So Stephen Harper is worried about the European sovereign debt crisis plunging the world back into a global recession and he should be. As Harper stated on Tuesday, “We’re kind of running out of runway here.” What is driving this fear is the possibility that the upcoming Greek elections could lead to the break-up of the eurozone and panic on the financial markets. Thus, Harper in his recent interview was insistent that “we cannot have a Greek election determining the future of the global economy, that’s not fair to anybody.” In other words the Greek people should just accept austerity and shut up.
About the seriousness of the situation Harper is correct. There is a real problem in Europe that is symptomatic of the larger capitalist crisis that won’t go away — it must be remembered that the current sovereign debt crisis is the leftover damage from massive bank bailouts across Europe. Spain and Greece are in a full tilt depression, France’s banks are grossly over exposed, Great Britain is in the midst of a double-dip recession, Italy’s austerity program has caused slower than expected growth, and the rest of Europe, well, the rest of the Europe is not doing much better.
The outlier in this case is Germany. Its low unemployment and high growth has been the engine of the European economy. However, the picture for Germany is not as rosy as it seems. Germany’s growing economy is built on rising productivity and stagnating wages. This means that it is extremely hard for any other European country to gain a competitive advantage by lowering wages. The very thing that keeps German capitalists afloat pulls all of Europe into crisis. There is now also a question of Germany’s current debt-to-GDP ratio, which officially is at 82 per cent. When one factors in EU and European Central Bank guarantees and obligations it is closer to 140 per cent, a number that resembles Greece’s debt-to-GDP ratio.
The tension of the European project is simple enough, it is a common monetary zone with a variety of fiscal policies and conditions. The current German plan, supported by Harper, being discussed is that EU (in reality Germany and France) should have some measure and control of fiscal policies in all Euro countries in exchange for pooling Europe’s sovereign debt. The erosion of fiscal control, if passed would mean that member states would be stripped of virtually all economic sovereignty. This would probably engender massive social unrest in certain European states, a reality that will in all likelihood prevent the realization of the German plan.
The sovereign debt crisis has become an unsolvable contradiction for Europe’s elite. They desperately want to keep the euro, which has given them unbridled power over labour in Europe. They also want to use the crisis to further concretize neoliberal policies through austerity. The crisis has enabled the wealthy to transfer a massive amount of wealth upwards. However, these two desires cannot now co-exist without furthering riskig a full-blown crisis. Austerity is worsening the debt problem, but the markets are demanding more of it. The political costs are growing. Greece’s election may mean its possible exit, if that happens it could set off a chain of unpredictable events that could plunge the world back into a global recession and leave the EU in the dustbin of history.
The crisis of the global economy is not a crisis of Greek democracy, as Harper would like us to believe. The Greeks are not holding us hostage with their elections. A debtor led default by Greece would be a challenge by labour to the whole EU project itself. It is a strategy that could both weaken capital and strengthen the position of labour. As Costats Douzinas recently wrote, “the task in hand is to rescue Greece from its ‘rescuers’ and to create a new model for democracy in Europe.”
The European debt crisis shows that the fundamental problems that drove the world into a massive economic recession have not gone away. Austerity is not working for workers and it is creating tensions amongst the capitalist class. If there is a solution to the impending crisis it lies in fostering more self-determination and more democracy over economic decisions, not less as Harper lectures. In other words, for all our sakes Greece and Europe should do the opposite of what Harper says.
This piece originally appeared on rabble.ca