After several weeks of tug-of-war, a precarious agreement was reached on aid to EU member countries that need extra financing to deal with the economic crisis triggered by the coronavirus epidemic. The states will get up to 540,000 million euros, but under what conditions? What does this have to do with the Marshall Plan for Europe that Pedro Sánchez demands? Is this viable?

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An agonising agreement that doesn't solve anything

For weeks, Pedro Sánchez has been demanding new “Moncloa Pacts” at home and a new “Marshall Plan” for Europe, or more exactly, for Southern Europe. However, instead of appealing to the United States as a donor – as was the case after World War II – his pleas are directed to the comparatively rich countries of northern Europe and to Germany in particular.

However, Germany, the Netherlands and other countries flatly rejected this proposal by Sánchez, which was also supported by Italy and Portugal. The former tenaciously resisted financing the debts of southern Europe, which is why they rejected the so-called “coronabonds”, an issuance of European public debt to be used by all the countries that needed it, but paid jointly by all (mutualisation). Germany and the Netherlands demand instead that each country pay its debts through existing funds such as the so-called Stability Mechanism (ESM), known as the European rescue fund, among others. And this was finally what was agreed.

Initially, the Netherlands went further, demanding that if Spain or Italy are rescued through these financial funds they must comply with certain conditions. EU intervention into their economies, they argue, should be accompanied with mandatory adjustment and austerity plans, as Greece and Portugal experienced between 2012 and 2018.

Finally, it was agreed that the ESM funds, up to 240 billion euros, would be provided "without conditions" but "only for health expenses derived from the pandemic" and up to a maximum of 2 percent of the GDP of each country; around 25 billion euros in the case of Spain. Any other non-health expenditure with funds from the ESM would bring constraints to the country's economic policies, which must be added to the already existing conditions for adjusting public spending.

In addition to the ESM funds, the European Investment Bank (EIB) will offer 200 billion euros for companies at minimum interest and bonds will be issued to finance programmes – such as furloughs – with an amount of up to 100 billion euros.

In reality this is a minimum commitment and any of these disbursements will be added to the debt of the country that uses them, so that little or nothing has been resolved in the end. What Spain, Italy and Portugal want is precisely to distribute the burden of the enormous new debt that they are going to acquire with the richest countries, rather than paying for them alone. That is why Spain and Italy pushed for a new summit of heads of state to be called to establish a "recovery fund" with no conditions for more general expenses, of which everything remains to be defined: its origin, whether there will be non-repayable aid, whether the expenditure will be shared among all or only paid by those who use it, if it will consist of direct loans from the European Central Bank to governments (which is currently prohibited by the ECB statutes, and to which Germany, the Netherlands and others oppose), etc.

What seems ruled out is that a new massive indebtedness on the part of the States will be developed through private investors, who could demand very high interest rates in the face of doubts about potential defaults or the threat of restructuring and write-downs, which would increase the debt toward more unsustainable levels. Hence the pressure from the governments of southern Europe may result in the ECB being forced to act as a direct lender to national governments, thereby violating its own nature.

The European Union faces an existential crisis. It will be the economic area of ​​the world that will suffer the deepest recession. It is buried by huge public and private debts, and by critical internal imbalances, which could lead to a disorderly explosion of the economic bloc, as the departure of Great Britain has already anticipated.

The Marshall Plan (1948-1952) was a programme of non-repayable aid from US imperialism to ward off the danger of "communism" / Image: USAID

Thus, despite Sánchez's insistence, it does not seem that the new Marshall Plan he is proposing will go very far. However, it is worth analyzing, despite everything, what the Marshall Plan was and, if undertaken, whether it would have the same “magical” effect that Pedro Sánchez intends to attribute to it today, with respect to the one it had in the 1940s and 50s.

What was the Marshall Plan?

The Marshall Plan (1948-1952) was a programme of non-repayable aid from US imperialism, to help the reconstruction of Western Europe after the Second World War and to ward off the danger of "communism". It was endowed with $14 billion at the time, equivalent to about $151 billion today. However, Western Europe then had a population 40 percent smaller, which implies that aid per capita was much higher than that figure could currently represent.

In reality, the capitalist reconstruction of Western Europe was not based on an economic premise, large-scale investment, but on a political premise: the discarding of a socialist policy by the Social Democratic and Stalinist parties. This abandonment, just as in the 1920s and 30s, betrayed the revolutionary wave that took place at the end of World War II in Western Europe, with the most resounding examples found in France, Italy, and Greece. The class collaboration of the leaders of the left with the "liberal" bourgeoisie established "social peace" and peace of mind in the ruling class, so that a gigantic mass of unemployed and underemployed could be used to restart capitalist production.

Today, as then, the leaderships of the left and of the labour movement keep the working class orphaned of horizons, and they strive everywhere to save capitalism or, at best, to recreate an impossible capitalism “with a human face”. But the revolutionary wave has not yet started, although the first tremors can be felt and the working class has yet to say the last word. And since the authority of these leaderships is not the same as it was 75 years ago, the stage is set for new leaderships to emerge that better reflect the revolutionary spirit of the new era, hence nothing has been decided in the political arena.

