The birth of the Euro
Bosses tool up against the working class
Love it or loathe it, the arrival of the Euro – the single European currency or European Monetary Union (EMU) as it has been known to date – is a gigantic event in European politics. It is equal (at least) to the Marshall Plan in the immediate post war period, or the original launch of the European Economic Community in 1957.
Economically, the sheer size of the zone the new currency represents – France, Luxembourg, Austria, Germany, Belgium, Finland, Holland, Italy, Ireland, and Portugal – instantly makes the Euro a super-currency second only to the dollar, and a major new player in world markets, probably as a reserve currency.
Politically, it represents the biggest single step yet towards a European super-state – the project favoured by the most powerful sections of the European bourgeoisie when faced with increasing competition from Japan and North America. The most important factor at that time was Japan, with the USA relatively in the doldrums.
The Single European Act of 1986 was designed precisely to challenge what was then Japanese pre-eminence in the world economy. It marked the transition from what had been until then a mainly economic project of a common market or customs union (aimed largely at avoiding further European wars) towards the highly political project of the European Union, and eventually a super-state.
EMU was the core provision contained in the Maastricht Treaty signed in 1992. It would take away the ability of individual nation states to fix interest rates, the most important fiscal lever available to them.
The Maastricht Treaty also contained provisions for a common foreign and defence policy and elements of social policy under the Social Chapter.
Other features of a nation state – such as the European Court of Justice – were already in place, and others such as a common immigration and asylum policy (under the Schengen Agreement) were soon developed after the introduction of the Maastricht Treaty.
1992 was also the year Britain and Italy were blown out of the EMU’s predecessor, the European Exchange rate mechanism (ERM). The ERM was a halfway-house between the previous free movement of European currencies and their locking together under EMU.
The demise of the ERM demonstrated just how difficult it would be to maintain the stability of a single currency which straddled a multiplicity of diverse economies across Europe. And the Euro comes to Europe at a time when there are 20 million unemployed inside the EU and 50 million people living below the poverty line, much of this a direct result of job losses caused by preparation for the Euro.
The Maastricht treaty’s answer to the maintenance of stability was the qualification clauses for membership of the single currency, the so-called "convergence criteria". This placed a strict limit (of 3% of Gross Domestic Product) on government borrowing, along with restrictions on balance of trade deficits and inflation levels. It imposed an economic framework which put the Europe of Maastricht firmly within the neoliberal agenda of the USA, the IMF and the World Bank.
M aastricht, therefore, represented not only an attempt by the Europe bourgeoisie to compete more effectively with rival power blocks in the world (where only the biggest and strongest can survive) but triggered a major attack on the European working class as austerity measures were introduced to meet the criteria. The various European welfare systems – now regarded by the European bourgeoisie as a luxury which could no longer be afforded – were the main target in these attacks.
The response of the European working class to these attacks was the biggest round of struggles which Europe has seen for a decades, with general strikes in a series of countries — Belgium, France, Spain, Italy and Greece. At the end of 1996 France saw the biggest strike wave since 1968, and the Juppé government fell as a result.
Britain remained the exception in this (with strikes remain at an all-time low after the defeats of the 1980s) but in country after country austerity measures designed to meet the Maastricht criteria were met with strikes and other forms of mass action from blockades by farmers and lorry drivers, to strikes by seafarers and bank workers.
In some cases austerity plans were pushed back.
I t was against this background that the European Marches were able to mobilise 50,000 people against the social effects of EMU in Amsterdam in June 1997. It was the first truly international demonstration of its kind – with an internationalised attack being met with an internationalised response.
International solidarity was on the agenda, and Renault workers staged cross border protests and strikes.
The Maastricht treaty and EMU, however, were bruised but not beaten by these actions, and by the middle of 1998 11 of the 15 EU countries had qualified (by a combination of austerity and creative accounting) to join the launch of the single currency on January 1st 1999.
The Euro, in the form of notes and coins, will not, of course, come into use until January 2002. But it will not be a "virtual currency", as some have suggested. From day one all the mechanisms of EMU will operate.
The currencies of the participating states will be permanently locked together, and the collective interest rate set by the unelected members of the new European Central Bank (ECB), set up last year. In reality it will be the 10 currencies destined for absorption which will be the virtual currencies for the next three years, with their values tied unalterably to the Euro.
The Euro will exist from day one as a major trading currency in electronic transactions. It will be an electronic currency for three years but no less powerful for it. And the introduction of the Euro will make financial transactions within the EU cheaper and easier.
