The euro: What change in global balance?

By Andy McInerney, Workers World, 14 January 1999

Amid a flutter of pomp and balloons, European bankers inaugurated a new currency on Jan. 1.

The euro marks another step by the capitalists in 11 countries toward a plan of economic unity set out in the so-called Maastricht treaty of 1991. Participants range from Germany—a mighty imperialist powerhouse—to lesser-developed countries like Ireland and Portugal.

The other countries involved are Spain, France, Belgium, Luxembourg, the Netherlands, Italy, Austria and Finland. Only Britain, Sweden and Denmark chose not to join. Greece isn't included because it did not meet the inflation requirements.

What does the euro mean for the European working class? Any class-conscious worker knows that what's good for the bosses can't bode well for the workers. And this is true of the euro.

Despite the fanfare, until 2002 the euro can only be exchanged electronically. Workers may write checks or use credit cards for euros, but day-to-day transactions like buying milk or bread will still be carried out in the old local currency—such as marks, francs, lira or pesetas.

The real change is that this step nearly completes the creation of a massive European internal market, a process that began in 1957 when the Treaty of Rome created the European Economic Community. While the immediate impact will be an end to currency exchanges, it sets the stage for an end to separate fiscal policies among euro countries.

This process will be regulated by the new European Central Bank, based in the German financial capital of Frankfurt. The ECB, run by the heads of the central banks from the member countries, coordinates the financial policy of the member states, including interest rates and money supply.

The effect of this increased financial centralization will be to strengthen the economically powerful capitalist concerns—mostly in Germany, and to a lesser extent in France—at the expense of the weaker ones. Workers across Europe will pay the price.

For example, the Spanish government has already announced it would be forced to close coal mines because they cannot compete with their European rivals. Five thousand miners are expected to lose their jobs; those left over will face speed-ups.

In Germany, the government issued an appeal to unions for restraint in upcoming contract negotiations.

In fact, unions across Europe have poured into the streets over the last two years to protest belt-tightening economic policies by governments moving to meet the strict requirements of the Maastricht treaty. Strikes in defense of social benefits and for jobs have swept Spain, Italy, France and Greece.

Official unemployment in the euro countries averages 11.8 percent, compared to 4.4 percent in Japan and in the United States.

In the wake of heavy working-class opposition, most of the key politicians who pushed for the euro have been dumped at the ballot box. French Prime Minister Alain Juppe and German Chancellor Helmut Kohl both lost their posts to social-democratic parties that promised more concern for workers' living standards. Europe's capitalists are counting on these social democrats to do a better job of selling sacrifice to the continent's workers.

Despite the outward appearances of unity, European capitalists remain competitors—the only relationship that can exist between profit-driven bankers and corporate barons. That could be seen in the last-minute struggle over who would head the European Common Bank: the German-backed Wim Duisenberg or the French-backed Jean-Claude Trichet. Duisenberg won out after heavy German arm-twisting.

So why are the European bankers putting their differences aside in favor of the ECB?

TEMPORARY AGREEMENT FOR MUTUAL GAIN

Capitalism is by nature a competitive social system based on the life-and-death struggle for profits. But that is not to say that capitalists cannot enter temporary agreements for mutual gain.

The most notable example of such an agreement on a world scale was the anti-communist alliance of imperialist countries after World War II.

In 1945, troops from the Soviet Union had liberated half of Europe from Nazi Germany's iron grip. The Chinese and Korean Red Armies were handing Japanese occupying forces heavy defeats. Within a year, workers were occupying factories across Western Europe. Communist parties gained wide support. Communist-led workers' strikes and mass demonstrations swept Japan.

Faced with this threat to their plunder, the capitalist countries' political leadership united behind the military and economic might of U.S. imperialism to halt the communist advances. U.S. capitalism—relatively untouched by the scourge of the war—poured money into West Germany and Japan to rebuild its former opponents as anti-communist allies. The other imperialist powers like Britain and France emerged from the war as junior partners in the new capitalist alliance against the socialist camp.

Under the terms of this alliance, open economic rivalry was subordinated to the U.S.-led military confrontation with the Soviet Union and People's China. Through formations like NATO, the Pentagon took the predominant role in organizing the overturn of working-class political gains.

Since the collapse of the socialist camp, however, the Pentagon's role has changed. It is no longer on the imperialists' front line against a powerful socialist camp.

EMERGENCE OF INTER-IMPERIALIST RIVALRY

Japan and Germany emerged from the Cold War as massive economic powers, but the Japanese economy is in a deep capitalist recession. The German economy has had long-term high unemployment. Open inter-imperialist economic rivalry is again the order of the day.