Above all, today the economic premises required for investment on that scale or greater do not exist, there cannot be a repeat of the same economic “reconstruction” that is spoken of.

World War II physically destroyed the productive forces of half the world: in Europe, Japan, and the Soviet Union. China, like all Southeast Asia, was then a huge poor primarily peasant country with very little industry and infrastructure. For its part, the Marshall Plan money invested in Europe, as well as in other parts of the globe with other denominations, had a material basis in the accumulated dead work in the form of gold bars, which were deposited in the warehouses of Fort Knox (USA), where the US treasured two thirds of the world's reserves. This accumulated dead labour was transmuted into real wealth in the form of new infrastructures, industries, and goods through the exploitation of the living labour of the working class in Europe and beyond. Combined with the looting of the former colonial world the invested wealth was multiplied by 4 to 5 times. In the process this allowed for the cleaning up of the balances of public and private debts generated by the war effort.

It should be added that a special role in this European "reconstruction" was played by state intervention, which introduced planning mechanisms and public control and ownership of basic sectors of the economy: heavy industry, telecommunications, railways, ports, etc., mechanisms which remained, in general, until the beginning of the 1980s. This proves the limitations in its capacity to develop the productive forces that private companies, with their own forces, had achieved in the interwar period and after the end of the Second World War.

Is a new Marshall Plan viable today?

What is the reality today? Today, on the contrary, the productive forces are a million times more powerful than previously and are materially intact. They have not been annihilated by a catastrophic war, there is nothing to rebuild, neither infrastructure, nor basic or consumer industry. In fact, what has led to the current economic crisis has not been the pandemic, which has simply acted as its trigger, but rather the overproduction and overcapacity that exist everywhere. This was already manifesting itself since the end of last year in an industrial recession in Europe, in slowing growth in China and the US, in protectionist trends in the US and in an emerging trade war between the major superpowers. To make matters worse, the global aggregate debt stood, before the pandemic, at 255 trillion dollars, 322 percent of the world’s wealth, GDP, the highest in the history of capitalism.

Today, the investment of hundreds of billions of dollars would not have the purpose of building roads, ports, or industries to supply goods to a hungry market. It would not have the effect of expanding the world market and trade as it did in the period immediately after World War II. The reserves of Europe's central banks, from which the funds of a new Marshall Plan would come, and which lack a physical and material reference in the form of gold, at least of the size that they were 75 years ago, are largely mortgaged by the existing galloping debt, to which they would add a new avalanche of debts. This is fictitious money which does not correspond to real wealth and which would not be destined to produce an equivalent amount in material goods, but only to absorb the private debts of large companies, to pay the expenses of governments on the brink of bankruptcy and to sustain a part of the wages of workers and tens of millions of unemployed. Putting into circulation such an exorbitant amount of paper money, largely destined for consumption but which does not lead to the creation of an equivalent amount of material wealth, can only lead to an inflationary explosion, of rising prices, pulverising the purchasing power of working families and the destabilization of the entire financial system.

Furthermore, the gigantic accumulation of enormous public debts by the States can only lead to two paths: to the bankruptcy of the national States or to a brutal policy of cuts in public and social spending to face the payment of this colossal debt, which would make the adjustments and austerity practiced in the preceding 10 years seem like a rosy picture. In both cases we would have a finished recipe for an explosion of class struggle not seen since the 1970s.

For the Socialist United States of Europe

Capitalism is going through the biggest crisis in its history which will also detonate the largest class struggle in history. In Europe this will be truer than anywhere. With the deep internal imbalances running through it, its powerful working class and the rich revolutionary history it has accumulated, Europe will become the centre of the world revolution.

For decades the powerful centralising trends in the world economy have pushed European countries to unite and blur their borders, but the persistence of dozens of states with such disparate economies and pulling in different directions has turned the dream of a Europe united under capitalism into a reactionary utopia, where the strongest economies in central and northern Europe impose their conditions on the weakest economies in the south. The seams of this forced union have only frayed throughout these 10 years after the 2008 crisis, and now they are going to deepen further toward the danger of an open rupture.

We Marxists are in favour of a united Europe, by bringing together the resources and capabilities of a continent with more than 300 million inhabitants, it would be possible to establish a splendid future of unlimited social and cultural development and well-being, but the condition is to expropriate the big banks and companies to use and plan their resources in the interest of all. This requires sweeping at the same time the national borders that divide us and throwing away the horrible, reactionary and costly bourgeois state apparatuses of each country: their police, their armies and their legion of judges, high officials and diplomats.

A socialist Europe would not recognise the enormous public debts that feed the bankers and vulture funds of international capital, it would eliminate them from the balance sheets of nationalized banks and companies. It would use existing resources to initiate the construction of an advanced and open socialist Europe, and would encourage the rest of the world working class and the ex-colonial peoples, oppressed by imperialism, to rise up and follow their example to together form a socialist world that puts an end to capitalist barbarism.