The capitalist “vampire squid” and the class struggle in Europe

As economic crisis worsens and class struggles continue in Spain, Greece, Portugal and elsewhere in Europe, the need for working class fight-back and to build the influence of Marxism grows.

Below, we publish a document on world and European perspectives which will be proposed by the CWI’s International Secretariat to a meeting of the European Bureau in April. Following discussion and amendments at the meeting, the final version of the document will be published on after the meeting.

The main lines of the CWI analysis in the document, “Capitalist chaos – class struggle sharpens”, adopted by the International Executive Committee, in January 2012, have been broadly confirmed. The processes of revolution and counter-revolution that have shaken North Africa and the Arab world, we have analysed in other material (see These continuing events are certain to impact on the international situation.

Despite the hopes of capitalist economists that the world economy was ‘recovering’, boosted by an improvement in job prospects in the US, this has once more proved to be a false dawn. The expectation was that this was a harbinger of a generalised economic revival which would draw in Europe as well. The weakness of the European economy is reflected in the fragility of the strongest economic power, Germany, with manufacturing output “unexpectedly shrinking”. This, in turn, has affected France which, according to the financial information company Markit, has been “sucked back into a slump”, not a good omen for Sarkozy in the upcoming presidential elections. He has sought to capitalise on the brutal killings in Toulouse, but the economy is likely to be important, if not decisive, in the outcome of the election. Manufacturing output has fallen in France and the service sector has “trod water”.

The European economy in general has stagnated and even declined slightly with the 17-member eurozone on course for a 0.2% contraction in the first quarter of this year on top of a 0.3% slide in the final three months of 2011. Significantly, European industrial orders – which offer a guide to future production levels – fell by 2.3% in January. Europe is beginning to be affected – and particularly Germany – by the shrinking market, particularly for manufacturing, in China, where GDP growth could fall by 3-4%, which would impact not just on Europe but the whole world, particularly on commodity producers. Australia, for instance, although an advanced industrial country, certainly in terms of living standards, is nevertheless a major commodity exporter. On the back of the turbocharged Chinese economy, it has experienced a 21-year uninterrupted boom.

That is all set to change with China facing unprecedented turmoil and even the prospect of revolution. The visible splits in the Chinese leadership indicate that China is at a dangerous crossroads for the elite. As we have remarked many times, a condition for revolution – perhaps the most important in this case – is a split in the ruling class. Revolution always begins at the top. The recent sacking of the boss of Chongqing, Bo Xilai, was not accidentally linked by the Chinese premier to the ‘cultural revolution’ of the 1960s. The deposed Bo was himself a member of the bureaucratic elite – a so-called ‘princeling’ – but for his own reasons demagogically played on the image of Mao and the egalitarianism with which he is associated. This, in turn, frightened the regime because it threatened to accelerate the discontent of the Chinese masses from below that would challenge the growing disparities in wealth and income which marks out China today. Additionally, it probably reflected the splits within the regime over which road to take: either further towards the market or a consolidation and reaffirmation of state control of the economy. In passing, we should just comment that Australia itself will also experience political convulsions as a result of the change in economic fortunes, as happened in the 1930s. This will bring with it greater opportunities for building support for socialist ideas and the CWI, in hitherto difficult circumstances.

Bleak economic scenario

In the bleak European economic scenario the search for “growth” remains elusive if not hopeless. Writing from Lisbon, Keynesian economist Paul Krugman wailed: “Things are terrible here, as unemployment soars past 13%. Things are even worse in Greece, Ireland, and arguably in Spain, and Europe as a whole appears to be sliding back into recession”. He contrasts this unhappy position with the US economic scenario, citing the recent improvement in the jobs market. The catastrophic position in Europe is reflected in the growth of unemployment, which has risen to a record high of 10.7% in January. This means that 16.9 million people are out of work across the eurozone. Across the 27-member European Union, unemployment has topped 10% for the first-time; a “jaw-dropping” 24.3 million jobless! Spain is at the top of the table with unemployment at 23.3% or 5.3 million people and rising.

Sections of the bourgeois are desperately seeking a ‘stimulus’ for growth. They have seen the results of ‘endless austerity’ in Greece and the social explosions that have resulted from this. Commenting on the collective resolve of the European capitalists to maintain the policy of savage deflation, the Financial Times warned: “Only so much hardship can be imposed in the name of European solidarity before it cracks.” But, in the words of the Economist: “The crisis is, in effect, moving from an acute to a chronic phase.” In other words, capitalism is stuck in a blind alley with no easy way out. And the more farsighted bourgeois have, as we have, drawn the conclusion that a single currency for a number of diverse and separate states has enormously aggravated the economic crisis and, by implication, is unviable and destined to break up at a certain stage. With the advantage of distance, Krugman correctly compared the eurozone to the gold standard dismantled in the 1930s: “By introducing a single currency without the institutions needed to make their currency work, Europe effectively reinvented the defects of the gold standard – defects that played a major role in causing and perpetuating the Great Depression.” He further warned, correctly, that Europe is “in for a long period of mass unemployment and slow, grinding deflation”. This merely repeats all we have stated on many occasions but the implications of this are stark, with the prospects for capitalism staggering from one failed ‘solution’ to another and the scenario of a chain of crises from which revolutionary events will flow. At the same time, cuts packages have been introduced everywhere, including recently in Austria and Belgium. Belgium was faced with a 4 day ultimatum from an EU Commissioner to announce cuts. In central and eastern Europe, there have been important developments such as resignations from the Czech government over cuts; the recent elections in Slovenia and the mass protests in Poland against proposals to raise the retirement age. The protests in Russia also represent a crucial change in the situation. Despite the election of Putin, an extremely unstable and explosive social situation has now opened up.

