The euro recovery: half full or half empty?

The OECD has just issued its half-yearly forecast for economic growth.  It reckons that world real gross domestic product (GDP) will increase by just 3.1% this year and by 4% in 2014. Across the OECD countries, GDP is projected to rise by a meagre 1.2% this year and by 2.3% in 2014, while growth in non-OECD countries will rise by 5.5% this year and 6.2% in 2014.    In the US, activity is projected to rise by 1.9% this year and by a further 2.8% in 2014.  However, GDP in the euro area is expected to decline by 0.6% this year and then turn up just 1.1% in 2014, while in Japan GDP is expected to grow by 1.6% in 2013 and 1.4% in 2014.

These forecasts are more or less repeated by the IMF in its spring estimates. What stands out is that the mature capitalist economies are crawling along while the developing capitalist economies are growing at a reasonable lick.  But the Eurozone area of 18 nations shows no sign of recovery from the Great Recession, with southern Europe deep in depression.   The Euro leaders met last Monday and agreed that France, Spain, Greece etc could have more time to meet their fiscal targets on government budgets and debt because economic recovery was non-existent.  So the pace of austerity was eased by the Euro leaders.  But it’s still the message.  As ECB President Mario Draghi recently maintained: “There was no alternative to fiscal consolidation, even though, we should not deny that this is contractionary in the short term. In the future there will be the so-called confidence channel, which will reactivate growth; but it’s not something that happens immediately”.   Clearly not!

Christian Noyer, governor of the Bank of France, also echoed Draghi in saying that austerity was necessary to encourage the ‘confidence fairy’ to make an appearance: “Over a certain threshold, which our country has probably crossed, any increase in public spending and debt has extremely negative effects on confidence.”  In other words, recovery is possible only if capitalists become confident that it will happen and that apparently depends on getting budget deficits and debt down.  Why? Well, because “the old model doesn’t work any more”, namely traditional Keynesian efforts to boost demand by encouraging spending.  Noyer added that France had to move away from public policies “overly concerned with preserving the jobs of the past” and allow for ‘liberalisation’ that could help future job creation.

And there we have it.  As I have argued many times in this blog, the aim of austerity is not just to reduce public debt and government spending as such, but to restore the profitability of the capitalist sector.  As Draghi puts it, “that’s why structural reforms are so important, because the short-term contraction will be succeeded by long-term sustainable growth only if these reforms are in place.”  And that’s why when the Euro leaders relaxed the pace of austerity for several governments, they did so on the condition that ‘supply-side reform’ was stepped up, namely cuts in job security,wage levels and ‘protected’ industries along with more privatisation.  That is the real aim of austerity: more neoliberal policies to restore the capitalist sector.

But is austerity working to achieve this?   Well recently, JP Morgan economists put together some measures of progress: the amount of deleveraging achieved in public and private sector debt; more competitive prices for trade by the distressed states; making it easier to hire and fire employees; opening up ‘markets’, more privatisations and interestingly, progress on reducing democratic and constitutional obstacles in various states to imposing neoliberal policies.

JPM concluded that the Eurozone was only halfway there in this neoliberal recovery programme (The Euro area adjustment: about halfway there, 28 May 2013).  For example, on the fiscal austerity targets, Italy was 75% on the way, Spain just 38%, Greece 97%, Ireland just 26% and Portugal 55%.  Longer term austerity targets (meeting the Fiscal Compact in 2030) were more or less along the same distance.

Wage cuts and reductions in labour costs had gone further, with Ireland and Portugal having done enough, Greece a little further to go (after a 30% cut in living standards!) and Spain still another 25% to go.

But when it came to ‘structural reform’ i.e. reducing the size of the public sector, selling off state assets, reducing labour and pension rights, lower corporate taxes etc, progress had been much slower.  Apparently, Italy, Greece, Spain and Portugal were still way less oriented to allowing the capitalist sector free rein than the likes of the Netherlands or Ireland.