This will create big problems for member states not in the first wave – Britain, Denmark, Sweden and Greece. Big sectors of commerce will trade in the Euro irrespective of whether it exists in the physical form of a currency.
Those left outside the Euro-zone will see economic activity gravitate towards what will be the undisputed core sector of the European economy. They will be the worst of all worlds – from a European capitalist point of view – subject to the continuing convergence criteria (continuing for those not yet in), but devoid of influence and the economic advantages of membership.
Membership of the EU is not inevitable, even from a capitalist point of view. But the half in half out situation is a big business nightmare. If the Euro maintains any kind of stability pressure will mount on the remaining four to join – and to do what is necessary to do it.
The big question, of course, is whether the Euro will remain stable, given the recent turbulence of world markets and the continuing severe crisis in key sectors of the world economy. Today the challenge to European capitalism is not so much from Japan, which has lost out to the USA in shaping the world to its model and is now in a deep slump, but to the USA which has regained its dominance.
How the crisis impacts on Europe and the USA over the next year, therefore, will determine how the Euro survives its early stages, and how strong will be the rush of the others to join.
At the same time the arrival of the Euro will accelerate the restructuring of the European economy, which has been under way since the arrival of the Maastricht Treaty, through mergers, takeovers, and the strengthening of the domination of the multinational corporations.
Whilst at the present time most EU countries have some involvement in the production of most goods and services across Europe, there is no reason why this should be the case under EMU. Why should such things be duplicated when the degree of protection given by the existence of individual currencies is gone and the single market complete? The strongest will survive, the weakest will go to the wall. Production and services will be rationalised, and jobs will go.
The current battles for control between European telecommunications companies are a case in point. From the logic of the EU (even more the Euro-zone) a multiplicity of suppliers makes no sense. This may be good news for big corporations who want to maximise their profits, but bad news for the working class in terms of wage levels, job losses, and unemployment.
All these objectives, however, depend on the stability of the Euro in short and medium term in international markets. The plan is that this will be achieved by the Stability Pact (the form the convergence criteria takes once EMU is in) under which government borrowing and inflation levels will hopefully be controlled. But this is easier said than done.
Beyond that the stability of the EU is based on the huge assumption that the institutions of the EU can bring about a harmonisation of the economies of the member states – from the biggest and strongest like Germany and France to the smallest and weakest like Ireland and Greece – to the extent that a single monetary policy can be imposed on them by the European Central Bank.
Yet, even as EMU goes in, pressures are mounting in the world economy which make this objective extremely precarious.
Already the international economic crisis has split the bourgeoisie over how to resolve it. One section, led by in Japan and the Asia Pacific economies (and supported by billionaire speculator George Soros), are pressing for a return to more regulation and for Neo-Keynesian measures to deflate the economies. They argue that the raw unregulated market is a recipe for disaster. The other section, led by the USA, sees more neoliberalism as the answer.
It is an unresolved debate. But it has its reflection in Europe, with the election of social democratic governments in most of the countries of the EU – in particular the arrival of Shröder in Germany and Jospin in France. They are both pressing for some kind of neo-Keynesian reflation, despite the economic realities of Europe under Maastricht. The brief of the European Central Bank is to ensure low inflation as its number one objective, regardless of the impact this will have on jobs and working class living standards.
As far as Britain is concerned, Tony Blair remains committed to enter the single currency as soon as he can be sure of winning a referendum, despite his continuing attachment to the Atlantic Alliance and his resulting craven support for the Clinton administration demonstrated so clearly recently in the Gulf.
In this he will get the full support of the TUC and most of the trade union leaders. The TUC has led the pack as an enthusiastic proponent of the whole European project, hoping that a few crumbs from the European table will compensate for their total lack of fight against the government and employers offensive in this country. The AEEU has even announced that workers can now pay their dues in Euros!
Yet the EU is a vicious, anti-working class institution, aimed at increasing the rate of exploitation and destroying welfare provision won by the working class in the post-war period. The responsibility of the left in Britain to fight for clarity on this issue is obvious – particularly in the unions and inside the Labour Party.
Fortunately a lead is being given around which it is possible to organise – that is the international marches and mass demonstration to be held in Cologne in June this year, and called by the European Marches. This will coincide with the German presidency of the EU, and will take place in its most important country.
A big mobilisation from Britain for those events would help to carry the fight into the labour movement, and show the reality of the arrival of the Euro – as another step in the restructuring of Europe against the interests of the working class.