Germany and the newly-elected French President François Hollande right now.

It even won a majority in the Irish referendum last Thursday. The Irish campaign should be warning to European leaders: the Yes side, backed by the conservatives and the social democrats, essentially campaigned on fear of Germany. The EU (Angie) will deny us the bailouts we need to stay in the EU and meet the reckless decision of a previous conservative government to guarantee the debts the largest private Irish banks. (I say reckless, but it was sound orthodoxy to the Very Serious People who define the neoliberal consensus in Europe and the US.) Ireland is currently shut out of private credit markets altogether, i.e., it can't sell its sovereign debt to private borrowers. That's what the Yes side's position came down to: if we vote this down, Angie will get mad at us and wreck our economy even more.

The EU has become not only a threat to the European economy but a threat to democracy, when protecting democracy and promoting international peace in Europe are supposed to be its primary mission. Angie already replaced two elected governments (Greece's and Italy's) late last year with governments of bankers' collection agents. As the Greek election in May showed, it further discredited the irresponsible conservatives and social democrats who agreed to play along with Angie's game of wrecking the Greek economy for a generation or more to provide for the comfort and convenience of European banks who don't want to have to face the consequences of their own weakness and bad management.

The key political fight right now is still between Germany and France over the fiscal suicide pact, formally called the Intergovernmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. Hollande is insisting that the treaty itself be amended to provide for fiscal stimulus. That position on its face is self-contradictory, because if it is changed enough to allow for sensible fiscal stimulus, it would no longer be the fiscal suicide pact Angie wants.

Angie, on the other hand, wants that treaty passed in its current form. She's looking for ways to propose some fig leaf of stimulus that Hollande would be willing to accept, though anything Angie would like wouldn't be a real stimulus. It would maybe be some token infrastructure investments along with more "structural reforms".

This is "disaster capitalism" in practice. The One Percenters want to use the crisis to remove every possible obstacle to unrestrained corporate dominance of the economy and of politics. The question is how much damage it will cause before popular resistance halts and reverses the process.

French Parliamentary elections on June 10 and June 17 will be an important milestone in this process. As Brian Love reports in Hollande to tighten grip in French parliament election Reuters 06/03/2012:

The Socialist Party [Hollande's party] has no guarantee of winning outright control of the lower house and may end up depending for a majority on the support of the Greens, or the more radical left-wingers and communists of the Left Front.

That would not hamstring Hollande as long as the Socialists win enough seats to limit the leverage of the Left Front, given the Greens should prove a loyal parliamentary partner. Analysts see this as a plausible scenario.

While the prospect of hardliners winning greater influence may alarm some in the financial markets, the Socialists mastered such a partnership with aplomb when last in power, and even kicked off the privatization of Air France under the tenure of a communist transport minister, Jean-Claude Gayssot.
With the parliamentary elections in France and Greece, June 17 is going to be a big day.

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