JPM’s estimate of progress on the neoliberal programme is more realistic than the talk in financial markets that the likes of Greece or Ireland have ‘turned the corner’.  Take Greece.  The three parties in the coalition over the last year have stuck rigidly to the EU-IMF fiscal adjustment program. They have been awarded with an upgrade in the evaluation of Greek sovereign debt as a result by financial markets.  Greece’s upgrade to B- comes almost a year to the day from the downgrade Greek sovereign debt to CCC, i.e. junk.  So the ‘confidence fairy’ has shown itself from the undergrowth.  But it is nowhere near enough to talk about the Greek crisis being over.

Greek reality

All the Euro bailout funds to Greece have gone on paying off Greece’s creditors, namely other European banks, pension funds and speculative hedge funds, the latter have made a killing as Greek debt interest rates have fallen as a result.  But the real economy remains in a mess.  The economy has had 19 consecutive quarters of contractions.

Greek real GDP

About 1.3 million Greeks are out of work, some 400,000 families have nobody earning an income, about 300,000 workers have employers who have not paid them for months and thousands have left the country to seek work, while the forces of neo-Nazism grow stronger. About 800,000 or so long-term unemployed have lost any access to benefits and free healthcare.  Public services, such as health, have been ravaged, while the incessant rise in taxes has put terrible pressure on even the healthiest of businesses.

People in Greece worked 2,032 hours a year in 2011, considerably higher than the OECD average of 1,776 hours.  By contrast, the Germans, clocked in on average 1,413 hours a year.  Yet the average annual disposable household income in Greece is €15,800, way less than the OECD average of €17,820 a year.  On indicators used of the OECD’s better life index, Greece ranks 30th out of 36 countries. In the EU, only crisis-ridden Slovenia ranks worse. Portugal came in at 28.

Small businesses in Greece are paying an interest rate of around 7% for credit assuming they can even get a loan from the country’s semi-comatose banking system.  In contrast, similar firms in Germany borrow at half that rate.  The current account deficit may have shrunk by about 7% pts of GDP but this been achieved largely on the back of a substantial fall in imports rather than a significant rise in exports.  Even the dreaded Troika  admitted in analysing the impact of its austerity programme that: “The rich and self-employed are simply not paying their fair share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earning a salary or a pension.”

Recovery in Greece depends on a return of investment in industry and key services.  But there is little sign of that.  In 2012 investment fell by 20% from the already ridiculously low levels of 2011. And the government is predicting a further fall in investment in 2013.

So if austerity is only half working at best to restore capitalism in the Eurozone, what is the alternative?  Well, there is another that is gaining prominence, especially within the distressed Euro states like Portugal, Greece and Italy.  It is the Keynesian alternative of leaving the euro and restoring a devalued national currency. For example, in Portugal, economist Joao Ferreira do Amaral has published a book urging Portugal to exit the euro.  This has become a best seller and is backed not just by the Communist Party but also endorsed by the Supreme Court President!  The book argues that austerity won’t work and the divergence between rich Germany and poor Portugal will only get wider if the current government’s policy is maintained.  The only answer is to exit the Eurozone and for Portugal to restore its escudo as in the 1990s.

The claim of these ‘exit’ supporters is that the cost of exiting the euro to the economy will be much less than the continuing cost of austerity imposed by the Euro leaders on the likes of Portugal or Greece.  These arguments are presented more theoretically by a new paper from Heiner Flassbeck and Costas Lapavitsas (Systemic_Crisis).  Flassbeck is  a former Vice Minister of Finance under left Social Democrat Oskar Lafontaine and seems to have formed an alliance with ostensible Marxist economist Lapavitsas to argue the case for exiting the euro as the only solution.  In doing so, they seem to have arguments very similar to those of many neoliberals like Dr Werner Sinn, now a leader of the new ‘exit party’ in Germany that calls for a return to the mark.  Lafontaine has also moved to this viewpoint.  So there is an alliance between some nationalist neoliberals and Keynesians for an exit policy.