Big business sitting on huge reserves

The central dilemma confronting capitalism at this stage is summed up by a lack of ‘demand’ set against the colossal cash cow– massive profits– which the big companies and the banks have amassed. We have drawn attention to this in statements and in our publications but each time we give a figure it is exceeded by subsequent revelations of the colossal reserves built up particularly during this crisis. There has been a virtual ‘strike of capital’ because the capitalists cannot see any profitable outlet other than looting the state in an orgy of privatisation. A recent article in the Wall Street Journal indicated the size of the problem: “Across Europe, corporations are sitting on a mountain of cash.” But it is not just in Europe that this is taking place: “…In the US, the eurozone, the UK and Japan, some $7.75 trillion in cash, or near equivalents,” is sitting in the vaults of big business. In Europe, “The problem is particularly acute.” The ratio of investment of GDP in Europe is at a 60-year low, even as companies pile up cash. Corporate cash holdings are now €2 trillion across the eurozone and an extraordinary £750 billion in the UK! In other words, the reserves of capitalism worldwide, past profits – excluding China – are roughly half the GDP of the largest economy in the world, the US!

These reserves should be used in order to mop up mass unemployment. One of our transitional demands should be for a ‘capital tax’ of at least 50% on these cash reserves. This would be more than enough to immediately cancel not only the debts of Greece but of all the indebted countries – Ireland, Portugal, Italy, Spain, etc. – threatened with a future of poverty and mass unemployment. This demand should be linked with the need to nationalise the major companies and introduce a democratically planned socialist economy. At the moment, the bourgeois are locked into a zombie economy. The idea that by cutting the top rates of tax – as George Osborne the British Chancellor of the Exchequer has recently done – this will lead to further investment by big business is so much moonshine. Moreover, the idea that if wage levels are further repressed and conditions undermined – David Cameron is implementing a freeze on public-sector wages – this will encourage the capitalists to invest is equally bogus.

Eurozone debt crisis

It is against this background that we must view the efforts of the European Central Bank to underwrite for three years the threatened ‘peripheral’ countries’ economies through the €1 trillion liquidity ‘rescue package’. They have succeeded temporarily in shoring up the situation, albeit through a partial default of Greece, with the attendant agonies of the Greek people. However, given the size of the debt problem – which can rapidly spread to Portugal, Ireland, particularly Spain – even this huge injection of liquidity is not the ‘ big bazooka’ demanded by Cameron but could prove to be a ‘toy gun’! Merkel, the German Chancellor, for domestic political reasons, subsequently sought to water down the package in order to cut the amount which German capitalism could be liable for. This means, according to Wolfgang Muenchau in the Financial Times, that “the total rescue capacity can be no higher than €500 billion at any time”. But even the original proposal for €1 trillion was no adequate ‘firewall’ to deal with the problems of Spain, Italy, etc.

Moreover, the loans package does absolutely nothing to break the death grip of deflation which besets the continent. On the contrary, even ‘healthy’ banks – such as those in the UK – have taken advantage of the ECB’s generous 1% charge on loans and then have, for instance, invested in 5% Italian bonds at a handsome profit. This is then ‘parked’ in the reserves with no benefit to the real economy. This is just another form of the ‘carry trade’, an expression of the parasitism of modern capitalism. At the same time, the loans have to be paid back by 2014, which could precipitate another financial crisis on the scale of 2008. As the experience of Britain and the US clearly demonstrates, the expedient of ‘quantitative easing’ – printing money in effect – can work in the short term. In the US, it clearly avoided in the short term a repetition of the Great Depression but it in the long term can pile up problems, particularly rising inflation.

Crisis in the US and economic shocks

The ruinous consequences of capitalism as a world system are being driven home almost daily as the recent revelations of the Economist have demonstrated. The fact that the US economy will have “stood still” for 10 years and other countries by lesser numbers of years is an astonishing admission of failure. Moreover, the current small ‘upswing’ in the US is below the trend growth in all recoveries from previous recessions since 1945. The crisis expresses itself not just in the inner-city areas but in the ‘suburbs’ too, which were previously synonymous with an escape from the collapse of the inner cities. Some US states are also bankrupt, such as Illinois, or on the verge of collapse. This upswing is not firmly based, has not resulted in the generation of high-paid permanent jobs but of part-time and precarious employment. The nightmare which is haunting the Obama administration is that this shallow recovery will stall or even collapse prior to the November elections with the consequence of him being defeated by a ‘dysfunctional’ right-wing Republican, probably Romney! However, at this stage, it seems most likely that Obama will be re-elected for a second term.

There are also unforeseen geopolitical shocks which could have a profound effect on perspectives, including economic perspectives. “Oil is the new Greece,” warn capitalist commentators. The price of Brent crude has recently risen to around $125 a barrel with fears of an attack on Iran and the repercussions of such an event on oil exports from the Middle East. Saudi Arabia, in an attempt to keep down the price of oil, has offered to increase oil production. This may not be enough to prevent further rises. Every recession since 1945 has been preceded by a rise in the oil price. This time, it takes place against the background of economic crisis, of recession and even depression in some countries, which could result in a further downward spiral of the world economy. The US itself may not be as profoundly affected by the oil-price increase given the rise in domestic oil production, through the application of new methods, but it will feel some effect through the economic contraction in countries that provide a market for US goods.

