Today the leaders of the 27 countries that make up the European Union meet in
. Their desperate
aim is to keep the debt crisis in Brussels Europe from
spiralling out of control and ‘promote jobs and growth’.
On Tuesday, the Organization for Economic Cooperation and Development warned that the 17 countries that use the euro risk falling into a "severe recession." It called on governments and
bank to act quickly to keep the slowdown from dragging down the global economy.
After three years of pushing for ‘austerity’ to reduce debts accumulated by governments as they shored up the bankrupt banks, cuts in public expenditure have wrecked services, driven unemployment levels beyond anything seen in the 1930s, and triggered a political revolt – certainly in Greece. In a sharply polarised
indicate that the left-wing coalition Syriza
is likely to win the election being held on June 17. Greece
The French elections brought a new government committed to abandoning austerity in favour of growth, which is also the International Monetary Fund’s perspective. So the long-term pact between Sarkozy and
’s Chancellor Merkel is
The financial columns are full of doomsday scenarios assessing the consequences if an anti-austerity government results from a second election in
17th and defaults on its debts. Greece
But the impact would be small compared to the spectre of a ‘double meltdown’ which could see the simultaneous departure of Greece from the eurozone and a Spanish banking implosion, warned former IMF economist, now hedge fund manager, Stephen Jen, after credit rating agency Moody’s downgraded the entire Spanish banking sector.
Stephane Deo, an economist at UBS, says the slow-motion collapse of Spanish banks from toxic real estate loans could suddenly turn into a fast-moving bank run, as depositors accelerate the withdrawal of their deposits.
, the insults
in the Coalition’s camp are flying back and forth between a previously unknown
advisor - venture capitalist, Adrian Beecroft, and Business Secretary Vince
Cable. Beecroft’s proposals to enable growth would remove protections for
workers - allowing employers to sack them virtually at will. Cable says the
idea is ‘bonkers’ because UK ’s
workers are already amongst the least protected. Beecroft says Cable is a
But this renewed assault on workers’ rights and living standards throughout the world is the real meaning of all the talk of ‘restructuring’ and ‘rebalancing’.
Today, as the discussion in Brussels reaches fever pitch the main idea is for Europe to move to a stronger, more mutual common defence by issuing ‘eurobonds’, in which the European Central Bank would raise loans from investors to be used wherever they might be needed. Eurobonds would protect weaker countries, like
Spain and , for example by insulating
them from the impossibly high interest rates they now face when they raise
money on bond markets. Italy
But, also today, in a direct challenge to a more united Europe,
federal government is strengthening its national interest, holding an auction
for some new bonds, borrowing money from investors in the way that governments
do. Only there’s something new about
this auction. The relative strength of the German economy is so attractive to
investors desperate for a safe haven, that the Germans have set the interest
rate they’ll be paying at zero – 0%. Germany
The IMF is also pushing the Bank of England to reduce its base rate below the half per cent it has been at for more than three years.
So, at its moment of sharpening crisis, the capitalist system has arrived at a new contradiction: competing to save the for-profit system means issuing credit at a not-for-profit 0%. And with inflation above zero, investors will be inverting the essence of finance - paying to lend money.
The declining value of money reflects and can only accelerate the contraction in the real economy, bringing a global slump into view. The system is definitely broken. How to bring into being a needs-based, co-operatively run economy based on people’s assemblies is the issue of the day.