The problem that I have with this exit policy is that it is a bit like the position of  the Irish Republican Army (IRA) on the issue of Irish unity.  The IRA argued that first we must end ‘the border’ that divided north and south Ireland and then we can adopt socialist policies.  Yet Ireland is still divided and still capitalist and the former leaders of the IRA now work within the existing two regimes for social change – a reversal of their old position.  The euro exit is also a ‘two-stage’  theory: first, we must exit the euro as the top priority and then we can talk about socialist policies to end the crisis.  I am sure that Lapavitsas and Amaral want to adopt policies for public ownership of the banks and major industrial sectors, public investment and a plan for Europe, but I think they obscure the battle against austerity by emphasising euro exit and devaluation as the major cure.  Surely, this is a diversion.

Why? Well,as I said in a  previous post
(https://thenextrecession.wordpress.com/2013/03/16/workers-punks-and-the-euro-crisis/), it is because the euro crisis is a crisis of capitalism and not a crisis of the euro. In other words, even if  the euro were to collapse and EMU states returned to running their own monetary and currency policies, the crisis would not go away and may even get worse.  That’s because the euro crisis is the product of the failure of the capitalist mode of production globally.  It has had the worst impact on the weaker capitalist economists like Greece, Portugal or Slovenia, but it has hit all economies.  The crisis is only partly a result of the policies of austerity being pursued, not only by the EU institutions, but also by states outside the Eurozone like the UK.  If that is right, then alternative Keynesian policies of fiscal stimulus and/or devaluation where possible, will do little to end the slump and will still make households suffer income losses.  Austerity means a loss of jobs and services and thus income.  Keynesian policies also mean a loss of real income through higher prices, a falling currency and eventually rising interest rates.

Take Iceland, a country outside the EU, let alone the Eurozone.  Devaluation, or Keynesian-style ‘beggar-thy-neighbour policies, have still meant a 40% decline in average real incomes in dollar terms and nearly 20% in krona terms since 2007 (see my post, https://thenextrecession.wordpress.com/2013/03/27/profitability-the-euro-crisis-and-icelandic-myths/).  If not Iceland, then Argentina in 2001 is dug up as a successful ‘exit’ strategy.  Argentina ended the peso’s peg with the dollar and devalued, apparently escaping its depression.  But for Greece it is not just a question of breaking a peg with the euro.  It will have to introduce a new drachma.  Would this new currency issued by an effectively bankrupt state have any exchange value whatsoever? Will the Russians accept a Cypriot pound in exchange for oil, and the Americans drachma in exchange for medicines?  Greece, which, unlike Argentina, is not a net exporter of raw materials with rising prices and so has little to support any new currency. Greeks can print as much as they like of it, but will they be able to buy electrical appliances, cars or even foods produced abroad with it?

And anyway, Argentina did not escape its crisis by breaking the peg with dollar.  Guglielmo Carchedi and I are just about to publish a paper (The long roots of the present crisis: Keynesians, Austerians and Marx’s law) that will show that it was not competitive devaluation that restored Argentina’s growth after the 2001 crisis, but default on state debt caused by the previous destruction of productive capital.  Argentina’s recovery was fuelled neither by devaluation nor by redistribution policies, but by the re-creation of previously destroyed private capital in the private sector with a low organic composition; a rising rate of exploitation; and improved efficiency. This is the cause—rather than Keynesian policies—of Argentina’s economic revival.

The euro project was unique in one way.  It was designed to achieve integration and convergence among various European capitalist states but without establishing a full federal union of Europe, with one government, one budget, one set of tax laws and one banking system. For a while, it seemed to work until the crisis came, although even in the boom years, there was more divergence than convergence.

Can the euro’s halfway house now survive?  It is clearly not going towards some federal union of European states, whatever the claims of the nationalist sceptics of UKIP or Front National.  A united states of Europe under capitalism is not on the agenda.  But the halfway house could lumber on if economic growth returns.  But growth depends on investment.  And investment has collapsed and not just in the weaker capitalist economies of the Eurozone.