Profound political crisis in Europe

The political and economic landscapes of the main countries of Europe are if anything more serious for capitalism and its parties than in the US. Alongside an economic crisis, European capitalism confronts a profound political crisis of the bourgeois system itself and its parties. They face a crisis of legitimacy, even without as yet the existence of mass left parties of the working class that will pose a serious challenge. “Thieves and liars,” the description and roar of the Greek workers on demonstrations, is echoed throughout Europe by the working class, if not yet with quite the class venom of the Greek workers. An elaborate web of corruption and intrigue exists between the ruling parties, the media and big business. This has always existed but it is now quite open. This is typified by the scandal surrounding the Cameron government in Britain, including Cameron personally, with the rotten Murdoch press.

This has been followed with revelations about paid ‘audiences’ with the Prime Minister and his wife – with a £250,000 price tag – for assorted millionaires and billionaires lining up to demand privatisation and its attendant kickbacks, reductions in wages as an ‘incentive’ to invest, etc. Ed Miliband, the New Labour leader, scored a bull’s eye in the House of Commons as he stole our slogan when he accused the government of being in favour of the “millionaires not the millions”. However, he was fighting with one hand behind his back, given the corruption of the previous Blair government; there were the scandals over cash for influence, MPs’ expenses and favours to Formula One racing chief Bernie Ecclestone, for which New Labour received £1 million, which Blair was then forced to give back once the scandal came out into the public domain. The same picture emerges throughout Europe with the former social-democratic parties grubbing their noses in the pig trough just as much as their openly bourgeois counterparts. Look at Strauss-Kahn in France, or Craxi in Italy who facilitated the rise of Berlusconi, etc. This is just one consequence of the bourgeoisification of the former workers’ parties. At the same time, it gives us further ammunition to strike propaganda blows at capitalism and its parties, which in turn can facilitate the basis of new parties of the working class.

Contrast this– the politics of the pig trough – to the incorruptible character of genuine Marxism and, hopefully, of new mass workers’ formations. Moreover, the recent exposure of Goldman Sachs, previously called a “great vampire squid wrapped around the face of humanity”, by its former executive Greg Smith has exposed its rotten ‘business methods’, describing clients as ‘muppets’ and extorting exorbitant fees for its services. This, in turn, allowed it to reward its employees with bonuses to the tune of $12 billion, equal to the GDP of Albania! It should also be remembered that this colossus once employed the two unelected current prime ministers of Greece and Italy. The persistent mass anger at the bailout of the banks already reflected in the Occupy movement, and the growing chasm between the classes has been given a further boost by the decision of the Icelanders to put on trial their former prime minister, Geir Haarde, for his handling of the 2008 banking crash. He is thought to be the first politician in the world to face a criminal trial in connection with the global financial crisis and could face up to two years in prison if found guilty. It is unlikely that he will be incarcerated, given the recent recovery in Iceland’s economy, which results from turning away from investment in financial assets towards ‘traditional’ businesses like fishing and tourism.

Fictitious capital is out, to be replaced by productive industries. No such happy option is on hand for the British or other populations; manufacturing industry has collapsed, never to return, and fishing and tourism are certainly no alternatives. This development, however, indicates two things: the enduring effect and the bitter anger at the fallout of the banking crisis – five years on – and the underlying mood that the culprits should be brought to book. Imagine if genuine, fighting mass workers’ parties existed, the deep-rooted corruption which has been exposed could become the point of departure for a mass campaign to expose not just governments but the system itself.


If Europe in the recent period has been the epicentre of the world crisis, Greece has been its most turbulent component. It has faced not just recession but a slump with a 17% drop in GDP in the last 3-4 years, with another 4-5% drop expected this year, adding up to a 21% contraction in the economy. This is almost at the level of the worst period of the depression in the US in the 1930s which saw a 25% contraction in GDP. If the Greek people four years ago had been presented with a film of where the economy and their lives are now, it would have been dismissed as a malicious exaggeration! The speed of collapse – even in the last two years – has been breathtaking. Who would have imagined that teachers, journalists and architects would line up at soup kitchens? We are witnessing the destruction of the middle class before our eyes. This is a repeat of Argentina at the beginning of the last decade but in the heart of Europe. Suicides in Greece prior to the onset of the crisis were the lowest for the whole of Europe, excluding the ex-Stalinist states. Now, they are the highest and we are treated to the sad spectacle of mothers compelled to give away babies because they cannot feed or house them. The Greek Orthodox Church feeds at least 250,000 people each day and there are unprecedented poverty levels with the troika inflicting even more savage cuts, the minimum wage being cut by 22%, to 490 euros net, per month, and for the youth (under 25) by 32%, to 430 euros per month etc. The Greek workers are like a man on a down escalator frantically trying to run up.

The desperation of the masses is indicated by the decline towards ‘barter’ trade – an attempt to bypass capitalist outlets –and a return to the land, or the islands, in an attempt to scratch out a living. This is a rerun of what actually happened during the depression in the US. It is clear that there is no way out, not even a respite, on the basis of capitalism. The lot of the Greek workers is that of the figure from Greek mythology itself, Sisyphus. He was destined to push a boulder up to the top of a hill, only to see it roll down again and for the task to be endlessly repeated. The difference today is that the boulder rolls down to below its starting point! After all these sacrifices merely to mollify the bond raiders, Greece will still be saddled at best with a debt of around 120% of GDP, the same figure as Italy now, which is deemed to be ‘unsustainable’. And this deal was only arrived at, allegedly, by much arm-twisting and threats to greedy private creditors that unless they accepted a 75% ‘haircut’ on their outstanding debts against the Greek state then the deal would be called off and they would receive nothing. According to the economist Nouriel Roubini, this now turns out to have been an elaborate charade. The deal “is an amazing sweetener for creditors”. Private creditors have been bailed out to the tune of €30 billion in guaranteed new bonds. It will be the ‘official creditors’, that is, the European institutions and governments – therefore taxpayers – who will foot the majority of the bill and will pay for actual future losses.

