What's wrong with the Eurozone

There are many issues in all that undemocratic bureaucracy that is the European Union, in which Capitalist facilitation dominate over the social fabric and the democratic participation, both of which occupy at best a very secondary position of the so-called European construction. Far from my intent to deal with all that here.

There are of course major structural problems and central issues of brutal injustice and unsustainability in Capitalism itself. Again, while being Libertarian Communist, it is not my intent here to address this fundamental matter either.

I want to address the problems of the Eurozone within a Capitalist frame, which is not necessarily the same as Neoliberalism. Neoliberalism (aka Reaganomics) is the fundamentalism of Capitalism: the ideology of pure Capitalism without any political support, what is in fact so unrealistic that must betray itself every day and still be a failure.

Problem #1: the euro is too strong

This is in fact the main problem. Since its origins there has been a fetishism of strong currency, largely imposed by Germany. It is not true that Germany fears hyperinflation because they suffered it before any German alive today was even born, the fact is that, given the high technology and quality level and dominant market positions of German products, they do not need a weaker currency to compete internationally, at least not so much as other countries with less elite ranking economies.

Germany sells rather expensive and buys cheap. That's their strategy: they buy raw materials, half-elaborated products and consume commodities at low prices thanks to their strong currency (now the euro, earlier the mark), then they sell elaborated products with very limited competition at rather high prices.

In order to keep such prices relatively low, the salaries of German workers have gone down as of late (still may be double than that of Greek workers) but this is compensated by a very strong welfare state. If Germans do not need to spend much in homes, as Spaniards for instance do, they still retain a much larger consume power and their salaries may still be cut even further if there is need (need of their Capitalist masters, of course).

So Germany can live and even feels better with a strong euro. Other small states, notably the Netherlands and Austria, hold a similar position. However for most countries, including most states in the Eurozone, this monetary constriction can easily become a handicap and burden.

But the design of the Eurozone was dictated by Germany in agreement with France and the euro was conceived as a clone of the old Deutsche Mark.

It would not have been that bad if the euro would have kept parity, more or less, with other currencies through the World, but the fact is that European note has appreciated almost 50% (in relation to the US dollar, the international reference currency) since it was implemented in 1999:

The euro has appreciated c. 50% vs the dollar, and most other currencies, since 1999

It is not a problem of competitiveness with the USA specifically but with almost every country on Earth, including privileged EU states like Great Britain or Poland, which keep their own currencies but share the common market, being able to export to the Eurozone without taxes. And including emerging economies like China, that keeps its currency at near parity with the US dollar.

It would help a lot if the euro would be a bit weaker, maybe at 1.2 exchange rate with the green note. European industries certainly would benefit, judging from Der Spiegel's data, which shows that most of the Eurozone has lost industrial output in th last 6 years:

Source: Der Spiegel.

It is not just the so-insultingly-called 'pigs' by racist Nordicists in hypocritical denial, France and even Luxemburg have suffered under the overvalued, rigid, euro and WTO-imposed global competition.

The red zone represents some 2/3 of the Eurozone's population (Germany is big but France, Italy and Iberia are as well).

Another way of seeing it is the way Stanley M. Black did some months ago:

While Germany and France's export price indicators have remained stable-to-low, those of Greece, Spain and Italy have gone quite high. However the graph does not show the last three years and it is clear that France is also suffering from the euro's constrictions.

In France's suffering there is, sadly enough, some hope because Berlin cannot impose its stand without Paris. But it's not clear how it will pave out.

Incidentally, France is not just suffering from a more difficult export market but it is the main sufferer also in the debt crisis. It is the most exposed to the unavoidable, but delayed, Greek bankruptcy and it is also highly exposed to Spain's debt uncertainties (but Germany and the UK are as well). 

Naturally all this fall in production and market competition affects employment, specially hurt being the young ones, who find much harder than ever since WWII to find a job, much less a decent and stable job:

Based on Der Spiegel's figures.

And that is why there are such huge protests in Spain: because most youths have nothing else to do nor realistic hopes of it, exactly as in Tunisia and Egypt. And I say exactly because those were the figures offered when the revolutions began in North Africa: more than 40% youth unemployment.

Problem #2: lack of European politics, including social politics

The designers of the EU and the Eurozone have got their Capitalist utopy: almost no government other than to impose similar standards in laws, taxation, etc. an independent Central Bank (i.e. one that is dependent on the bankster oligarchy only) and no social state at all (except for the old remnants of the common agrarian policy, which is meant to be scrapped eventually).

But this mess is totally ungovernable: the Central Bank historically was meant to be a political tool on the economy, one of those valves that governments could manipulate to regulate markets and such but in the 21st century Eurozone the ECB is an almost totally autonomous monster. And can't be otherwise because the EU lacks common politics: the European Parliament has never been entitled with true powers and citizens mostly vote on state and not EU logic, while many EMPs take their office as a perk rather than a duty.

Instead of converging in labor and social rights, the EU has been used to pit state fractions of the working class against each other on nationalist grounds, and together against the immigrant workforce from Africa, Eastern Europe and Asia. The result is that some states like Germany heavily subsidize their workforce costs with a consolidated welfare state, while other states are supposed not to do such thing and instead squeeze more and more their working class even up to the point of slum-ization, which is the next step in Mediterranean Europe, considering the total lack of relationship between salaries (extremely low) and housing costs (extremely high).

In Spain they have gone one step beyond and have approved a law by which mortgages can end up in de-facto slavery for life of whoever can't pay it (losing the home anyhow but still owing impossible-to-pay amounts forever). And this was done under a so-called "socialist" government, go figure!

Because the lack of European politics begins at state level, where there are no politics other than the usual show of the two (sometimes three) parties with seal of approval from the Empire, and the also docile approved labor unions. It is a one-party system with a pretense of plurality but not at all true multipartidism because in no member state can a third force really achieve due representation unless they first muster a support from the majority, including rural backwater areas.

An exception may be Greece in the near future, where both establishment parties have lost all credibility almost simultaneously, and where the true Left is very strong traditionally. But elsewhere the governance by the single twin party is assured and I will be gladly surprised if anyone within this duopoly challenges the Imperial consensus.

In any case there is still a long road to walk until an alternative can be organized and takes power. This will probably be a true revolution, which I have vowed not to discuss here.

Dignified exceptions within the system, such as the Icelandic President Ólafur Ragnar Grímsson, who vetoed an attempt to impose the narrow interests of foreign banks on the people of the island, are desirable but, as we have seen in Ireland, Greece, Spain, Portugal, etc.  very unlikely. The system is organized behind the scenes and these politicians, mere managers in most cases, won't behave as statesmen nor will consider the will of the People of any importance. 

Sadly Europe is not a democracy. But I would not blame only the institutions of the European Union, that also, but the very institutions at state level: the state governments are not by any means "of the people, by the people, for the people", as Lincoln put it, but for them the People is little more than a pretext. 

However in the long run, as the situation deteriorates, as no doubt is happening already at fast pace, the People, the peoples of Europe, will get tired of this manipulation, of this farce and demand real democracy. It has already began... and eventually, as the banksters (who are the real government) will not deliver, they will make things change for the better. 

But that is another story.

Discussion thread: HERE.

Some (most relevant) articles on the Euro-crisis at For what we are... they will be: