This text has benefited from the seminar on crisis organized by Transform! In Vienna in January 2010 and has been enriched from a debate carried out in the Managing Board of Transform! Europe and particularly thanks to the useful remarks of Walter Baier, Stephen Bouquin, Patrice Cohen-Seat, Haris Golemis, Véronique Sandoval. It was presented at a meeting organized by Synaspismos and the European Left Party held in Athens February 27. For alternatives, see European Left Party, Platform for the 2009 European Parliament Elections; Euro-Memorandum 2009/2010, www.memo-europe.uni-bremen.de/euromemo and the editions produced with the help of Transform! Europe in English, French, German, Greek (www.transform-network.net; Jurgen Klute, Wastun — in der Krise, Supplement 1/2010 Zeitschrift Sozialismus. Dominique Crozat, Economic democracy, an alternative to the crisis. An account of a symposium held in Paris in June 2009. Transform! N°5.

1. The crisis: What are the facts?

What we are dealing with in the present conjuncture, is actually “a double crisis…or in other words, two simultaneous crises: a financial crisis and a crisis of the real economy. Apparently the two are mutually reinforced. However, trying to interpret the recession of the real economy uniquely as a consequence of the financial crisis and expecting that the overcoming of the financial crisis will also bring an end to the crisis of the real economy, we are merely failing to notice a number of problems… The financial crisis, provoked by an enormous expansion of private credit has brought into the open the fact that a crisis of over-accumulation has been emerging for many years”[1].  Some 2,900 billion dollars of public money have been spent throughout the world to jump-start its economies. The average debt of the G20 countries is expected to increase from 99% of the GDP in 2009 to 107% in 2010 and to 118% in 2014[2]. Over 4,000 billion dollars of values have been destroyed but without any possibility of considering that we are beginning to emerge from the crisis, or that the financial system has really been proportionally scaled following the crisis of over-accumulation.

Following the crisis in Dubai and Iceland, the markets have become aware of the possibility that even a State can default. Those that were saved thanks to injection of public resources are, today, attacking the fire brigades that saved them by gambling on the crash of national economies and even the Euro so as to extract speculative profits from this in proportion to the seriousness of the crash.

“We have reached the limit of Keynesian policies of jump-starting through public deficits”[3]. Henri Sterdyniak (France, OFCE) considers that “the situation is unmanageable. An austerity plan based on tax increases and reducing expenses representing 1% of the GDP means at least 1% reduction in growth”[4]. At the same time, the IMF has warned the States stopping such stimuli too quickly. In fact, too rapid a repayment of the debt and an austerity programme would contribute to slowing the rate of growth, create the danger of a recession and diminish fiscal revenue. Even at the present stage, the classical social shock absorbers are no longer able to face up to the social consequences of this crisis.

In such a context, the attitude of the principal E.U. leaders of refusing any change of direction and of preferring to allow some countries to sink and drown in the crisis, at the risk of the whole Euro zone bursting apart, is totally irresponsible[5], would strengthen the crisis and would risk leading to the development of nationalist attitudes.

Regarding the government policies in 2008/09, these cannot be considered to be Keynesian. In the “market state” perspective, they massively mobilised public funds — but without touching the division of wealth as between labour and capital, between private and public interests.  The Left must insist on the fact that the criteria of economic, social and ecological development as well as of world stability, require the development of domestic markets — not on the basis of private of public indebtedness but on the basis of a distinctly fairer sharing of added value in favour of work and public interest.

The EU and the States have unceasingly moved the balance in favour of shareholders[6] and the transformation of the latter into “investors” without any lasting connection with the firms concerned. They can no longer be content to remain spectators while providing public assistance to the private — they must intervene in favour of another sharing of the added value and another steering of the management of firms.

2. The E.U. dead end

The present crisis of the Euro and the E.U. — one of the centres of the crisis — is not just the consequence of the worldwide financial collapse. It brings right out into the open the failure of the Euro and the serious defects in the building of Europe, in a way that has been rejected by a majority of the voters during the referenda in France, Holland and Ireland. Neither the E.U. nor the respective governments have observed the decisions of the peoples but, on the contrary, have continued to implement the same trends as before.

