* European Union European Monetary Union will start in less than 100 days. François Vercammen asks whether it can work, and in what conditions social protests could emerge. Exchange rates between the participating currencies will be fixed on 1 January 1999, though Euro bank notes and coins will not begin to circulate until January 2002. Besides the EU's chief propagandists, critics of all colours have stressed that the road towards stabilisation of the Euro system will be long and hard.
Despite the risks, EMU is an important victory for Europe's major capitalists. It is no exaggeration to say that the EMU opens the way for a dramatic decline in the living conditions of the working masses, and a historic regression of political democracy.
Such a victory, however, will only come after a series of battles and contradictions. It is crucially important that the workers' and social movements understand the changes that are underway, and rethink the strategy and programme for dealing with them.
The initial success of EMU preparations has created a mixed atmosphere of arrogance, euphoria and among Europe's ". It was far from certain that the Brussels summit on 2-3 May would confirm the official timetable for EMU. But it
The EMU will shake up the EU's institutional framework, introducing a variety of transformations, with different rhythms.
By replacing the 11 national currencies of the participating countries, the Euro will reduce the cost and uncertainty of financial transactions within "Euroland". This is likely to boost the Euro as a strong currency, with low interest rates. The single currency will increase price transparency across Euroland, and encourage trade in goods and services between the 11 participating countries. The European Commission, always fond of optimistic predictions, claims that the EMU will spark a "mechanical" 0.5% increase in the total value of goods and services produced in Euroland. A super market
By converting their public debt bonds into Euros, the participating states will create a two trillion dollar market for Euro-denominated securities, and pro16 International Viewpoint #304
Leine Stimme ind sozile Gereehtigkeit ARBEITSLOS ARBEITSLOS ARBEITSLOS heute ich, morgen Du! eil ARBEIT ARBEITSLOS ARBEITSLOS bably attract 0.5-1.0 trillion dollars of funds currently held in other currencies.' Euro-denominated stock exchanges are also expected to attract new funds.
This completely deregulated market will become much more "liquid" because of this new, rapidly moving capital. But the only winners will be the continent's major companies. Indeed, the gap will increase between the large companies that raise money on the stock exchanges and the small and medium enterprises which borrow money from the banks. In other words, continental Europe will adopt the "Anglo-Saxon" model of organisation of major companies.
All this will encourage the formation of a "super league" of the top 300 or so European multinationals? There will be a wave of "megamergers" across Euroland's internal borders, particularly among banks and financial institutions. As the race to increase productivity and competition increases in speed, the social consequences will become greater and greater.
At the political level, this process of concentration will further weaken state control over key economic sectors such as finances, energy, communications and
For working people, the implications in terms of working conditions will be enormous. Business Week estimates that one in five workers will have to change jobs in the first five years of the EMU, as "a series of economic shocks" leads to the creation of a "leaner corporate Europe" with maximum "flexibility." (27 April 98) Monetary Union will help the EU present itself more clearly as "new" superpower. With a larger economy than the United States or Japan, the EU will be in a neck-toneck race with the US. These two giants are evenly matched in terms of production, foreign trade, and the size and wealth of their domestic markets. Within a decade, some predict that the Euro will replace the US dollar as the global currency of reference and reserve.
Authoritarian government
With the EMU, Europe's major capitalists have laid the basis for a supranational state structure. We can no longer repeat the old Marxist judgement that the major capitalist countries are incapable of creating a supranational state by peaceful means or by war. That was true throughout the 20th century, but seems to be no longer valid.
The institutional set-up around the Euro is the result of a real transfer of national sovereignty. And since we are talking about nothing less than the money of the new Europe, the intrinsic dynamic will be towards the reinvigoration of the whole executive power of the EU (the European Central Bank, the Council of Ministers, and the European Commission). These bodies will be "obliged" to increase their profile, and to lead.
The dominant classes will have created a centralised and authoritarian command structure, removed from public scrutiny and the pressure of public opinion and the subordinate classes.
This is a considerable step forward for the capitalists. For the last 10 years they have been fighting to prevent the social and political gains of the workers movement being transferred from the national to the European level. Now they will be able to reverse this trend, and use their new despotic central power-base to reshape the political and social institutions of the member states, emptying them of their democratic and parliamentary character, and removing or weakening the system of social laws guaranteed or underpinned by the force or control of the workers' movement.
Interest rates in Euroland will be fixed "independently" by the European Central Bank. The Bank's main task will be to
ensure the stability of the Euro. Interest rate policy will obviously have a major impact on the management of national public debt. The size, repayment programme and most other details of debt vary from one country to another. This means that, although all use the same currency, Euroland states will borrow money at different interest rates, reflecting their international credit rating. The implications are serious for those countries with the worst rating. And the impact of their higher repayments will be felt by the entire population. How feasible is EMU?
