Crunch Time For The Eurozone


August is traditionally the month when politicians, bankers and bureaucrats across Europe take an extended break away from the chaos of the economic meltdown of the eurozone.

This year their holidays will be ruined by the knowledge that there is no respite from the economic crisis and that their return in September will, in the words of one EU politician, be marked by a ‘make or break’ situation for the entire capitalist economy of Europe.

Last week the highly influential credit ratings agency Moody’s dealt a savage blow to the EU when it warned Germany that its Triple A credit would be downgraded.

Moody’s assessment was based on the unarguable fact that the EU faces the impossible task of bailing out the bankrupt economies of Spain and Italy.

Greece, Ireland and Portugal are economic minnows compared to Spain let alone Italy which is a member of the G7 group of the world’s wealthiest economies.

In the case of Spain the EU has already agreed to lend Spanish banks 100 billion euros to stop them collapsing and bringing down the entire European banking system, and now they face demands from Madrid for a full bailout of the bankrupt Spanish economy of 300 billion euros.

There is simply not enough money in the European Stability Mechanism (ESM) to pay for all this – the ESM only has 500 billion euros at its disposal and this will be entirely swallowed up in one hit by Spain.

The German chancellor, Angela Merkel, and the Italian prime minister, Mario Monti, responded to Moody’s  by issuing a statement which said that it was ‘agreed that Germany and Italy would do everything to protect the eurozone.’

This has been interpreted as them being willing to print even more billions of worthless paper euros to pump into the countries to stave off sovereign bankruptcy, but it is increasingly apparent that such a move is completely unsustainable, that the economy of Germany – the eurozone’s chief bank of last resort – cannot support such a massive inflationary step.

Even the existing 500 billion euro ESM fund is under threat in Germany where the Constitutional Court is set to rule on September 12 whether it is compatible with the German constitution, a constitution framed with the horrors of Weimar-type hyper-inflation very much in mind.

If the court rules against Germany propping up this fund then the political and economic consequences would be explosive, with the immediate collapse of the eurozone and the entire economies and banks of Europe.

Should the court rule in Merkel’s favour, it would only mean a very temporary respite as the pressure from bailing out Spain and Italy builds up and creates an even more explosive situation.

With capitalism having exhausted all the meagre economic weapons in its arsenal, the real meaning of Merkel and Monti’s statement about doing whatever is necessary to rescue the euro becomes clear.

They are preparing to launch an all-out class war throughout Europe to impose the ‘austerity’ measures on the working class necessary to save the banks.

To date, all their attempts in Greece and now Spain have been fiercely resisted by the working class which has stubbornly refused to passively accept a lifetime of poverty and unemployment as the price to keep capitalism afloat.

In its desperation, the ruling class must now step up its attacks driving the working class even further along the revolutionary road.

With the socialist revolution developing at an increasingly rapid pace throughout Europe the issue of the hour is to build sections of the International committee of the Fourth International in every country to lead the working class to victory in the European socialist revolution.