The Greek working class has demonstrated heroic determination and colossal reserves of strength, manifested in the 16 or 17 general strikes, including three 48-hour strikes, since the beginning of 2010. An all-out general strike has not yet been posed. But it is lodged in the situation. At this stage, these general strikes, together with the recent general strikes in Portugal, Spain, Belgium and other countries, as we have explained in other articles, have still assumed the character of ‘protest strikes’ rather than a challenge for power by the working class. The Greek workers are weighing up the present situation, which despite all the best efforts and because of a lack of leadership at the top, has resulted in a defeat. This is not a decisive defeat – certainly not on the level of the ‘two black years’ following the defeat of the Spanish workers in the Asturian commune in 1934. This was a regional, semi-civil war but reaction could not consolidate itself and was forced to give way to the Popular Front government in February 1936. An unparalleled class struggle broke out – with virtually every city facing a general strike – which then culminated in the actual Civil War.

Greece is not yet at such a stage. The masses seethe and bridle at the defeat and the severe reductions in living standards which have resulted from this but they are pausing before gathering their forces for the inevitable struggle which surely must come down the line. But struggle, even of the most determined kind, is not enough. A mass party with a farsighted and determined leadership is the vital ingredient missing in this situation, as our comrades have consistently pointed out. Normally after such a movement, as we have witnessed in Greece, fought out primarily on the streets and in the industrial field, is checked, there can be a turn towards the political field in the elections which loom in April or May. The Greek section of the CWI, Xekinhma, has postulated earlier that this could result in a swing towards the left, with the prospect of a continuation of the struggle but in a different form. Therefore, it was correct for us to expect that the left parties – particularly the Communist Party (KKE) and Syriza – and their allies would experience a significant rise in the polls as the election approaches. However, at this moment it is clear that the rise in the left parties is far behind what is possible, and actually there is a drop compared to a few weeks ago. The KKE and Syriza seem to be stuck around 11-12% each (whereas ANTARSYA, anti-capitalist left is stuck at around 1% and not able to reach the 3% barrier necessary to enter parliament). The failure of the KKE and Syriza to win massive support has flowed from the failure of the leadership of both organisations to advocate a clear alternative programme and struggle to overthrow capitalism, which would need to include the formation of a united front between these and other organisations, as Xekinhma has advocated.

On the other hand, the fracturing of the left – with support scattered amongst dozens of groups and parties – now seems to be mirrored on the right with support for Pasok and New Democracy together currently reaching 35-40% of the votes which represents a collapse compared to the 70-80% that these two parties received at the last elections. Both parties have, in turn, split reflecting the colossal confusion and the lack of a real authoritative alternative both on the left and the right. This poses the probability of a new right-wing unstable coalition – a tripartite arrangement in government – including either New Democracy or Pasok or both and one of the split-offs from the main right-wing parties. At the same time, there is a rise of nationalism and the far right could grow. Overall, this reflects a profound scepticism amongst the masses of the possibility of a parliamentary solution to the crisis. However the idea that the working class will quietly acquiesce to the savage austerity programme cooked up by the EU and the bond markets is false to the core. It is one thing to legislate austerity, it is another thing to impose it on the ground. The Greek workers – the people as a whole, minus the tiny parasitic elite– will resist every inch of the way in every way they can and try and overcome the huge handicap of the leadership. The programme of ‘unalterable’ austerity will provoke uprisings and occupations, the character and scale of which cannot be fully anticipated in advance.

A ‘disorderly’ Greek default and a break from the eurozone are still on the cards. Of course, in or out of the EU or the eurozone the same fundamental problems will confront the Greek people. We oppose the rose-tinted perspective that outside the eurozone things will be ‘easier’ on a capitalist basis. The example of Argentina, which appeared to successfully break from the dollar peg, is not fully applicable in the case of Greece. Firstly, this took place in an entirely different economic situation with a continuation of the world boom which granted Argentina a certain latitude in pursuing an independent policy on the basis of capitalism. It involved a cancellation of partial cancellation of the debt but Argentina is not entirely free, even today, from the consequences of this. It has experienced difficulties in raising loans but, more importantly, it still has searing poverty. In the event of Greece, breaking from the ‘prison’ of the eurozone, the alternative is not to fall back on narrow nationalism but to break from capitalism – nationalisation of the banks and the commanding heights of the economy – and make a call on the European working class to come to its assistance.

There’s never been a more appropriate time in history to make such a call. We face a more favourable objective situation, in a sense, than confronted Lenin at the time of the Russian Revolution. He expected an international revolt of the working class which would come to the assistance of the first workers’ state. This was at the time when there was no visible expression of working class revolt – the First World War dragged on with a continuation of the brutal and bloody regimes of the officer corps. Nevertheless, Lenin was confident that the brewing revolt – not at all visible to superficial commentators – would inevitably break out. He was vindicated by the German revolution and the revolutionary wave that swept throughout Europe subsequently. We do not have to wait for this revolt of working people to reveal itself. It is already there in the mass movements in southern Europe in particular but throughout the continent. In fact, the political centre of gravity in the next period is likely to move away from Greece towards other countries in southern Europe, including Portugal but particularly Spain. For us though, Greece will still remain crucial, not least because of the considerable forces and the potential we have built up for the growth of the revolutionary movement.


Spain is heading down a familiar path, already trodden by the Greek and Irish population. It has, according to some estimates, almost 25% unemployment, the highest in Europe. The figure of more than 50% of young people unemployed is an unmitigated social catastrophe. It also signifies a system sick unto death. Consumption – real living standards – has been remorselessly cut year after year. And although some bourgeois economists protest: "Pushing more austerity onto an economy already in recession may do more harm than good."[The Independent.] That is precisely what Mariano Rajoy, the right wing prime minister of Spain, has done in his budget. In advance, he promised "very, very austere" measures and he has not disappointed the Spanish capitalists. It was an “eye-watering Budget, the most austere since the Franco era, [which] included a €27bn package of spending cuts and tax rises”. This prompted Martin Wolf of the Financial Times to criticise in advance austerity measures recommended for Spain when the country was clearly already on its back. He echoed a point that we have made many times: "One definition of insanity is doing the same thing over and over again and expecting different results." But insane policies are dictated by an insane system. It is to put the pursuit and restoration of profitability before social need. This is the system that Martin Wolf and his like support. Yet it is unlikely to lead to a restoration of economic health but rather a worsening of an already desperate economic situation and the resulting social inferno which can result from this.

Spain’s banks need a further bailout. They must find at least €50 billion this year against possible losses ranging between 35% and 80%. The local banks, the cajas, are in serious difficulties. The huge building boom that Spain experienced and which has now gone bust left literally millions of empty homes – even a brand-new airport stands empty and has been mothballed! The Spanish capitalists are under the illusion that they have been given an injection of oxygen, a breathing space, by the funds provided by the ECB and, theoretically, this could last three years. But a period of rising unemployment, further sharp declines in house prices and widespread loan defaults by businesses and households will shatter these illusions. The PP’s austerity programme is estimated to be the biggest in history!

Even Rajoy believes he will not be able to proceed as quickly or implement all the draconian measures demanded by the EU. He famously warned the EU that their austerity proposals would “cost him a general strike ". And he has not been disappointed! The country had a fiscal deficit of 8.5% of GDP in 2011. This is 5.5% more than what is dictated by the newly agreed ‘fiscal compact’ of the EU, which stipulates no more than 3% of GDP as a budget deficit for a country. Failure to adhere to this will bring fines down on the heads of an offending country. Spain was successful in its appeal for more time and therefore an agreement was made that its deficit will be set at 4.4%. The pact – allegedly set in stone – was breached when it faced its first test! But Spain cannot carry through its side of the bargain. 5.8% was the initial target by the government, but which was already rejected by the European Commission. The government were forced into a climbdown and accepted a target of 5.3%, which means 5 billion in extra cuts imposed.

Even before further austerity measures were announced the position of the Spanish working class was desperate. Spain has lost 2.9 million jobs in four years, with almost 300,000 shed in the latest quarter! Now the employers and the government are proposing a third reform in two years of the labour laws which will allow the bosses to negotiate shorter working hours on low wages. This comes on top of the sell-out agreement between the unions and employers in January to limit pay rises over the next three years. This represents a further deflationary impact which will enormously aggravate the economic position and plunge the working class into further despair. The government is sitting on a social volcano. Under the previous government of PSOE we witnessed the general strike of 10 million workers in September 2010 as well as the development of the ‘indignados’ movement. However, the massive general strike that took place on 29 March exceeded in its scale and effects those movements.

The new PP right-wing government has only been in office a few months and it has already been given a warning of the resistance it is likely to meet to its programme of austerity by the result of the elections held in Andalucía – Spain’s most populous region – which it expected to win but failed to do so. A coalition of PSOE and the United Left (IU) is possible to form the regional government. However, it seems the pressure of the masses and the rank and file of the IU to oppose joining a coalition with PSOE may result in PSOE ruling alone. The refusal of any possible coalition government involving the IU to go outside the limits of rotten Spanish capitalism will inevitably disappoint the masses.

The national question – which was not present in the same form as in Greece – is a major complicating factor for the EU and the bourgeois in seeking to carry through its programme. Normally, regional governments vie with the centre for power, with the government emphasising ‘national’ priorities and ‘autonomous’ rights pushed to the fore by the regional governments. This tension is enormously exacerbated by the deteriorating economic situation and the conflicting demands between the centre and the regions. This will give an even sharper edge to the national question in the Basque country and Catalonia and, with the results of these elections, in Andalucía too. It is not excluded that the movements for greater autonomy and even separation could develop further within these areas as happened in the 1930s – particularly in the case of Catalonia in 1934 and in the Basque country. We, of course, while standing for the right of self-determination up to and including secession, will emphasise the necessity for the unity of the working class throughout the Spanish state and put forward our own solution of a socialist confederation of Spain and the Iberian peninsula as a whole.

