european currency

Working-class defeats allow a
single currency to stabilise

Merseyside Socialists – former Socialist Party members on Merseyside.

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In the 1990s the Socialist Party leadership followed on with the line of Ted Grant, who frequently predicted the collapse of the Common Market and European project. In the early 1990s the national leadership were initially repeating this line, with a slight modification, "a shattering of the EC is only likely in the event of a deep slump".In 1993 in an article for Militant International Review, written by a comrade from Liverpool, it was argued:

"Deflationary policies will lead to class conflicts…nevertheless, it is likely, though not certain, that five or six countries could implement a single European currency…Can political union be achieved? That is unlikely due to the separate interests of each capitalist class… International solidarity has been undermined through the role of the Stalinist parties and social democracy in the last decade. The seeming triumph of the market and the collapse of the Stalinist states have reinforced this. European monetary union will bring back onto the agenda the pressing need for international solidarity"

Instead of taking such points into account the analysis centred on European Monetary Union and its inevitable non-completion. A few quotations will show the main trend, especially those taken from the latter part of the 1990s, when it was increasingly likely that the project would be completed. In 1994 predictions were being made that Maastricht was in tatters and would be "shredded" by the time of the European Union summit in 1996. Then when that didn't happen the prediction changed to there was no possibility of the other eight European Union members meeting the Maastricht criteria.

The statement to the 1997 conference said, "One of the by-products of the French events is the shipwrecking of EMU. For the first time, there is an admission from bourgeois spokespersons that, "it (EMU) might not happen at all".

Despite all the efforts of Kohl to plough on regardless, even the "core group of countries around German capitalism will not be able to adhere to the Maastricht criteria by 1999. The defeat of Juppé and his plan, which is what the French election signified, was a shattering blow to Maastricht and EMU. The softening of the criteria for EMU will completely undermine the idea of a strong "euro". This in turn could lead to currency turmoil and competitive devaluations".

In opposition to this Merseyside argued, "The election of Jospin in France has not fundamentally altered the prospects for EMU. The government is staffed with those who believe that monetary union must go ahead and the view of the Governor of the Bank of France is that there is no possibility of postponement. There is great uncertainty surrounding the project but the underlying tendencies now point in the direction of its eventual completion-even if it is postponed for a period.

While the Socialist Party forecasts

the death of the single currency

Peter Taaffe at the March 1998 National Committee declared it unlikely that monetary union would be launched. In fact he was categorical "EMU will blow – take it down, write it down.

Too much has already been invested in EMU by the banks, the multinationals and national governments to go back. Additionally EMU is part of a political strategy to attack the living standards, especially the social wage of the working class and middle classes.Kosova and the Left

These tendencies are rooted in the competition of the major world economic powers. The blocs that have emerged in America, Japan and Europe push in the direction of free trade areas and a common currency is a necessity, within Europe for the multinationals and financial institutions. Whilst in France and Germany there are political ambitions of creating a united Europe as a counterweight to Germany, the most important underlying issue initially is economic monetary union. The prospects of political union are a far distant prospect and on the basis of capitalism it is very hard to see anything like this being achieved. With monetary union only one and half years away there is likely to be a core of countries who will jump onto the train and the other countries will not be far away. Even if the convergence criteria was to be softened this would not automatically undermine the moves in this direction, though it could bring deleterious effects for European capitalism in future years. Neither will a renewed recession, which could coincide with the launch of the project, in the world or European economies fundamentally undermine the process".

On this issue the leadership were hopelessly at sea, so much so that they could marshal little support from the rank and file delegates, the majority of speakers in the debate around EMU opposed the leadership.

Peter Taaffe at the March 1998 National Committee declared it unlikely that monetary union would be launched (Jan 1999) but if it is it will not go through to completion [in 2002]. In fact he was categorical "EMU will blow – take it down, write it down."In June 1998 a CWI statement/update on the world economy was circulated, once again predicting a 1929 crash. Significantly nowhere in the statement is there any mention of the actual social and political movements of the working class, except that there will be the re-emerging of an anti-capitalist mood but there were no predictions about the impossibility of EMU in 1999. "Now the EU countries have decided to set up the world’s biggest peg on the basis of superficial economic convergence. The looming world recession will put enormous pressure on that peg….a new world recession, political and social unrest in Europe itself will tend to blow the continent’s currency union apart."