Eurozone GDP composition

The figure above is from Greek Default Watch (http://www.greekdefaultwatch.com/2013/05/the-eurozone-since-2007-in-one-image.html).  The first column shows real GDP indexed at 100 in 2007.  The Eurozone as a whole by 2012 remained below the level of 2007.  And most Eurozone economies are still well below their 2007 levels – Greece is down 21%.  The next columns show the changes in GDP since 2007 by expenditure sectors.  The drop in GDP is really a factor of Germany growing (+€85 billion) but without a supporting cast to offset the declines in Italy (-€102 billion), Spain (-€40 billion) and Greece (€42 billion). On a net basis, Italy’s decline accounts for the bulk of the decline in the overall Eurozone, while Germany’s gain offsets the decline in Greece and Spain and the rest of the union is more or less even.

The Eurozone has a clear investment problem: investment rose in only one of the 17 countries (Luxembourg).  The issue of external competitiveness that the Keynesian exit economists emphasise, just like the neoclassical neoliberals is less important.  For the seven countries whose 2012 GDP was higher than in 2007, net exports made a big difference in only three cases; of the ten countries where GDP declined, net trade made a material contribution in seven, but this was not enough to offset the decline in investment. In other words, the problem for the weaker Euro capitalist states is not external competitiveness, but investment— it’s a very conventional capitalist crisis.

And as I have shown in previous posts, investment under capitalism depends on restoring profitability.  Yet, with the exception of Ireland, all the peripheral EMU economies still have much lower rates of profit than their peaks before the global crisis of capitalism hit. With the exception of Italy, profitability did recover in 2012, while in the case of Ireland, profitability turned round as early as 2010.

ROP EMU

It’s a halfway house.  Austerity is working but very slowly.  Last Monday, ECB Board member Jörg Asmussen denied that there is a “Euro Crisis”, though he admitted Europe has ‘a decade of “adjustments” ahead.  Can the euro project survive another five or more years of austerity?  Is it half full of success or half empty?

There is a third way out of the Eurozone’s crisis: a socialist option.  That would involve Eurozone governments renegotiating and writing off public sector debt owed to the banks and other financial entities.  To pay for the losses that the banks incur, rich bank share and bond holders would be liquidated and Europe’s big 30 banks would be taken into public ownership.  They would become part of a Europe-wide New Deal to start public investment projects that could deliver jobs and housing and new technology. Governments would share Europe-wide revenues from each according to their abilities and to each according to their needs – as in a proper political and fiscal union based on common ownership and under a democratically endorsed plan for growth and welfare.

Of course, such a ‘Soviet Europe’ is not on the agenda and is thus utopian.  But then exit from the Eurozone by ‘oppressed states’ is also not on the agenda of any government in the Eurozone or even in the main opposition parties.  So it is equally ‘utopian’ with the added problem that it would not solve anything.

Leaders of Leftist parties like Syriza from Greece, IU from Spain, Front de Gauche in France etc have been meeting to discuss a joint programme for the Euro 2014 elections (http://www.publico.es/456053/la-izquierda-europea-se-pone-en-marcha-para-conquistar-bruselas).  Will that programme adopt the vision I expressed above or not?  If not, then we are faced with years (decade?) of more austerity.

17 Responses to “The euro recovery: half full or half empty?”

  1. S. Artesian Says:

    Or in the immortal words of the (former) guv of the Bank of England: “This is not a liquidity crisis, it’s a solvency crisis.”

  2. S. Artesian Says:

    Hit the button too soon: This:

    “There is a third way out of the Eurozone’s crisis: a socialist option. That would involve Eurozone governments renegotiating and writing off public sector debt owed to the banks and other financial entities. To pay for the losses that the banks incur, rich bank share and bond holders would be liquidated and Europe’s big 30 banks would be taken into public ownership. They would become part of a Europe-wide New Deal to start public investment projects that could deliver jobs and housing and new technology. Governments would share Europe-wide revenues from each according to their abilities and to each according to their needs – as in a proper political and fiscal union based on common ownership and under a democratically endorsed plan for growth and welfare.”

    is mos’ def’ not a socialist option, no more than the New Deal was a socialist option. The option describe here, which does not even mention the expropriation of one class by another, would become nothing but another method for securing the working class’ adherence and subordination to one or more wars of various sizes.