In some countries the political vacuum has been capitalised on by the populist right. Even in Greece, there has been a growth in nationalistic sentiments. In Austria, the FPÖ is now level with the SPÖ in recent polls at around 28% with the traditional right ÖVP at around 23%. The threat and dangers posed by these forces to the working class, socialists, the working class and CWI must be aware of a fight against. Developments in Hungary are a warning of the threat posed by the populist right using a combination of nationalist and racist rhetoric if such forces are not answered by the working class. The eclipsing of Le Pen in France by Mélenchon also demonstrates how the right-wing populist, racist forces can be effectively combated despite the limitations of the Front de Gauche (Left Front).

In Spain, key to the situation is in the hands of the working class and labour movement. On the one hand is the enormous combativity of the youth and the working class. This is symbolised by the general strike but also in the ferocious resistance of young people to education cuts seen in Valencia. As 30,000 marched in solidarity in Barcelona some clashes with the police took place. There was also police violence against protests and the occupation of a secondary school in Valencia which triggered days of protests in the city and transformed the school into a symbol of a country where the pain of austerity "is becoming a feature of everyday life". It also found a partial expression last year in the ‘indignados’ movement. Due to the sectarianism of some elements in the leadership of the movement, such as the “Democraccia Real Ya!” platform, which did not support the general strike, this movement has generally receded in most areas, although it could explode again. However there has been a certain shift, reported by our comrades, towards the left, certainly within the IU. The crisis and pressure of the masses is such that it can result in upheavals within the UGT and CC.OO, which are also seen as an important points of reference for the working class. This is an important arena for us in seeking to acquire a firm base. However, the proliferation of small left groups – including those of a ‘Trotskyist’ character as well as those influenced by anarchism – still remains. This is a reflection of the ideological confusion which in turn is a product primarily of the opportunism and failure of the leaders of the workers’ organisations, as well as the period of ideological confusion following the collapse of Stalinism.

If the leaders of the trade unions fail to respond to the demands of the youth and the working class for decisive measures against the government, this scattering of the potential power of the youth and the working class could actually grow. On the other hand, this discontent could be reflected in shifts towards the left particularly in the IU and the corresponding reconstitution of an organised left, within which we would participate. Spain assumes great importance in the work of the CWI in the next period. Great efforts have been made by our comrades to establish a firm base which has met with a certain success. Our slogans, particularly for a 48-hour general strike, did, it seems, get an echo where we could reach workers on the demos of 29 March! The whole of the CWI will give its maximum support to the attempt to establish a firm and powerful section for the international organisation.


Portugal, a small country and not yet attracting as much attention as its bigger neighbour, Spain, is nevertheless just as much beset by a searing crisis. It confronts the worst economic and social crisis since the incomplete 1974 revolution, the imprint of which is still present in the consciousness of the Portuguese people, especially the working class. The economy will drop sharply by more than 3% this year while unemployment, which stands at 13.6% of the workforce, is almost 30% amongst young people. Portugal was a founder member in 1999 of the eurozone and, like Greece, Ireland and to some extent Spain, envisaged a smooth overcoming of historical backwardness and an easy passage to first world status through the single currency and the EU. It should be remembered that at the time of the Portuguese revolution in 1974 40% of the population was illiterate. But its growth was largely fuelled by huge debt and specialisation in textiles, clothing and ‘low-end products’, which were no match for the competition that came from Eastern Europe and East Asia.

It now finds itself in the most exposed position in its history with swathes of the population seeking a way out through emigration from the worsening poverty which afflicts the country once more. Mass emigration in the 1960s and up to 1974, to the booming economies of Western Europe, was an escape from the backward stagnant years of the Salazar and Caetano dictatorships. But that route is now closed off and therefore it is to former colonies – Angola and Mozambique – as well as the booming countries of Latin America, especially Brazil, that emigrants now seek economic salvation. An estimated half a million or more Portuguese have emigrated in the past period, largely to these areas. Unfortunately this escape route will be closed off to those Portuguese who wish to follow in their wake as the world economic crisis draws into its vortex the semi-colonial world, and shatters the expectation of an economic renaissance of countries like Brazil etc.

Portugal is destined to experience the same savage deflation as other countries. It is the most ‘leveraged’ country after Ireland in the eurozone area. Public sector debt is due to hit 118% of GDP next year if cuts are not made. Portuguese bonds have soared to 17%, a record for the euro area. The bond markets are pricing in a Portuguese default at a certain stage. Financial institutions that hold bonds will be expected to take the same kind of ‘haircut’ as Greece and this will be "no mere snip and trim". A German economist commented: “The real economy does not have the structure to grow in the future and thus will not be able to pay back its debt in the long run." It would require a primary surplus of 10% in the coming years to reduce Portugal’s debt ratio to a permanently serviceable level. This would require cuts that would completely exceed the present vicious austerity programme.

The revolt of the Portuguese working class at the prospect of the bleak future mapped out for them by Portuguese capitalism was reflected in the huge demonstration on 19 February, in which it was claimed 300,000 participated (and our comrades estimated 200,000), which coincided with the election of the new leader of the main trade union federation, CGTP, Arménio Carlos, who is widely seen as more militant than his predecessor. However, the general strike held on 22 March, despite achieving a generalised stoppage, was somewhat weaker than those held last year, reflecting the impact of the impoverishment of sections of the working class, as well as a certain weariness with the strategy of isolated mobilisations, seen as having a largely symbolic character, that are not linked to a fighting strategy to win viable alternative policies. However, this could rapidly change, giving way to a larger social movement. Again, we must support the efforts of our small forces in Portugal to find a base and grow in the changed situation that exists in the country.


