EUROZONE manufacturing activity has hit a three-year low at the same time as the banking crisis is reaching explosion point. Greece has run out of cash and requires an immediate 130bn euros, while Spain requires hundreds of billions of rescue cash. The system is rocking, the tremors are growing and there are predictions that the global financial system is heading for a huge earthquake.
At the centre of the manufacturing crisis is its heartland Germany whose industry has contracted faster than many eurozone countries.
The manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, fell to 44 from 45.1 in June. Any reading below 50 indicates contraction.
Germany’s PMI for July was 43, also a three-year low. Only crisis-ridden Spain and Greece saw their manufacturing sector contract faster, while job losses were the severest in Germany and France, the two most industrialised EU states.
Markit stated despondently about the situation – ‘The July survey is characterised by faster rates of decline in output and new orders, leading manufacturers to cut back on headcounts and inventory holdings and suggesting a fear among companies towards ongoing weakness in the coming months.’
German carmaker BMW reported a sharp fall in profits despite record sales and revenues with net profit for the three months to the end of June at1.28bn euros, down 28% from a year earlier. This is despite revenue rising 7% to 19.2bn euros.
The situation with GM Opel was worse with GM said to be poised to sell off its German carmaker after sacking its chief executive Karl-Friedrich Stracke.
He is replaced by Steve Girsky, the head of Opel’s board of directors with the reputation as a plant-closer from Detroit.
Professor Ferdinand Dudenhoeffer of the Centre for Automotive Research in Duisburg in Germany commented: ‘Until yesterday, the strategy was to guarantee jobs through 2016. Today, it is making cuts and closing plants as quickly as possible.’
In contrast to profits for GM’s North American operations, the European end made a loss of $256m (£164m) in the first three months of the year and $747m last year, putting both Opel and Vauxhall car plants in the closure zone.
Since GM emerged from bankruptcy three years ago, Opel has racked up $3.5bn in losses.
Meanwhile, the French car-maker Peugeot-Citroën is struggling. Its manufacturing side is losing just short of $250m a month so it is planning to cut 8,000 jobs.
The more that Merkel, Hollande and Italy’s Monti insist that they will fight for the euro to the end, the more big business is convinced that the end is indeed in sight.
According to Fathom Consulting, a eurozone break-up will plunge the UK into a much deeper slump with an initial 5.2% cut in GDP, trigger £1 trillion of new QE, and see the government nationalise all of the UK’s banks in the midst of a financial collapse. Others such as DeAnne Julius, a former member of the Bank’s rate-setting Monetary Policy Committee, says that ‘The next global shock will be like an earthquake.’
It is clear that the crisis of capitalism is fast reaching the point where, to stop the destruction of the productive forces, and stop society being driven backwards over the edge of the abyss, the working class must take the power and expropriate the bosses and the bankers, to put an end to capitalism in the UK and Europe, and bring in a socialist planned economy under which production will be planned to satisfy people’s needs.
This is the change that the whole world needs.
Central to this task is the rapid building of sections of the International Committee of the Fourth International to organise the victory of the world socialist revolution, to rid the planet of capitalism and imperialism.