Europe: European Union at 50 facing worst ever crisis

At a summit in Berlin on 25 March, the European Union will celebrate its 50th birthday.

By contrast with the 1990s – a period filled with ‘grand projects’ – the recent years have shown the Union in crisis. The euro-zone has stagnated economically and there is massive political distrust towards the EU on the part of workers and ordinary people as well as against the governments all over Europe.

One symptom is that, at the very time of the birthday celebrations, workers in Germany, France and Spain employed by Airbus – a company supposed to embody the very ideals of the EU – are involved in a joint struggle to save their jobs.

The crisis of the European Union has manifested itself in the last four years. Known as the “Union” since 1992 when the name was changed from ‘community’, the EU was split over the Iraq war. While Britain, Spain and Italy supported Bush’s invasion, the governments in France and Germany – up to then the leading core of the EU – opposed the US’ unilateral war.

Economic growth in the EU has been extremely weak, contrary to all the promises made when the euro was launched in 1999. Instead, the introduction of the euro and the process of enlargement and the “reforms” which have accompanied these, have been used to attack workers’ living standards and job security.

Political backlash

A political backlash was clearly demonstrated when, in the referendum in 2005 in the Netherlands, only 38 per cent of voters were in favour of the proposed EU constitution. This came after a resounding “Non” in France. For the first time, in two of its six founding countries, governments and the EU itself had been defeated in referendums. The constitution was quickly buried and other governments postponed their planned referendums.

The president of the EU commission in the 1980s and early ‘90s, Jacques Delors, says this was the worst crisis ever for the project. He also criticises the fact that most politicians around Europe today attack Brussels as a means of diverting popular discontent from themselves.

After the two ‘No’ referendum victories, EU leaders decided on a “pause for reflection”. The politicians’ perplexity was enormous, since the official purpose of the constitution had been to take the EU “closer to the people”. The so-called pause has been extended twice, but the scepticism has not disappeared.

A Financial Times/Harris poll in the five biggest EU countries – Germany, France, Britain, Italy and Spain – found that, “More than half of adults surveyed believed that the euro had harmed their national economies, with scepticism especially high in France and Italy”. “Just 26 per cent expect to be better off at the end of the year”, the poll said, and almost a quarter fear they will lose their jobs in the coming year (Financial Times, 29 January). In another article, the FT reported “exceptional public gloom” in France in the run-up to the presidential elections this spring.

Three aims

The real purpose of the EU project, however, has been threefold – to strengthen European companies against US and Asian competitors, to act as a common European weapon against the working class and public welfare and to secure a common border against instability and insecurity as well as refugees and cheap goods. But even in these fields – where the ruling classes of Europe seemingly have a common interest – national power interests have limited their ability to act together.

The euro and the ‘Lisbon Agenda’, launched in the year 2000, were supposed to improve economic growth and create jobs, with the US economy as a model. But The Economist’s special report on the European Union of 17 March maintains that, “Much of America’s faster growth merely reflects faster population growth and longer hours of work”. The results have been meagre, with last year’s 2.6 per cent growth in the eurozone being the first year over 2 per cent.

Instead, this decade has seen further steps in a neo-liberal direction, with privatisations, pension “reforms”, cuts in welfare and deregulation. Telecom, airlines and the finance sector are to different degrees deregulated on an all-European scale, with tens of thousands of jobs lost as a result. Energy and public transport in Sweden have been deregulated in line with the Lisbon Agenda, with German, French and Finnish companies owning large parts of these sectors and Swedish companies moving abroad.

The EU today has larger markets and bigger companies than a decade ago. Last year, mergers and acquisitions worth $1,590 billion took place in EU countries – overtaking the US – in industries such as insurance, banking, steel and energy. The trend of “Anglo-Saxon” speculative finance capital has established itself in Europe. Private-equity and venture capital, which only started in Europe a few years ago, has grown to the value of 173 billion euros (Economist, special report on European Business, 10 February).

Particular praise is given by the Economist and others to the German “reforms” – wage cuts and longer working hours. The German government under Schröder understood, “the euro changed the rules of the game. The only way you can become competitive is the hard way – by keeping wages in line or by boosting productivity”, said the OECD’s European Union bureau chief David Rae (FT, 26 Jan).

All EU governments follow the same line, clearly illustrated by the new “socialist” government in Portugal, increasing attacks on workers and the public sector. In general, the result has been rapidly increased profits (last year higher than in the US) and much improved “business confidence”. For workers, it has meant that real wages have declined and that most new jobs are temporary.