A general strike called by the biggest trade union federation in Italy, the CGIL, is likely to be called before Easter – prior to the European bureau – which could draw into the movement other smaller union federations. The source of the ire of the working class is primarily the famous Article 18 of the constitution – which enshrines gains made at the high point of the workers’ movement in the past. Various governments, including Berlusconi’s, tried but were unsuccessful in eliminating it. Currently, even part of the church is against the proposals, with bishops speaking about the attempt of the government to withdraw this clause. The Democratic party (PD), the bulk of whose membership came from the former Communist Party – could split on the issue, with parts of the leadership shamefully prepared to vote in favour of Article 18’s abolition.

The attacks on workers’ rights – as we have seen in Spain, Portugal and Italy, with other countries to follow – are part of a generalised offensive which mirrors what happened in Britain under Thatcher, who introduced the most draconian anti-union laws in the ‘developed’ world. These countries have not yet gone as far as Thatcher’s measures – which were later acceded to by the New Labour governments of Blair and Brown – but the capitalists are edging in that direction. Even in Scandinavia – particularly Sweden – vicious neo-liberal measures in schools, the health service, etc., are more evident even than Britain at this stage.

A massive conflict still looms over the building of the railway tunnel at Val di Susa. But, like Spain, the crucial issue facing Italy at this conjunction is ‘reforming’ the labour laws. The bonanza which the capitalists hope to get from anti-union laws is underlined by what has happened in Andalucía in Spain. When laws were introduced to make it easier to sack workers, there were eight times as many sackings as there were this time last year. The Italian bourgeois believe they have their best opportunity now, through the unelected and unaccountable Monti government, of realising a long-cherished aim of significantly weakening and defeating the Italian workers’ organisations. This has been met with bitter opposition from workers with a one-day strike of FIOM, the metalworkers’ trade union, and other workers who marched through Rome chanting "no Article 18, it equals slavery". The Italian ruling class see the dismantling of Article 18 as the precondition for creating the necessary ‘flexibility’, which in turn will lead to much lower paid jobs pushing up total employment from its present low level of only 57% employed, the second lowest in the eurozone. The ‘theory’ is this will open up employment in low-paid jobs for young people and women. Yet gross domestic product is at the level of 2004 and industrial production slumped 5% in January year-on-year. The country is still saddled with a debt burden running at 120% of GDP, second only to Greece. Moreover, the austerity measures of first Berlusconi and now the Monti government have had a deleterious effect on the economy. Finmeccanica, the state-controlled defence and industrial conglomerate employing 74,000 workers, has reported big losses for 2011 and is intending to close down ‘loss-making’ divisions. And this is just the beginning. The head of a business association consequently declared: "The depressive effects are evident. Although the objective should be to make the economy grow, the opposite is happening." The same policies as the rest of Europe are producing the same results!

As elsewhere the movement of the working class is key; a significant movement led by the unions can defeat the government on this issue and, in the process, bring about its demise. Berlusconi attempted to do a ‘Thatcher’ when trying to eliminate Article 18 in 2002. He failed and today, if the PD collapses, it will bring down the Monti government because it plays a crucial role in propping him up. At the moment, the Monti government’s strength lies in the discrediting of the ‘politicians’. In one recent poll, only 8% of voters rated the existing parties highly. Berlusconi’s party ‘people of liberty" is at an all-time low at just over 20% in the polls. The PD may split, as we remarked, with a vacillating leadership unable to put its stamp over the party’s factions.

But class tensions have increased as a result of the government’s attacks. The bourgeois are conscious that, 10 years previously, an attempt to ‘free up’ labour laws provoked a colossal reaction of the working class and the Red Brigades assassinated the then Labour Minister. The current holder of that position now requires six bodyguards allegedly to prevent a repetition! This is probably an exaggeration of what can happen – the Red Brigades do not appear to pose the same danger now – and is designed to emphasise the ‘courage’ of government ministers in refusing to be cowed by the working class!

Politically, the mighty Italian working class, for the first time in generations, does not have its own party. The hopes that were raised by the formation of the RC almost two decades ago have been cruelly dashed. This requires raising the central issue of laying the basis for the re-emergence of a class struggle workers’ party.


France, with its rich revolutionary traditions, is vying with other countries to become the focus of revolutionary explosions in the next period. The upcoming elections – the first round of which on 22 April takes place just before the European bureau – will be an important indication of the temper of the French working class. Their bitter fury at Sarkozy and his ‘rich man’s government’, the more than 3 million unemployed and the jobs massacres which are still taking place with around 900 factories closed in recent years, will undoubtedly find expression in the elections. Moreover, as the Guardian indicated, “France is now one of the least industrialised nations in Europe, with factories closing, French car-makers opening plants abroad and even Renault outsourcing to Morocco. Only Luxembourg and Greece are less industrialised, according to the OECD. Thirty years ago, industry generated about 23% of French jobs, now it is only 12%.” Strikes and occupations have taken place, with women workers in a rural area of central France, faced with the relocation of their factory to Tunisia, staging demonstrations and occupying their workplace.

