Capitalist crisis – No way out

Some think that the sole aim of the ruling class is to save the banks. That is too simple. There are contradictions between different sections of the capitalist class, and the bankers represent only one section. In Britain the weight of finance capital is very great because of the destruction of British manufacturing industry. But even in Britain the Tory-LibDem coalition has been forced to put pressure on the banks, investigating the affairs of Barclays and RBS after the latest interest rate fixing scandal. Cameron demanded the resignation of the head of Barclays, while the timid Labour leader Miliband wants to see him in jail.

In Germany, it is the industrial wing of the bourgeoisie that rules the roost. They are putting pressure on the banks to pay up and accept losses. In Spain, the shares of Bankia lost between 80-90% of their value, even though the value of these shares was supposed to be “guaranteed” by the state, and the government was in the hands of the right-wing People’s Party.

On all sides we see insoluble contradictions. The demand is being raised for Eurobonds. But somebody will have to underwrite these hypothetical bonds. Who will that be? Why, Germany, of course! When the debtor nations propose the establishment of Eurobonds, Merkel answers: “not in my lifetime”.

The German Finance Minister says Greece has received more money than Germany got from the Marshall Plan after World War Two. This is a lie. After 1948, Germany received far more from the USA to pay off the vast debts she had accumulated before and during the War. Yes, but that was at a time when the USA held two thirds of the world’s gold in Fort Knox and the capitalist world economy was in a tremendous upswing.

What is the position now? The world economy is in the deepest crisis in history. The USA has a huge deficit – both externally and internally. The biggest creditor nation in the world has become one of the biggest debtors. And as for Germany, there is not enough money in the Bundesbank to bail out Spain and Italy. The debts of Italy alone amount to almost two trillion Euros.

Germany does not want to pay, but it cannot simply allow the Euro to collapse. On the one hand, German (and American) banks hold large amounts of Greek, Spanish and Italian debt. On the other, Germany exports its goods to the Eurozone.

To the insistent demands for Eurobonds, Merkel replies: Certainly, but we demand that all debts must be agreed by the EU (that is, by Germany) before being presented to the national parliaments. We further demand that the EU (that is, Germany) must have the right to interfere with your budgets and veto unacceptable spending, etc. That is to say: Germany will only agree to underwrite your debts when you agree to hand over your national sovereignty to us.

With an astonishing mixture of cynicism and insolence, Cameron says: We agree that there should be closer union of the Eurozone states to save the Euro [and protect British interests] but we British will not be part of it and will not pay a single penny to help you. However, what Cameron says or does is of little consequence to Europe nowadays.

It is highly unlikely that France, Italy and Spain would agree to sign away their independence to please Merkel and the Bundesbank. Even if Hollande, Rajoy and Monti were to agree to it, it would have to go before their national parliaments for ratification, and probably would have to be put to referendums, which would take years and lead to interminable arguments. However, the crisis of the Euro is taking place right now and the markets will not wait until the cumbersome workings of parliamentary democracy decide the issue.

Markets and investors are losing patience. There has been what can only be described as a “slow motion” run on the banks in Greece and Spain. That shows what the future holds. The European banks are poised on the edge of an abyss. Sooner or later a big bank will fail, as happened with the Kreditanstalt of Vienna, which collapsed in May 1931. Such an event can be the trigger of a general European banking crisis and a deep slump, which will have the most serious consequences for the whole world economy.

Source: http://www.marxist.com/the-crisis-of-european-capitalism-wp-app-2.htm