The very nature of European integration has turned out to be a crisis factor. The crisis has been fraught with particularly serious consequences in Europe. The Euro and the E.U. orientations were not designed to stimulate real cooperation in favour of the populations, of a new industrial or agricultural policy, public research, the development of public services and infrastructures in favour of a new mode of development. The treaties that encouraged fiscal and social dumping, the stability pact (that has been completely exploded) sought to direct the flow of money towards the markets. The whole collection of measures to set wage-earners and regions into competing against one another benefit to the big business groups, of the financial markets and of the most competitive economies of the most powerful countries. In fact, the Stability Pact — which is now being permanently violated by most countries of the EU —has burst asunder.

According to the prevailing EU dogma, integration should take place without conflict to the extent that capital and labour could move freely between the former “national economies”. In fact, there were new realities of power and exchange that were set up.[7] “The monetary union has failed, at least in this form that Germany itself imposed with all its force. The German objective of giving the Euro (through the Stability Pact and the European Central Bank) the strength of the D-Mark, of excluding any transfer of payment to weaker countries and ensuring its all-important ability to export to the other European countries has not happened and will not happen during the crisis”. [8]According to Heiner Flassbeck, chief economist of UNCTAD, Greece may have lost its resources because of its economy’s downward spiral through being brought into competition with Germany’s wage dumping. The German short-term perspective will end up by threatening the German elite and employers with the loss of its export markets.[9] New policies of compensation, of gradual integration would be necessary if they wished that less developed countries to buy the products of the leading countries… The transfer of governance from the centre to the periphery (by privatisation and austerity) strengthens the most important powers at European level in the same way as it does faced with the dominated classes inside each country.[10]

As the contradictions develop between the centre (the most powerful countries in Europe) and the periphery so are accentuated, inside each country, the contradictions, inequalities, employment and social problems, attacks on democracy and conflicts. Thus, in the most powerful countries of the Euro zone, the pressure exercised by the employers and the government have been particularly strong and effective, which corresponds with the objectives of increasing competitiveness. It is inside each country of the EU that the hunt for increased competitiveness produces devastating economic social and political effects that are being accentuated, today, by the crisis.

The whole debate around “new governance” is at its height. However, Sarkozy and Merkel only consider it as an increased source of power for the most powerful, without altering the orientations whose failure, nevertheless, can no longer be concealed. No re-orientations are envisaged by the principal European powers. The timid European attempts, aimed at supervising and regulating the financial system, are inadequate and only very partially answer to the issues at stake[11]. The proposal for a new Pan-European tax on financial transactions is indeed useful, but should be linked with a multi-dimensional offensive to face up to the markets in the sphere of circulation and production.

From a Left point of view, the issue is that the demands expressed by the people should be conveyed by alternative objectives and methods, by a new political co-ordination at the scale of the E.U. Without converging systems of taxation, common industrial and research policies, complementary budgetary choices, public services working in cooperation, wage and social protection levels that are harmonised upwards, monetary union can only lead to rule by market law and social regression. The Left can only say “yes” to stronger cooperation when it is a matter of building alternative objectives.

3. Greece, the “PIGS”, the Baltic countries, the Eastern European countries …

In Europe today, Greece is just one of the countries that constitute the visible part of the iceberg. It is one of the countries stifled by high price of the Euro and for which the ECB’s policy is harmful.

“A glance at the map of Europe shows that the crisis has different dimensions. In Ireland, in Great Britain and especially in Spain, the bursting of the speculative property bubble has led to mass destruction of capital. In Hungary, Latvia and Estonia the economic crisis has long since broadened out into a political crisis or a State crisis … In the Czech Republic the government has not even been able properly to complete its period as president of the European Council … In Scandinavia, Denmark and Sweden, as well as Finland, have clearly been hit by the crisis… In Germany[12], partly because of and partly in spite of its economic superiority and its dominant role, is at the very centre of the crisis. Germany is successfully playing the game of “beggar my neighbour” regarding the other countries of the Euro zone by creaming off their economic demand and exporting its unemployment … The reality of the crisis shows that, in many respects, Europe is a continent that is increasingly split. The gap is widening between North and South. This is firstly due to the dominant competitive position of German capital as against that of “Mediterranean capitalism”. This then feeds a differentiated capacity for indebtedness … the member countries develop in divergent ways regarding their competitiveness”[13]. At the present time, concern is growing regarding Italy and Spain (their fiscal revenues are plummeting) — two countries where the grey economy represents a major and uncontrolled part of the GDP.