The most obvious threat to the EMU is an "asymmetrical shock" affecting one country much more than the others. Since the EMU makes it impossible for any one country to devalue its currency or allow inflation to increase, the only "flexibility" left for a country in economic difficulty is to increase labour mobility, raise prices or reduce salaries. Unless, of course, the other member states agree to transfer
We have already seen two such "asymmetrical shocks' - German reunification and the collapse of Finland's foreign trade with the former USSR. But it doesn't require much imagination to foresee other dangers: a banking crisis elsewhere in the world that affects the banking sector in one or more member states more than the others; a speculative revaluation (strengthening) of the Euro, which would reduce the export competitiveness of some coun tries or sectors more than others; a war just outside the EU, perhaps in ex-Yugoslavia; or a social explosion in one country, "obliging" that government to break the rules of the EMU stability pact. Or even the "natural" cycle of the capitalist economy, with the return of recession at a local or international scale
Shocks like this are normally absorbed by the nation state. That won't be possible after the EMU enters into effect, because states will have virtually no manoeuvring room in their monetary policy. Of course, the EMU treaty allows each state to invoke "exceptional circumstances," but in practice that would threaten to break up EMU.
This doesn't mean that the EU doesn't have any solutions to potential crises like these. But so far we are talking of "blind"
Exchange rates can't be changed, because there is only one currency. National budgets are in a straight jacket formed by the Maastricht criteria and the stability pact. And interest rates will be fixed by the European Central Bank, after a study of the likely reactions of the financial markets. The ECB is specifically forbidden to help member states overcome a crisis by increasing the money supply (printing new Euro bank notes). And the EU has no bottomless central budget to smooth out such problems. In fact, the
EU budget is fixed at a maximum of 1.27% of the EU's gross domestic product. To bail out a member state, it would need five or six times more money!
Nor do member states have much flexibility in fiscal (tax) policies. At the European level, there is absolutely zero flexibility. The minimalist proposal of EU Commissioner Monti, to introduce a Europe-wide minimum tax of 20% on interest payments and share dividends, was shot down by a series of protests from financial markets. The current tendency towards fiscal dumping (competitive tax cuts) will continue, as states compete ferociously to attract new capital, and keep the footloose investors they already have. Socialy explosive
This means that all the pain of adap tation" will be carried by wage-earners. In the United States, regional economic difficulties provoke widespread labour migration to more fortunate parts of the country. European workers are much less likely to move from one country to another in search of work. Language difficulties and the national organisation of social security systems will continue to be brakes on such movements for the foreseeable future.
With mass emigration unlikely, EU governments intend to introduce radical labour market reforms." This means making everybody's salary, working hours, regulations and working processes much more "flexible." Governments will also try to sharply reduce the overall "cost of labour" to employers, and dismantle large parts of the social security system. In other words, there will be a harmonisation of social standards across Europe. But it will take the form of a downward spiral.
A currency like the Euro cannot be managed by the "autopilot" technical system currently regulating exchange rates between EU members. The EU will clearly require a real government, as supranational as its new currency. But, for the moment, the supra-national European Central Bank operates on a different level than the European Council, which is only an inter-state body (a committee made up of representatives from the government of
This is the Achilles heel of the European Union. It is a congenital problem, and apparently insurmountable, until such a time as there is a Europeanised capital sector, detached from the various national states, and willing to impose its European will on the various national governments. This is already the case in Luxembourg and Belgium (which have no multinationals of their own) but is certainly not so anywhere else in the EU.
Because of this, the EU is unable to rationally define a coherent state structure based on the existing institutions. The supranational logic of the EMU process has become bastardised, both in terms of efficiency and democracy.
Policies and structures are patched together in secret, in response to crises, in reaction to events and under pressure from conflicting directions. And always in completely undemocratic ways. This is no accident. But when the EMU is introduced, the politicalinstitutional centralisation will be reinforced, and will take a qualitative step forward. The partisans of a political, rather than just economic Europe will have won the day. EMU pushes the EU to "talk as well as economics. much closer day-to-day management of the common economy.
Unfortunately, the accumulation of external difficulties and internal contradictions mean that this "political Europe" will not develop in a democratic direction. On the contrary, everything points towards the strengthening of the executive branch, which will accumulate more and more legislative and constitutional powers.
At first sight, the situation is one of total rigidity at both the institutional level as well as EMU norms. And total impotence at the level of national governments
In reality, however, nation states are still the main source of power, and they have the economic and material force and the ability to exercise political pressure. Who in Brussels can impose a major decision against the German government?