Eager to show their sympathy to the working class, all presidential candidates have rushed to organise factory gate meetings, even Sarkozy. Yet steel workers, who are to stage a 10-day march on Paris against job losses and factory closures, were tear-gassed by the police while attempting to picket his campaign headquarters. The Socialist Party candidate Hollande tapped into this mood in the first stages of the campaign with his radical call for a 75% tax on the banks, contributing to him gaining a decisive lead in opinion polls. Even before the Toulouse massacre, Sarkozy sought to steal the clothes of the far-right leader of the National Front, Marine Le Pen. As a result of a concentrated attack on immigrants in general, singling out Moslems on the issue of ‘halal meat’ – which also earned the hostility of the Jewish population as he attacked kosher food too – after his disastrous poll ratings began to revive. It was an indication of the vicious campaign which Sarkozy has launched in a bid to retain power. His anti-immigrant stance combined with previous measures, the government’s outlawing of the veil, etc., succeeded in alienating the 5 million Muslim population of France, the biggest in Europe. But this has obviously boosted his support, against those who earlier were looking towards the far right. This will now mean that he will probably edge Hollande in the first round of the elections. In the unlikely situation of Sarkozy winning the second round and the election, it will undoubtedly provoke massive social explosions.

However the economy will prove to be the decisive issue in the election. With Sarkozy’s record, this will count against him in the final round and probably lead to the victory of Hollande. But the surprising success of Mélenchon, the candidate of the Left Front, is an important barometer of the mood of the significant section of the youth and the working class. He presently stands at 14-15% in the polls and has overtaken Le Pen to become the third strongest candidate. He has both undoubtedly occupied the ground vacated by the NPA and won support from wider layers. The NPA and the LO are likely to get 1% of the vote between them. Compare this to the potential at the beginning of this century when their combined vote reached 10% in the 2002 presidential election. A colossal opportunity of creating a new mass revolutionary pole of attraction has been lost. But in the charged situation which exists in France new opportunities will be presented. In a highly significant, development Mélenchon’s main slogan called on workers and youth to "take the power" and accompanied this with a call for “a citizens’ revolution”. He has also called for the nationalisation of the energy sector. The proposal to "take the power", while inadequate, is nevertheless a huge step forward from just calling for a ‘change of curtains’, where the party in government changes but the same neo-liberal policies continue. It allows us to give an economic and class content to the formula of "power". It represents, therefore, a possible new stage in the evolution of consciousness. Under the blows of this crisis, reformism, even left reformism, can grow through new mass parties and find a resonance amongst the working class.

The coming to power of a government, presided over by the Socialist Party and Hollande, will mark an important change in the situation in France. He will be under huge pressure to resist the neo-liberal programme – symbolised in the EU fiscal compact, which he promises to reject or at least amend. He will be compelled to undertake some measures on the jobs front but also, of course, will face the opposition of the ‘markets’ to any concessions to the working class. After such a ferocious election, it will not be possible merely to pursue exactly the same policies as Sarkozy. This can also have international repercussions and increase the antagonism and conflicts with Merkel and German capitalism. A new and interesting period for our organisation will develop, which we must be attuned to exploiting politically.


Ireland is a key country for the CWI and has now entered a decisive period in which the hard work of the CWI’s section, the Socialist Party, can reap rich rewards. Because of the compliance of the official trade union leadership with the programme of austerity there have been little visible signs of opposition. This earned the country the label of "poster boy for austerity". In reality, the opposition to the cuts in living standards has been as hostile from Irish workers as elsewhere. However, because of the blockage at the top of the trade unions there has not been much opportunity to vent this opposition. Now, however, the EU imposed ‘household tax’ has ignited a mass movement with unprecedented and tumultuous indoor meetings and demonstrations – led amongst others by the Socialist Party. This provides the opportunity for the working class to vent their accumulated anger not just on this tax but on all the issues which have frustrated them in the last few years. On top of this, with the referendum on the euro pact, the Financial Times warns: "In the recent history of European treaty making, Ireland has emerged as something of a roadblock in the path to deeper integration." Although Ireland by itself could not shipwreck the proposed "fiscal compact" – it takes the agreement of only 12 of the 17 Eurozone members to confirm it – rejection of the treaty would throw a huge spanner in the works and, together with other factors, could wreck the proposals. Moreover, this is a referendum not just on the EU proposals but also the Irish government itself.

The bourgeois will move heaven and earth – issuing dire warnings that Ireland will be cast out into the dark, for instance, it will not receive loans from the EU – in order to try and blackmail the Irish population into voting ‘Yes’. However, they have a formidable obstacle to overcome in a campaign in which we will take a crucial, leading role. Out of these two campaigns on household tax and the referendum our party can grow substantially.

Germany and Northern Europe

We have highlighted in this statement the main developments on a European level and in key countries. However, it is not possible in this statement to cover all the countries of Europe but most of them have been touched by the crisis. Belgium – with demands by the EU for cuts – has been drawn in. The Netherlands has seen a rapid deterioration in government finances which has earned reprimands from the EU and as a consequence opposition to the EU has grown. The rise of the Socialist Party in the Netherlands is one expression of the crisis, with the rapid demise of the Labour Party – clearly a bourgeois formation. In Belgium the increasing calls within the trade unions for a new working class political force, the recent appeal of the FGTB/ABVV socialist trade union for Mélenchon to come “as quickly as possible to Belgium” and the recent growth of the former Maoist PvdA/PTB are all indications of the possibilities for the development of a new workers’ formation in opposition to the SP.a and PS.

Germany, the strongest power of the continent, seems to be riding high at the present time. However, the Merkel government is not at all stable and could be defeated at any time – as it has been in regional elections. In fact, its survival is partly due to an unofficial grand coalition, with the SPD backing the government. This may last until next year’s federal election. Merkel’s coalition partner, the liberal FDP, is struggling to survive. The debate amongst the German ruling class how to deal with the euro-crisis is reflected in divisions within the conservative parties. Further financial turmoil inside the eurozone can immediately trigg

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April 2012