Why attack Greece today? In order to set an example! The country’s debt is marginally lower than that of Italy, and almost equal to that of Belgium. At the same time, in terms of new loans undertaken, Greece is lagging behind Ireland and Spain and stands at a comparable level to that of Great Britain. In total, 20 countries have been subjected to the procedure of exceeding deficits, a fact that demonstrates the inequality of power among the countries of the EU. Ireland- a country contributing only 1% to the European GDP- has received a generous 15% from the funds the ECB. In the case of Greece, the EU has decided to set an example and to test in this way the available instruments for surveillance of economic and budgetary policies as a whole, which are being implemented for the first time. The recommendations of the Commission constitute a list of neoliberal measures that reproduce, without any reservation, those recipes which have clearly failed in the past and which can only aggravate the situation in the countries where they are applied. The centralised, rigorous and austere way of intervention used by the EU executives, would be unthinkable in the case, for example, of a federal State like that of Germany[14].

In the framework of the single currency, the lack of co-ordination, of measures in favour of harmonisation and of reducing inequality leaves the weakest economies without any means of reacting. They are thus driven to adjust either through indebtedness or austerity. If there is any criticism to be made of the Greek government’s lightness, large military expenses (in complicity with those countries interested in arms exports), or extremely neoliberal policy, one should also condemn the most powerful European states their egotism, so harmful to the whole region. The aggravation of the crisis in Greece will also have disastrous effects in the Balkans, where the Greek banks’ capital is very present and where an estimated 8,000 Greek firms have invested[15].

Following the development of the spread in the cost of money and, more recently, of speculation investors are demanding that Greece pay interest rates of between 5 and 7% — that is 2.5 to 4% more than the rate paid by Germany. The speculators enjoy loans at 1% even less important from the ECB and require 7% from the Greek State. At present the rates demanded by the markets are costing 0.5% of Greece’s GDP for a full year[16]. We must urgently break with the operations whereby States take over all the risks and accentuate the pauperisation of their societies while the banks use these safety nets to extend still further their risk-taking. It would be more suitable urgently to refinance those States in difficulty at clearly below market rates.

The E.U. (that is the president of the Euro-Group, J.C. Juncker and the 16 Finance Ministers of the Euro zone) have decided to supervise Greece’s straightening out and demand, through their “recommendations” a series of structural measures regarding wages, the labour market, pensions, health, education, public administration, fuel and power, transport, and retail trade — briefly an kind of accelerated Lisbon Treaty (!) as well as other measures, if needed, such as raising VAT and taxes on fuel and power, luxury products and cars. France considers that the effort demanded is already considerable while Germany would like to make it even tougher. The ECB, as usual, is one of the hawks and demands that the deficit be reduced by 5.25% of the GDP in 2010 (the EU States demanded 4% reduction)[17].

A real trial of strength between the interests of the people of Europe, and those of the European powers is beginning now. It is in the name of “Europe for the peoples” and of “another Europe for another world”, it is in the interest of all the peoples of Europe, to find alternative solutions for all the countries in need (including Greece), helping them to face the crisis. It is a matter of creating a shield against the neoliberal project of trampling social rights, employment, the public sector and social protection. Without placing them under tutelary guardianship. Without letting their country be used as a breach for increasing austerity throughout Europe.

4. What political response for Greece, for the "PIGS" and for Europe?

The peoples or the markets? That is the choice we must make. Emerging from the crisis presupposes a radical change of policy. There is no way out of the crisis without seeking a transition to another kind of economy and policy, which presupposes strenuous work in support of real alternatives and of political and ideological mobilisation. Today, every major demand comes up against the logic of the capitalist system in an acute state of crisis. The increasingly excessive and aggressive logic of financialised capitalism, can lead to serious threats to democracy and peace.

It is part of the logic of financialised capitalism, of its mode of accumulation, which has brought about successively the financial crisis, the crisis of the real economy, the public debt crisis, the social crisis and the fiscal crisis all fully developed. We can add to them the crises due to speculation of foodstuffs, on fuel and power, on patents etc. as well as certain armed conflicts.

The logic at work — financialisation, speculation, privatisation, commodity fetishism, the over-exploitation and impoverishment of whole societies — form major obstacles to setting up the policies needed to resolve the ecological crisis. “The fundamental question then arises: do we know for sure that the pursuit of a finance-driven accumulation has not yet reached its limits?”[18].