The Socialist repeated the position, "EMU could be shattered by massive currency turmoil even before the fixing of exchange rates and interest rates in January 1999. If that does not happen, then in all probability it will break down under the pressure of economic collapse, currency turmoil and huge social revolts before the euro replaces national currencies in January 2002.".

In other words the past position of EMU not being completed in 1999 has been conveniently forgotten, and a new prediction now takes its place.

The actual facts are that 11 countries will take part in the first stage of monetary union.

Growth, which will undoubtedly be affected by the world crisis, is running at 2.5 per cent through the EMU area. Installed into government in Britain, France, Germany are formerly social democratic parties – all committed to EMU. In Britain, the foremost proponent of EMU is the Trades Union Congress (TUC).

Greater liberalisation, mergers, further privatisation, deregulation and attacks on the working and middle classes will accompany the completion of the first stage of EMU.

The practical effects of the preparations for the euro have already been shown in the restructuring of Siemens [AG], with 47,000 jobs being destroyed, the largest restructuring in German history. But again this is only the beginning of the process,

The euro will force a two tier European economy - the same as we see in Britain and the USA - the process of mergers and acquisitions in Germany is just part of the catching up process with the Anglo-Saxon model, more of this is about to come throughout monetary union.

Sitting back and waiting for the collapse of the euro will do nothing to assist the struggles of the working class. Understanding what the representatives of capital are planning, and trying to organise against this can impact on the euro’s future.

The only force likely to stop the completion of European Monetary Union is the political, social and economic struggle of the working class on a European wide basis, otherwise the euro will be the common currency in 2002.

Finance capital is looking to consolidate its power through "democratic" means, giving an illusion of power.

The state is to be maintained in a new way, by cutting down on expenditure, "decentralising" and using new technologies available for surveillance and state suppression.

Recession, slump or "depression" may wreck EMU, but it is unlikely. There is no financial transparency for the capitalists and financiers to predict what is going to happen, so a considered judgement is difficult if not impossible.

Underlying processes indicate the greed of finance will cause a crisis, but that does not lead to the conclusion of EMU collapsing. Past examples of fixed rate currencies and pegs are not relevant here. What we have is an "architectural" restructuring of the financial world system, along the lines of the Bretton Woods agreement.

This restructuring is part of and flows from the changes in the real economy towards service-based industries, the changes in information technology and the political agenda of the representatives of capitalism.

Too much has already been invested in EMU by the banks, the multinationals and national governments to go back. Additionally EMU is part of a political strategy to attack the living standards, especially the social wage of the working class and middle classes.

The only way in which it could be halted or stopped would be on the basis of revolutionary upheavals. Recession, if it unfolds, will drive in the direction of even greater concentrations of industry and finance, and further attacks on the working class.

On a world scale Europe and the USA will be crucial to whether or not the world economy falls into recession. The predictions of the IMF are currently down from 4.5 per cent to two per cent, and are likely to fall further. But measures in the USA and Europe could alter this, especially if, as is currently happening, interest rates fall, thus helping to postpone recession. In such a situation the possibilities of EMU being fully completed, in 2001, would also be greatly enhanced.

Monetary union is not an abstract economic issue, it has enormous practical consequences for British and European politics.

In November 1998, the press reported, Ken Jackson, the leader of the AEEU electrical and engineering union urged Blair to abandon the pledge to hold a referendum and instead make joining EMU an election issue.

In the days prior to this the CBI employers’ federation and the Chamber of Commerce both came out enthusiastically backing EMU. The TUC leaders almost to a person enthusiastically support joining EMU. Top foreign industrialists are warming up the debate by asserting that jobs may be lost if Britain does not join.

The Social Democrats throughout Europe are openly urging Blair to announce a target date for joining. Mandelson and Brown are softening up the ground for Blair, the Chancellor will spend millions selling the euro and indirectly this will play a part in re-electing Labour.

What will be the impact on the Tories? Such a campaign in an election will split them down the middle and could result in further electoral isolation.

Such issues are not abstruse, they raise practical consequences issues.

How will parties respond to this? What will be the impact on the political alliances between Labour and the Liberals? How will it impact throughout Europe?

Furthermore, what strategy should workers adopt in relation to European wide alliances (already top trade union leaders are talking about pay bargaining on a European basis). How can working class resistance be organised on a European basis?