January–February 2015        

Quo vadis, EU (and Ireland)?

Tomás Mac Síomóin

While Europe’s core economies—Germany, France, etc.—stagnate, Spain’s conservative Rajoy government and its Troika neo-liberal gurus are cock-a-hoop at the Spanish economy’s growth rate of 0.6 per cent. Spanish working people bear the enormously heavy costs of this “success story”: shrinking pay packets along with burgeoning poverty, evictions, and homelessness, whole families subsisting on their grandparents’ meagre pensions, child hunger, an unemployment rate of 26 per cent (56 per cent for under-25s), emigration of the young, a growing black economy, etc. The wholesale hiring of seasonal and part-time workers keeps wages low and getting lower. Other labour market “reforms” include, predictably, restrictive limits on collective wage bargaining.
     Spain has been an EU test model for austerity therapy over the last two years, with these disastrous consequences for its workers. However, given the “success” of the 0.6 per cent growth rate, Troika operatives now claim this model to be viable and generally applicable. Spain today, Ireland tomorrow?
     Spain’s economy ceased declining because of its rising volume of exports—made possible by these steep wage reductions, which lowered production costs. This essential fact is not lost on EU policy-makers. Reducing the production costs of goods for export by slashing wages is referred to by them as “internal devaluation.” Having the euro as its currency, Spain (like Ireland) cannot formally devalue a national currency to give its exports a cost-price advantage. But it can internally devalue, boosting the profitability of exports by slashing labour costs.
     High unemployment rates, by forcing workers to accept minimal wages in conditions of precariousness, are an indispensable part of this Spanish export-oriented strategy. However, pushing unemployment up to Spanish or Greek levels is not a political option for Italy, France, or the core EU economies.
     Unemployment of about 12 per cent throughout the euro zone for the past five years is already leading to a distinct rightward political shift, associated with anti-EU stances, throughout much of the continent. Nascent far-right and fascist parties are a growing feature of the EU landscape. Britain’s fascist and racist UKIP has mirror images in Hungary’s Fidesz and others. Marie Le Pen’s re-invented Front National takes advantage of vanishing social-democratic politics in France by calling for working-class support to fight EU-mandated cuts in social welfare and salaries imposed by the “socialist” government headed by Manuel Valls. The latter’s declared political referent is the anti-Marxist “socialist” multimillionaire Felipe González, former president of Spain. Valls proposes removing the word “socialist” from his party’s name to keep it in line with his “modernising” policies.
     On a more positive note, the left anti-austerity fight back is growing in Italy and Portugal, now spearheaded by Die Linke in Germany, Syriza in Greece, and Podemos in Spain. Podemos, like Syriza, has a real possibility of forming a national government in 2015 and thus directly challenging head-on the reigning EU-IMF neo-con consensus.
     The failure of the Irish left to unite behind a coherent strategy that challenges the same consensus in similar terms, together with its derivative economic and social policies, means that Ireland is a notable absentee in this EU periphery fight-back.
     Euro-zone capitalist elites opine that future political instability will hinder the economic recovery of the German, French and other stagnant core economies, already seriously affected by the economic fall-out of the political upheaval in Ukraine engineered by the United States and slipping deeper into recession.
     But even if Greek and Spanish unemployment levels are not generally acceptable as a lever with which to depress wages in the core EU countries, EU governments are likely to come under mounting pressure from the Troika or the EU Commission in 2015 to apply the “internal devaluation” magic fix to significantly reduce labour costs. This drive for salary reduction is in tandem with rigid government policies of debt reduction, involving deep cuts in social spending, that will further screw down working people’s living standards.
     The motive behind this attack on wages is the failure of the ECB’s monetary policies over the last five years to get the banks to stimulate enterprise, leaving a stagnant neo-con Europe with little choice but to export its way out of its latest recession. Such a focus implies that production costs must be driven down yet further in order to competitively match those of Europe’s Asian competitors, with their enormous pools of cheap labour. So “labour market reform” becomes the Euro-elite battle cry for 2015, and “internal devaluation” its main weapon.
     But being able to boost exports by reducing workers to penury raises the question, “Where are the markets for these exports?” If the global capitalist economy—including China, Japan, Latin America, and the United States—continues to decelerate in 2015, according to doom-and-gloom forecasts proliferating in the financial media, who will be able to buy euro-zone exports? Even Christine Lagarde, managing director of the IMF, is less than sanguine about the prospects for 2015: “Global activity is picking up, but the momentum could be less strong than we had expected, because potential growth is weaker and investment . . . remains subdued.”
     One way or another, however, the Troika ringmasters are determined that working people, in Ireland and elsewhere, will continue to pay for vicious anti-worker policies that are feeding a burgeoning social disaster such as defines the present Greek social panorama and, increasingly, that of Spain. The outcome of the looming battle between progressive forces emerging on the EU’s southern flank, especially Syriza and Podemos, and the EU’s reactionary phalanx, headed by Jean-Claude Juncker, president of the EU Commission, and Wolfgang Schäuble, Germany’s minister of finance, will have critical consequences for Irish and all other EU workers.

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