On a European scale as well as in each of our countries, it is a case of fighting for real political breaks as well as emergency measures also inspired by an alternative logic.

The governments, who have a high responsibility for the arrival of the crisis, must be brought to breaking with this logic of “debts for the States, tightened belts for the peoples a Casino for finance”[19]. Instead of consulting experts tied to the markets they must make democracy work by taking measures and undertaking reforms in favour of social and economic democracy.

4.1 To stop the incendiaries, to oppose the establishment of chaos, of monetary or speculative war:

• Finance must be democratised, re-directed, resized in a responsible manner. This is also a condition for releasing credit.

• The EU must decide to apply specific ways of controlling the movement of capital and to tax financial transactions. The tax havens must be closed. Bank secrecy must be reviewed. A European public credit rating agency must be set up. Protective measures against fraud and tax evasion must be set up.

• The banks must be brought — by a convergent effort of the governments and the EU — immediately to change their orientation, to stop using savings for speculative activity on the Stock Exchanges and to re-orient credit towards the financing of useful activities and the creation of jobs and infrastructures. The separation of deposit banks and merchant banks as well as the setting up of public banking centres and even taking certain bodies into the public sector must be organised.

• All policies must be aimed at stopping the crisis of over-accumulation, at intervening massively in favour of the fairest sharing of Added Value in favour of work and public interest and of freeing them from the power of the market. The policies of European States must converge in this manner.

4.2. At international level, the EU must counter the United States aggressiveness and act in favour of the stabilisation of the real economy;

the use of SDRs as a reserve currency; replacing the G20 by a Global Economic Council under UN auspices; the development of machinery to favour equity in trade; removing common and public property from speculation; in favour of multi-lateral and bi-lateral agreements as opposed to setting up competition between peoples, wage earners and regions; ambitious and shared policies for resolving the ecological crisis. The EU must contribute towards freeing raw materials from being turned into “financial products”[20]. In International bodies the EU’s voice carries some weight: it must be heard in favour of a world of solidarity, which presupposes a radical change of direction.

4.3. We must break with the dogmas of European neo-liberalism that Juncker, Trichet and Gonzales continue to defend tooth and nail.

• The Stability Pact, designed to ration social expenditure must be abandoned; The European peoples need a pact of cooperation, in favour of social and ecological development and of solidarity. It is on such a basis that government cooperation — a “democratic governance” — must be undertaken. Sustainable and lasting development is the best motor for European integration. A programme of ecological conversion must be set up, particularly in the areas of fuel and power, transport and housing. The European budget must be significantly increased and must enable positive actions by the EU. Fiscal, social and ecological dumping must be banned.

• The European social model must be renovated and re-invented. A radical break with the Lisbon strategy is urgent. Flexicurity must be abandoned, casualisation and job insecurity must be fought against, the value of work increased and a minimum income guaranteed. We must start reducing working hours again. The period for paying unemployment benefits must be increased in a period of crisis in all countries. Poverty, particularly amongst the young, old age pensioners, women and single parent families must be eradicated, housing must be a guaranteed right.

• The privatisation of whole areas of retirement benefits — urged by the Lisbon strategy and particularly developed in the Eastern countries — leads to serious dangers because of losses in the context of the financial crisis. According to OECD figures, the economic and financial crisis has reduced the value of the assets accumulated to finance pensions by an average of 20 to 25%. In Europe the most affected countries are Belgium, Holland and the United Kingdom. Moreover the growing unemployment and the inability of a number of firms to finance their pension funds are drying up resources. Stopping the privatisation of pensions, one of the motors of the financialisation of the economy, is a major issue[21].

4.4 “Tightening the belt” is not the answer. The public debt must be reduced another way. Every measure that suffocates the real economy is irresponsible.