  3. Cameron Says:

    In my opinion this New Deal is not a socialist plan. Is it a bold reformism or socialism? I’m certain Syriza would consider it too radical.

    Speaking of GDP, an article in dshort.com yesterday (May 30, 2013) says this about the revised US Q1 2013 GDP:
    “the BEA’s relatively low “deflater” (nearly a full percent below the CPI-U) boosted the published headline rate. If the CPI-U had been used to convert the “nominal” GDP numbers into “real” numbers, the reported headline growth rate would have been a much more modest 1.49%”
    The headline GDP reported by BEA is 2.38%.
    So what is the real GDP? Which one do you use? The PCE or core PCE, CPI or core CPI, CPI-U or C-CPI-U?

    • michael roberts Says:

      Cameron My use the ‘New deal’ was really a short way of proposing an alternative policy programme and was not an endorsement of Roosevelt’s New Deal, which failed.

      The issue of the GDP deflator is vexed. It depends on what you are measuring: GDP, personal consumption, incomes. The Fed favours the PCE for an inflation indicator. But this probably underestimates inflation. For real GDP using the CPI or versions of it, will make the real GDP lower on average than using the GDP deflator.

  4. matthewrusso9Matt Says:

    Yep. Don’t manufacture more hopium for a Euro New Deal that is moreover “utopian” in any case. This goes in the “Communist” China circular file. This is a different question from the one posed by an actual mass movement demanding the same – a tactical revolutionary approach would be then required. But the demand would still be hopium, and it is not our job to manufacture the substance. Leave that to the political charlatans. Our job is to unmask them, as with Marx-Proudhon or Lassale for that matter.

    Thomas Ferguson (“Golden Rule: The Investment Theory of Party Competition”) has an excellent empirically based class analysis of the actual New Deal as it happened in the U.S. Basically it was a shift in political power from one coalition of capitals to another coalition that was also willing to form a bloc with a sector of the trade union movement, as a junior partner, for a time. The interesting thing about Ferguson is not his apparent neo-Beardianism (not a bad thing in itself, relatively speaking) but that he empirically tracks capitalist political behavior along an axis defined by relative labor intensity of production. Hence it is implicitly keyed to relative surplus value (or pure rentier surplus profit) appropriation and OCC.

    Generally the higher the OCC, or the more “rentier” the capitals, the more likely they were to align behind the New Deal Democrats, on the theory that the less the exposure to direct antagonism with the working class, the more open these were to “labor-friendly” reforms, on condition that the Democrats adhere to a “free trade” foreign agenda, which FDR went all in for after 1936. Not a biggie for them: recall that the post Civil War 19th century Democrats had generally been the party of free trade, low tariffs and sound gold-backed money, this last no longer necessary after London went off the gold standard in the Depression. That traditional Democrat program, dating all the way back to Andrew Jackson and the Slavocracy, was only temporally interrupted by the silver mining capitalists, led by the Hearsts, father and son, who promoted the snake oil salesman William Jennings Bryan to hijack the party. Woodrow Wilson restored it to its rightful owners – NY investment banking, urban R.E. and the Jim Crow Bourbon South – setting the stage for the New Deal, which then merged these with the most technically advanced capitals and a sector of organized labor. There were New Deal exceptions: the US chemical industry, led by the DuPonts, were staunchly anti-New Deal, while Big Oil, contrary to its present image, leaned toward the Dimocrats. The Rockefellers had always been big opponents of the capitals centered around the Morgan interests – the historic core bloc of “Old Guard” Repubilcanism – anyway.