The problem for capitalists and politicians is the poor results for economic growth. The EU fundamentalists, led by the central bank – the ECB, still repeat their demand for more “structural reforms”. They want more of the same:- easier ways for employers to sack workers, lower pensions, cuts in welfare and company taxes, the promotion of low-paid service sector jobs, privatisation of state energy companies and banks, and of any remaining state-owned shares in telecom etc.


Workers’ struggle has blocked and limited these plans since the early 1990s. For example, Berlusconi was not able to force through the cuts in pensions he had promised the capitalists. Such resistance has underlined the strength of the working class, but trade union leaderships, adapting to employers and governments, have opened the way for new attacks again and again.

The European Union has always been marked by national contradictions, but in the 1990s and early 2000s most of them could be resolved or glossed over by the by the mood of euphoria created about the EU moving forward and dramatic improvements being promised as a result of the grand plans. There was a big effort to achieve a convergence within the EU over meeting the criteria of the euro. Governments seemed to be pulling in the same direction. In the last four years, however, economic stagnation and political crises have increased national tensions. Politicians such as Berlusconi in Italy, Sarkozy in France and the Polish president, Lech Kaczynski, openly attacked the EU.

The national card has been used to blame EU enlargement for unemployment and cuts. Both Sarkozy in France and Germany’s Angela Merkel have opposed Turkey becoming a member state, despite negotiations only talking about entry at the earliest in 10-15 years’ time. European capitalists have promoted Turkey, to get access to its supply of cheap labour and its large market, and also for military-strategic reasons. The prospect of EU membership is supposed to exert discipline on the policies of the Turkish government, as was the case with the East European countries. In Turkey itself, however, support for EU membership has dropped from 63 per cent in 2004 to 35 per cent last December.

Governments in France, Italy and Poland have blocked takeovers of national companies by European rivals. The French government blocked the Italian energy giant Enel from buying the French company, Suez. Instead, Suez was merged with former state gas company GdF. This killed two birds with one stone, for de Villepin’s government. The companies remained French and the state share fell to 30 per cent, in contrast to earlier promises to the GdF trade unions to keep a state majority.

New crises

Despite the present superficial optimism about the EU economy, new crises are on their way. Cuts in wages and welfare in Germany have increased profits, but at the same time reduced the consumer market. The result is an upturn depending on exports. With a sharp drop of the dollar coming closer, this upturn can end abruptly. Even in Spain, with high growth for the last decade, the economy is heading for a downturn. The country’s current-account deficit is 8.8 per cent of GDP, the second biggest in the world. In crisis-ridden Italy, there has even been talk of the country being forced to leave the euro, to be able to devalue its own national currency. Steps in a national direction are inevitable under capitalism, but offer no solution either. Italy leaving the euro would mean a huge political and economic crisis, comparable to when Argentina dropped its peg to the dollar.

At the EU birthday party, as with all summits since 2005, the aim of the leaders will be to avoid conflicts rather than break any new ground. Any new draft constitution – one of Merkel’s aims – will be much shorter than the previous one and played down as just a minor change. Governments in Britain, Denmark, Italy and the Czech Republic are deadly scared of referendums undermining them, not to mention France and the Netherlands. “Europe’s elite seems to have tired of its ungrateful citizens”, the Financial Times commented (25 January). Backroom deals are the model again.

The EU leaders will attempt to cover up their weakness with talk about environment and energy plans. But their market model, with the privatisation of energy companies and emission rights that can be bought and sold, will not stop global warming. In addition, European transnational companies which are causing pollution in China and India are the real masters of the EU governments.

Workers’ needs

The Economist summarises how capitalists look at Europe as “stuck to a corporate model of capitalism that takes the wishes of government and workers into consideration”. Their hopes are shown by the comment: “Much of European business already operates outside its home country, far from the constraints of old corporatism…” Workers all over Europe know that their “wishes” are far from being taken into consideration. It is only workers’ struggle, or the threat of it, that has put some restraint on European capitalism.

The EU has lost its momentum, but will continue as a talking shop for politicians, taking action in fields where they have common interests. For workers and youth in Europe, no support can be given to the capitalist EU or the nationalist capitalist opponents. The recent increase in workers’ struggles in different countries in Europe points to the need to build fighting trade unions and new workers’ parties which will fight for a democratic and socialist Europe as the only alternative to the bosses’ European Union.

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March 2007