Negotiations have already started to define the ground rules of the relationship between the three segments of the fledgling European executive: the Central Bank, the Council and the Commission. The most delicate negotiations concern the day-to-day relationship between the Bank and the Council in the determination of monetary policy. Europe's financial newspapers regularly express their concern at "Brussels do-it-yourself" or "out-of-control Brussels"
What is clear, however, is the growing active role of the European Commission. The European Commission has always been responsible for applying the treaties and making suggestions for further cooperation. Since 1985, the Commission has concentrated its efforts on the harmonisation of the Common Market. It will
* European Union apply the same minute and regular intervention to the Euro, the Stability Pact, and employment policy.
The Commission has already clashed with the European Council, which in the current system is supposed to make decisions on the basis of suggestions and recommendations from the Commission. The Commission wanted a new, national power, to force member states to "guarantee the free circulation of goods." As Transport Commissioner Neil Kinnock (former leader of Britain's Labour Party) made clear during the recent strike by French truck drivers, this means sending police to break-up picket lines wherever a strike somehow threatens to hinder trade across EU internal borders.
Another new power was discussed at the November 1997 EU summit in Luxembourg. Member state governments are now obliged to co-ordinate their employment policies, and present them to an annual meeting of the European Council. The Commission lost no time in criticising the French and Italian governments for their positions in favour of a 35hour work week (though neither has actually introduced such a measure).
Monetary union generates an unstop pable pressure towards the emergence of a supranational and intergovernmental political power at the European level, dominated by the more powerful member states, but with the European Commission taking
This does not just mean a stronger central power. It will also be more visible, since it will be in more regular and direct interaction with society.
"Social disorders" like strikes, factory occupations, cross-border solidarity, and other "anti-economic" demands will be judged as "threats to the stability of the
As such, they will "justify" interventions by the Commission, the Council and the Central Bank.
This is a new political situation, both in terms of the structure of political power, as well as the populations' perceptions. The workers' and social movements should recognise and understand both aspects of this new situation. We are witnessing a powerful offensive against labour, and the evolution of a European state structure, which embodies this offensive, but, for the moment, has very little legitimacy among the population. The coming struggle
The November 1997 Luxembourg Summit was the result of a growing awareness among the "upper spheres" the EU of the need for quick action in response to the growth in social protest that had accompanied the Amsterdam summit in June 1997. (Solidarity actions were held in response to the threatened closure of Renault's Vilvoorde plant, and the convergence of the "EuroMarches" into 50,000-strong demonstration against unemployment, job instability and marginalisation during the Amsterdam Summit.) 18 International Viewpoint #304
Europe's leaders also realised that the tensions that would accompany the introduction of the Euro made a period of extremely firm management necessary throughout the transitional period in order to control any social explosion.
Much depends on exactly how this European political power crystallises and how soon the public will see it as irreplaceable and unavoidable. If that happens, we will need to rethink the ways in which to encourage the extension of immediate demands and struggles to a national and European level.
As this process intensifies, our own alternative policies will have to incorporate a more "positive" dimension, to resquestions, particularly unemployment and democracy. The political and social struggle will be to break through the process and modalities of EU
As we near the end of 1998, Europe's social democrats already have a majority of European Commissioners. They form the government in Britain, and dominate coalition governments in France and Italy. But will the social democrats be able to maintain the neo-liberal policies they have inherited? If so, what will be the impact on the trade unions nationally and in the European Trade Union Confederation
The social democrats aren't the only ones in trouble. Many of Europe's major bourgeois parties are in their greatest crisis since 1945. Italy's Christian Democracy has collapsed, and millionaire businessman and politician Berlusconi has been unable to regroup the right. Both conservative parties in France are also in crisis, as are Britain's Conservatives.
In many continental countries, the far right is gaining votes and political impact. On a smaller scale, the radical left is also increasing in importance.
Might we see a change in the balance of forces in one or more countries? Could this throw the EU into crisis?
The current economic "good news" cannot continue indefinitely. When the downturn comes, how deep will the recession be? What will be the social and political context?
International Viewpoint's economists say the most likely development is a generalised slowdown during the next 12 months, after which we could even see a legitimacy crisis for the neo-liberal system in one or more countries. This would have a complex impact on the EU in general, and the introduction of the Euro in
We should prepare for an unstable social and political situation, with sudden shifts in the electoral and political panorama, a worsening social climate, and the broadening of economic-political contrawill push people towards struggle. With the traditional workers' movement in historical and existential crisis, and completely unable to respond to such a situation, the field is open. *