    Thanks to the legacy of the Communist Party USA, there are a lot of myths about the New Deal, but basically it was a classic, by-the-book conservative “passive revolution” from above, and the war period and the postwar revealed its true class nature.

  5. SWPM Says:

    Estimado Sr. Roberts: espero pueda disculpar que no escriba en su lengua. Lamentablemente no hablo ingles y leo sus interesantísimos trabajos mediante la traducción de google. Por lo tanto, debo forzar la comprensión ayudado, además, con algún diccionario; con todo lo que ello supone.

    Espero que usted sí hable castellano, o tenga a bien utilizar el mismo procedimiento. Comparto su diagnostico sobre la naturaleza de la crisis y la incapacidad, por lo tanto, de las medidas de estímulo que pregonan los keynesianos. Comparto su interpretación sobre el objetivo de la austeridad, la desregulación del mercado de trabajo y la búsqueda de ampliar el negocio del capital hacia horizontes tradicionalmente gestionados por instituciones y empresas públicas, cuyo único propósito radica en recuperar las condiciones de rentabilidad del capital.

    Hasta aquí, creo que solo una interpretación dogmática o interesada puede desconocer la multitud de evidencias que aparecen por doquier. No obstante, hay un elemento de la mayor importancia que, a mi juicio, esta o bien ausente o apenas mencionado en sus escritos, así como en los de otros marxistas que, como usted, defienden la interpretación basada en la caída tendenciál de la tasa de ganancia: ¡la carencia de toda orientación política que promueva la acción independiente de los trabajadores frente al embate del capital!

    ¿Cree usted que, dadas las características de las sociedades “desarrolladas”, en las que pareciera no haber el más elemental vestigio de conciencia de clase, no hay alternativa alguna y que tan solo corresponde esperar a que la destrucción del capital excedentario “rinda sus frutos” y las condiciones de valorización se pongan nuevamente en marcha?

    Atentamente SWPM.

    Dear Mr. Roberts: I hope can excuse to not write in their own language. Unfortunately I don’t speak English and read his interesting work through the translation of google. Therefore, I must force helped, also, with some English understanding; with all that entails.

    I hope that you do speak Spanish, or please use the same procedure. I agree with your diagnosis about the nature of the crisis and the inability, therefore the stimulus measures that preach the Keynesian. I agree with your interpretation of the goal of austerity, deregulation of the labour market and the pursuit of expanding the business of capital towards horizons traditionally managed by institutions and public companies, whose sole purpose is to recover the conditions of profitability of the capital.

    So far, I think that only a dogmatic or interested interpretation can ignore the multitude of evidence which appear everywhere. However, there is an element of the utmost importance that, to my mind, is either absent or barely mentioned in his writings, as well as of other Marxists who, like you, defend the interpretation based on the falling trend of the rate of profit: the lack of any political orientation that promotes the independent action of workers against the onslaught of the capital!

    Do you think that, given the characteristics of the “developed” societies, in which seems not to have the most elemental vestige of class consciousness, there is no alternative, and that it is just wait for the destruction of surplus capital “yield their fruits” and conditions of valorization is restart?

    Carefully SWPM.

    • michael roberts Says:

      SWPM

      You pose a big issue – will the working class react? This blog does not really deal with this issue but just tries to understand, along with its readers and commentators what is going on in the world capitalist system. Of course, how people react to change that is the most important thing.

  6. Thomas S. Says:

    Dear Michael,
    I wonder if you could write something on the relation of crisis in Europe and in the world. That is, how can we explain the fact that Europe (and the US) is stumbling, while the rest of the world seems to be doing fine (concerning capitalist growth, of course, not equality, social justice etc.). Is it possible to speak of a ‘world crisis’ at all? Is there a chance that BRICS etc. will also get into a halt?
    Thanks!

    • michael roberts Says:

      Thomas

      With more than 50% of the world economy in a Long Depression, the emerging economies on their own cannot turn things round – indeed unemployment continues to rise globally. Will the BRICs come to a halt? – not yet, I think. But another global slump is very likely before this decade is out. For a fuller view on what I think, see my paper, A world rate of profit (http://gesd.free.fr/mrwrate.pdf).