• By rejecting any rapid budgetary restriction, which would lead to the danger of a massive plunge into recession. “Man kann sich aus krise nicht heraussparen”.
• There must be moratoria to stop the growth of public debt, to reduce the growth of public indebtedness, to reduce the pressure on the States, to gain the time needed to set up instruments that favour transparency (enquiry commissions etc), to set up new democratic policies and methods. These must be moratoria that do not increase the repayment of the debt and do not lead the States to depend on the banks via sophisticated financial products. A selective treatment of debts must also be envisaged.
• New means (new deals) must be mobilised, bypassing the markets, so as to meet the needs of public expenditure, to face the crisis and emerge
• The markets must be bypassed via the ECB. Interest for public expenditure must be radically reduced. It is unacceptable that the banks that lend money to Greece at a 5% to 7 % rate can themselves borrow from the ECB at 1%. The ECB must be endowed with the power to buy public bonds to the extent that they could be useful for a new kind of development of jobs and of industrial and research policies, for restarting public services and social protection. This kind of monetary creation in support of wealth and the development of society would enable the resources of the public authority to be increased.
• The assignment and management of the ECB as well as its orientation of credit must be altered to support objectives of development, by abandoning the straightjacket of monetarist policies and modulating the conditions of access in accordance with the contents of the projects, making it impossible for credit to contribute to speculation and overdraft loans. The architecture of the EU, allowing the ECB to be completely independent, reveals at the same time its perilous potential. The ECB must be put under democratic control.

4.5 Economic redistribution and democracy as principles for anti-liberal reforms.

• Faced with the causes and consequences of the crisis, policies for energy resources and redistribution of wealth must be set up, aiming at their gradual harmonisation within the EU. The revenue of public authorities must be increased through “confiscatory taxation” aimed at shareholders, banks and investors on a long-term basis. A better sharing of Added Value is indispensible to fight the development of the crisis. Income from work (including insecure jobs …) must be valued more highly than that from capital. A greater part of business profits must be invested in favour of human and ecological development. Solidarity economy should be promoted and also the rights and powers of wage earners.

• The directive “on the rights of shareholders” and its adaptation in the various countries must be suspended and measures to counter the volatility of investment and to make more permanent the relation between firms and investments, to separate management from shareholder logics, to strengthen the “social interest of firms” and the requirements of the real economy as against the interests of shareholders, investors and the market.

• The use of public money must be democratically controlled. The mobilisation of public funds, particularly in favour of big groups must be based on democratic principles (their use must generate new powers for the public authorities and the wage earners), social (the criteria of creating or defending decently remunerated jobs of quality…) and ecological objectives (in favour of a new kind of development). The local authorities’ means of reacting must be strengthened rather than restricted.

• Any commitment of public money must help develop economic democracy and open the way to a change in power, in property and orientation, accompanied by new powers for wage earners and citizens.

• With regards to banking systems, the setting up of public financial centres, subject to control by the State and society, is more than ever indispensible to ensure that credit works in favour of the public interest.

5. What perspectives for political change, what alliances?

What must be on the agenda for the Left is to mobilise the peoples against the shareholders, the banks and the market and in favour of democratic alternatives, of real breaches with the logics of financialised capitalism. The ideological struggle, the power of interpretation are the decisive issues, as well as the capacity to link immediate objectives with setting up perspectives of transition towards another mode of economic, social and ecological development, towards a new kind of economy of solidarity and alternative political choices.

The last few days show a considerable popular fighting spirit in a number of European countries. We must succeed in deeply and lastingly altering the balance of power to ensure that important political forces and governments be led to translate the demands of those who resist and struggle into concrete political choices.

The challenge for the Left forces consists of working for counter-hegemonies, and particularly of helping the working classes and the groups most harshly threatened by the crisis and the austerity plans, to achieve a power of interpreting reality that will enable them to take over the issues of the moment and intervene as actors, to win the capacity for united action, to realise that very deep changes affecting power and property have become an immediate necessity. In the face of a crisis of passiveness, encouraging such an awareness presupposes waging an ideological battle at every moment and knowing how to link the meaning of the resistances and struggles with the necessity for changing powers and policies in every State, at the level of the EU and of international institutions. The question of the political representation, which the forces of resistance and struggle need, must be put publicly and widely as well as the nature of the relations between the movements, in all their diversity and the political forces and authorities. The class struggle continues to develop at the national level. However, in view of the increased class confrontation at the European level, the cooperation between social movements, trade unions and the left forces must be considerably intensified. 

The concrete policies that the Left forces propose must aim at creating a social block, on the basis of common immediate interests, as for example:

• Those who have only their wages, pensions or meagre allowances to live on

• Those who are working in the private sector.

• Those who are working for the public sector or responsible for public institutions and local authorities.

• Those described as of the “middle strata” and whose fears of being declassed are constantly growing.

• Those whose activity as managers of small or medium firms, shopkeepers, or liberal professions is largely dependent on access to credit.

•  Those who work on the land and find themselves strangled by the big business groups and banks