THE capitalist economy of Europe took a decisive step over the brink into the abyss of collapse with the news that the euro debt crisis has entered a new phase.
The plans for a European wide bail-out of the bankrupt state economies of Greece, Portugal and Ireland – along with the daunting prospect of bail-outs being required for the much larger economies of Spain and Italy – has split the capitalist class, especially in Germany
The creation of a European central bank dedicated to pumping money into bankrupt economies has been pushed by the governments of Germany and France.
The funding for this central bail-out mechanism, 440 billion euros, would be provided by member states with the bulk coming from Germany.
This plan has run into a brick wall as splits within the German capitalist class have burst into the open.
On September 12 the German parliament will vote on the legality of this plan, whether it breaches the terms of the EU Treaty or breaks the financial sovereignty of Germany.
In the event of Chancellor Merkel losing the vote it will mean not just the collapse of her coalition government, but victory for the growing number of German politicians and capitalists who are openly acknowledging that all the bail-outs are doomed to failure, and that it is time to let the weaker economies of Europe go bankrupt and be thrown out of the eurozone.
The problem for them is that there are no strong economies that can survive the international collapse of the banking system.
Germany has some of the most exposed banks in the world to sovereign debt.
For decades they pumped billions of credit into European economies, credit that has now returned as massive debt that simply cannot be recovered.
Germany’s largest bank, Deutsche Bank, has seen the price of its shares drop by 50% while the second largest, Commerzbank, has lost two thirds of its price value in the past six months.
Small wonder that German analysts are reporting that a wave of ‘hysteria’ is gripping the financial institutions of Germany.
Such is the scale of the crisis that the new head of the IMF, Christine Legarde, last week threw a huge rock into the troubled waters of European banking when she told them bluntly that the banks had insufficient funds to deal with the crisis and that the only way they could avoid bankruptcy was to raise more money from their shareholders.
Such is the world nature of the crisis that none are immune to bankruptcy.
In the US, bank share prices have collapsed on a huge scale, with the mighty Bank of America losing half its share value last week.
In Britain the story is the same, with the Lloyds Banking Group plummeting to half its share value and Barclays not far behind.
What is clear is that the crisis of the capitalist banking system has reached a point of transformation.
None of the measures, from quantitative easing to recapitalising banks through raising extra cash from shareholders, is going to stave off the collapse.
The only way out for the capitalist class is to fight it out with their capitalist rivals while at the same time fighting it out with their own working class.
The survival of the banks depends on them ending all expenditure on welfare, health and benefits and driving wages down to below poverty levels.
The working class is similarly forced to fight back against these attacks, creating the scene for a revolutionary confrontation between the working class and capitalist class on an international scale.
The urgent requirement is to build the revolutionary leadership capable of taking the working class to power and smashing bankrupt capitalism once and for all.