  7. Nadeem Mahjoub Says:

    and what about Germany?
    http://www.guardian.co.uk/world/2013/jun/01/germany-champion-europe

    • michael roberts Says:

      German capitalism is in much better shape than southern Europe and the UK. But its growth is currently very low – it’s crawling. According the EU AMECO database, German profitability rose sharply between 2002 and 2007 and then slumped as elsewhere and profitability is still some 15% below its 2007 peak, although it is nearly back to its 2005 level, while the Euro area as a whole is still 15% below that 2005 point. Of the G7 economies, only US profitability has recovered better.

  8. billjefferies Says:

    The US is not in a long depression. Growth of *just* 3.1%, what’s *just* about it?

    • michael roberts Says:

      I said ‘world’ real GDP growth was just 3.1% according to the OECD, not the US. Before the crisis, world growth was averaging over 4% a year, faster than in the 1990s at 3.1% and in the 1980s at 3.2%. However, since 2008, world real GDP growth has been 2.9% a year. And this includes emerging economies.
      The OECD is expected to grow at just 1.2% this year with the US at just 1.9%. For the OECD that’s less than half the rate before the crisis. The non-OECD emerging economies will expand by 5-6% this year, pretty good, but a little slower than before the crisis. I maintain that advanced mature capitalism remains in a mode of jobless ‘growth’,a long depression, with per capita income hardly growing, and down in many cases compared to end-2007. This does not apply to newer capitalist economies where a growing labour supply still exists to be exploited (see my paper A world rate of profit). But growth there did not enable the mature capitalist economies to avoid a slump in 2008-9 and they wont again.

  9. Alberto Florentin Says:

    I am not an economist, so I will not really comment on the euro exit consequences versus staying in the euro etc.

    My attitude to that question concerns more the politics: If crisis propels some kind of radical left into state power in a eurozone state, and if a social movement enables it to take real anticapitalist measures, then I think that the question of exit or not will be affected by the political conditions on the rest of the eurozone, and the EU.

    So, if capitalist power is temporarily stable there, then I quess that the left government will be forced to a quick exit from the euro, since it will be used as a powerful weapon against it. In that case, things will anyway be shaky for the radical left power, which will have to fend as best it can, especially if it is a small and economically dependent the state.

    If on the other hand there is political instability and a strong workers/left movement in the rest of the euro zone, then it might be possible that the euro can be transformed from a weapon of the neoliberal capitalist class into a weapon of the left. Solidarity in the rest of the euro zone might initially block attempts for the euro to be used to blackmail, as it was used in Cyprus (The ECB will nullify your banking system in a matter of days, by cutting off liquidity). And the existence of the eurozone itself might serve as part of a wider pro-working class policy, not least by providing a more or less ready instrument for economic cooperation for the benefit of the working people on a multinational scale. This is utopian now, but I am not talking about “now” anyway.

    While the question of radical (not necessarily revolutionary) left state power is not on the immediate horizon, it seems to me that the euro exit or not question actually does “obscure the battle against austerity”, as Michael put it, which can and does take place on the ground, everyday – Lagarde’s “implement, implement, implement” is characteristic. Also, the closing of ERT in Greece.

    Of course euro exit might become a necessity for the left and the working class, but I think we should take the attitude that “we will cross that bridge when we come to it”.

    Of course, SYRIZA in Greece might take power in the quite near future, and it might also come to pass that a strong popular movement demanding and forcing radical changes will also accompany that event. So, I think that SYRIZA should at least make immediately clear that if the euro is indeed used as blackmail when it takes power, then it will both appeal for solidarity to the anti-neoliberal movements of the rest of the eurozone, and be ready to exit the euro, in the interests of being able to continue the fight, rather than as an element of a national (class collaboration) neokeynesian “solution”.
    I repeat I am not an economist. So Michael, I would appreciate your comments on my post.

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