The Maastricht treaty that set the stage for the European Central Bank was signed in 1991—the year the Soviet Union was formally disbanded. Eight years later, European capitalists are uniting behind German imperialism to better compete with their U.S. and Japanese rivals. Britain, the closest U.S. ally in Europe, has so far kept out of the common currency.

The new euro market accounts for 18 percent of world output—roughly the same as that of the United States. In trade, the new European economic zone accounts for 20 percent of world exports, compared to 16 percent for the United States and 10 percent for Japan.

The euro is going to pose a powerful challenge to the dollar, British analyst Nick Parsons told the Washington Post. This view is widely circulated by bourgeois commentators. It acknowledges the attempt by the big European capitalists to shift the economic center of gravity away from the United States toward a German-dominated Europe.

European economic and monetary union doesn't just change the world's financial landscape, wrote the Wall Street Journal Jan. 4, it also could alter the global balance of power.

This change can only end up in widening inter-imperialist competition. Conflict between the two poles could easily arise, warned economist C. Fred Bergsten in a 1997 Foreign Affairs article.

In fact, just weeks before the euro was inaugurated, a sizable trade battle between U.S. and European Union capitalists was already shaping up.

Massive U.S. conglomerates Chiquita Brands and Dole Food charge that the EU is imposing penalties on their bananas, costing them over $1 billion a year in lost profits. On Dec. 21, the Clinton administration announced that it would issue a 100-percent tariff on luxury goods—such as cheese, olive oil and wine—imported from Europe to retaliate on behalf of the U.S. corporations.

While a settlement could be reached before the tariffs are imposed in March, EU spokespeople are fuming. It is time to take action against the pernicious and unlawful effect of this wholly unilateral trade legislation, warned EU Trade Minister Leon Brittan.

The intensified economic rivalry since the collapse of the Soviet Union is also beginning to have echoes in the political and military sphere. French and British politicians signed an agreement in December calling for an EU role in the military affairs in Europe and beyond—a clear snub to Washington's traditional dominance through NATO. Washington is finding it more and more difficult to line up European support for its military adventures in Iraq.

U.S. imperialist dominance in Europe—disguised under the phrase NATO's traditional role—is increasingly being questioned in the months leading up to the April NATO summit in Washington, called to mark the pact's 50th anniversary. The Dec. 19 Christian Science Monitor headline Partners are no longer marching to the American drummer is typical of the new period.

Of course, U.S. capitalism has a single centralized state to manage its interests—an advantage over the European capitalists, still divided into smaller national states. And the Pentagon remains the dominant military force in the world.

The 1992 Pentagon white paper threatening against emergent powers showed that the generals are prepared to defend this dominance not only against countries like Iran, Iraq or China, but also against France, Germany and Japan.

European imperialists are unwilling to submit to U.S. dominance, though. In an attempt to compete with the U.S. military-industrial complex, there is a growing move toward creating a European arms conglomerate. This firm, tentatively known as the European Aerospace and Defense Company, is to be formed by British Aerospace, DaimlerChrysler Aerospace and Aerospatiale.

The current situation of two imperialist powers, Germany and Japan, without any sizable military force—an historical anomaly resulting from the Cold War anti-communist bloc—is untenable. Economic rivalry has historically spilled into military conflict.

NEED FOR INTERNATIONAL WORKING-CLASS SOLIDARITY

To confront this threat of growing militarism, class- conscious European workers need to challenge their bosses' efforts to build a war machine. They have already held demonstrations against government subsidies for a European war industry. In the same way U.S. workers have to challenge the Pentagon's plan to turn NATO into a U.S.-led worldwide police force.

The European working classes have already begun to feel the effect of the European capitalists' euro deal. Unemployment continues while social benefits are under attack. But at the same time that the euro-zone strengthens the bosses on the international arena, it opens the opportunity to expand the workers' most powerful weapon: international solidarity.

In June 1997, some 50,000 workers from Britain, Belgium, Germany, France, Spain and Portugal converged on Amsterdam, the Netherlands, as part of the European Marches against Unemployment, Poverty and Social Exclusion. Their main demand was No to the euro.

This example of multinational solidarity points to the way forward—not only for the European working class, which has been in the streets in the millions, but for the U.S. labor movement in building solidarity with the Mexican, Caribbean and Latin American labor movements. Solidarity with Europe's besieged African, Arab and Kurdish immigrants can only strengthen the workers' movement there.

Capitalism, Marx wrote, creates its own gravediggers. The united action of Europe's working class—and the worldwide solidarity it will create—will be the biggest obstacle for their bosses' march toward plunder and war.