Crisis in the Eurozone. Costas Lapavitsas
But this amounts to pretending that, by virtue of some fiat, the existing reality could be changed magically into its very opposite. In other words it amounts to the type of wishful thinking which has paralysed the entire European Left, even those currents which refused to compromise with neoliberalism and fought, sometimes with success (like in the 2005 French referendum), against certain aspects of the European project. Such an outlook has prevented the Left from realising that the more ‘European’ each ‘solution’ or ‘strategy’ was, the more it was synonymous with radicalised neoliberalism and anti-democratic regression.
Apart from leading to political impotence, this perspective has also proved to be a kind of ‘epistemological obstacle’ to the analysis of the recent crisis, and more specifically to an understanding of the manner in which the general systemic trends (such as the instability created by financialisation, the issues of profitability and the pressures on labour) are mediated by political actors, by states or alliances between groups of states of uneven economic and political weight acting within a hybrid supranational framework such as the EU. In this sense, the euro should be understood not only as a ferocious class mechanism for disciplining labour costs – starting with the wages of German workers, which remained flat during the whole first decade of the new century – but also as a means through which the hegemony of German capital is forged and imposed on the European and, more broadly, the international stage. This is why every political agenda which claims to be serious in its objective of breaking with neoliberalism, even within an overall ‘reformist’ or ‘gradualist’ perspective, must pose the question of breaking with the euro and confronting the EU as such.
This brings us to the final but probably also most crucial point of the material collected in this volume: not satisfied with providing a pioneering analysis of the specificities of the capitalist crisis within the eurozone, Lapavitsas and his RMF collaborators went one step further, providing us with the outline of an alternative strategy. This outline starts with the proposal of default on the sovereign debt – a matter of sheer survival for the countries of the periphery, starting of course with Greece – and extends to exiting unilaterally from the euro for the countries which need to default, allowing them to regain control of a part of their national sovereignty and to escape from the cataclysm of internal devaluation imposed by EU-designed shock therapies. These measures, of course, need to be supplemented by a set of others, such as the nationalisation under genuine public control of the banking system, the control of capital flows and income redistribution, including a reform of the tax system which would counter years of neoliberal tax-alleviation in favour of the wealthy and corporate power. This proposal for an alternative path immediately sparked controversy, starting in Greece, but gradually shaped the entire agenda of the debate within the Left but also beyond it.
Some found these ideas absurdly radical, others saw them as too modest and moderate. They were criticised for being ‘nationalist’ or ‘utopian’, ‘reformist’ or ‘adventurist’. One needs, at the very least, to acknowledge that they mark a sharp break with the entirety of the aforementioned deeply rooted tradition of Europeanist wishful thinking, with its belief that this meticulously built neoliberal authoritarian fortress could be amended and transformed from within. Let us note that the method followed here by Lapavitsas and his colleagues is faithful to what a certain tradition of the workers’ movement has called ‘transitional demands’.
What is meant by this? Neither the ‘maximum’ nor the ‘minimum’ programme, neither the cry for utopian ‘impossibility’ nor the management of the existing order of things, but a cohesive set of concrete demands strategically designed to hit the adversary in the heart, where the contradictions of the situation tend to concentrate, in order to create the necessary lever to change the overall balance of forces. Questions such as the default on sovereign debt, the dismantlement of the EMU and confrontation with the authoritarian fuite en avant of the EU are the contemporary equivalent of the demands of peace, bread, land and popular self-government on which depended the outcome of the first assault on Heaven of the twentieth century. Urgently posed as issues of immediate relevance where the current crisis has hit the hardest – that is, in the europeriphery and more particularly in Greece – they are central to the strategic debate of the Left in the Old Continent as a whole.
At a time where any type of strategic thinking has become increasingly rare, and even more so on the Left, and where the crisis of capitalism seems to inspire perplexity and embarrassment amongst what remains of its organised adversaries rather than new energy to wage further battles, the work undertaken in the volume at hand needs to be recognised in its proper measure: a major intellectual achievement combining rigorous and innovative scholarship with lucid but also radical political commitment.
Stathis Kouvelakis
GLOSSARY
BIS: Bank of International Settlements
BoG: Bank of Greece
CAC: Collective Action Clauses
CB: Central Bank
CDO: Collateralised Debt Obligation
EBA: European Bank Authority
ECB: European Central Bank
EFSF: European Financial Stability Facility
ELA: Emergency Liquidity Assistance
ELG: Eligible Liabilities Guarantee
EMU: Economic and Monetary Union of the European Union
ESCB: European System of Central Banks
ESM: European Stability Mechanism
GDP: Gross Domestic Product
IMF: International Monetary Fund
MFI: Monetary Financial Institution
MRO: Main Refinancing Operation
NCB: National Central Banks
NPV: Net Present Value
OMO: Open Market Operation
SME: Small and Medium Enterprises
SMP: Securities Market Programme
SPV: Special Purpose Vehicle
TAF: Term Auction Facility
TARGET: Trans-European Automated Real-time Gross Settlement Express Transfer System
VAT: Value Added Tax
Part 1 BEGGAR THYSELF AND THY NEIGHBOUR
C. Lapavitsas, A. Kaltenbrunner, D. Lindo, J. Michell, J.P. Painceira, E. Pires, J. Powell, A. Stenfors, N. Teles
March 2010
1. SEVERAL DIMENSIONS OF A PUBLIC DEBT CRISIS
A crisis with deep roots
The sovereign debt crisis that broke out in Greece at the end of 2009 is fundamentally due to the precarious integration of peripheral countries in the eurozone. Its immediate causes, however, lie with the crisis of 2007–9. Speculative mortgage lending by US financial institutions, and trading of resultant derivative securities by international banks created a vast bubble in 2001–7, leading to crisis and recession. State provision of liquidity and capital in 2008–9 rescued the banks, while state expenditure prevented a worsening of the recession. The result in the eurozone was a sovereign debt crisis, exacerbated by the structural weaknesses of monetary union.
The crisis of public debt, thus, represents Stage Two of an upheaval that started in 2007 and can be called a crisis of financialisation.1 Mature economies have become ‘financialised’ during the last three decades resulting in growing weight of finance relative to production. Large corporations have come to rely less on banks, while becoming more engaged in financial markets. Households have become heavily involved in the financial system through assets (pension and insurance) and liabilities (mortgage and unsecured debt). Banks have been transformed, seeking profits through fees, commissions and trading, rebalancing their activities toward households rather than corporations. Financial profit has emerged as a large part of total profit.2
But