The crisis in Europe - Part three: What is the EU and where is it going?

As the EU’s ongoing political and economic crisis enters a new and potentially decisive phase, parts of the ruling class are beginning to question whether the Union’s strategic goal of “ever closer union” can really be achieved, and some are doubtful as to whether it would even be desirable.

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Nevertheless, there is a general consensus that the EU as it stands – effectively a half-way house between a free-trade agreement and a unified federal state – is a compromise which is neither satisfactory nor sustainable.

Wolfgang Münchau writes in the Financial Times, “If you create a monetary union without shared economic institutions, fiscal policies and legal systems, you are bound to hit a wall eventually. Likewise, a passport-free travel zone without joint coastguard and border controls cannot last.” In another article he goes further: “If the European Union were a democratic federal state, we would not be having this discussion. There would be no euro crisis, and no refugee crisis either. Such a state is currently not attainable, however.”

Münchau suggests that instead of greater integration, the EU should take a step back, returning to its prior state as no more than a customs union made up of a collection of discrete markets - for example those of the affluent states around Germany, those of the Mediterranean, and those of Eastern Europe. In contrast, others argue in favour of pushing towards even closer integration, including full banking union with common deposit insurance across the euro zone. George Soros has gone as far as to suggest that Germany should establish a “benevolent hegemony” and correct Europe’s internal trade imbalance by importing more goods from other European countries – something export-dependent Germany has no intention of doing.

The question of whether EU member states should aim for ever closer union also forms a part of David Cameron’s negotiations over Britain’s status within the Union. He wants to obtain a British exemption from this aim, in effect saying “this far and no further”. The mistake that the above commentators all make is that they assume that the process of European integration or disintegration is entirely within the control of the EU or any of its individual member states. Ultimately, however, it is the world market that decides.

The birth of the European project

The EU did not begin life in the same form as we know it today - it arose out of and has evolved with the development of the world economy. It is impossible to understand the nature of the EU today without taking this development into account.

The Second World War resulted in a new re-division of the globe. Under this New World Order, the USA had emerged as the supreme imperialist power, militarily and economically dominating the rest of the capitalist world. Meanwhile, the USSR had been strengthened rather than weakened by the war and now presented an existential threat on the doorstep of European capitalism - quite literally in the case of West Germany.

The old ‘Great Powers’ of Europe on the other hand had been completely shattered by the war. Britain had seen its status reduced to that of an American client state, while France had been bled white by the Nazi occupation and the destruction of the war. Italy - economically backward and devastated by the Allied invasion - and the Benelux countries were in no better state. Germany, defeated and dismembered, was unable to house or feed millions of its people. European capitalism was on the verge of collapse.

Clubbing together on the pretext of preventing an impossible war, the founder-members of France, West Germany, Italy and the Benelux countries formed the European Coal and Steel Community under the Treaty of Paris in 1951 as an important first step towards a power bloc capable of protecting its interests in the world market.

The declaration of Robert Schuman, the French Foreign Minister and later “Father of Europe”, which laid the basis for the Treaty, made plain the ultimate purpose of European integration when it stated that with “increased resources Europe will be able to pursue the achievement of one of its essential tasks, namely, the development of the African continent”. Several years after signing the Treaty, a newly bolstered French imperialism would set about this noble task in the form of its genocidal war in Algeria, and later - along with Britain - the attempted invasion of Egypt in 1956. Peace in Europe was, as ever, the precursor for war in the so-called Third World.

Ever closer union

The destruction and de-population of the War had laid the basis for an exceptionally prolonged upswing in the Western economies. Post-war reconstruction and decolonisation provided powerful spurs for industrial development, not least in France, where 20% of the population poured from the countryside into the cities between 1946 and 1962.

In this period of boom, Europe saw almost full employment, the birth of the Welfare State and consistent increases in the standard of living. It was in this period of rising confidence, economic expansion and flourishing world trade that the considerably more ambitious Treaty of Rome was signed in 1957, establishing the European Economic Community (EEC) and the European Atomic Energy Community in addition to the ECSC (the “European Communities”). The Common Market had been born.

The Treaty of Rome set out for the first time the fundamental principles of the free movement of goods, services, people and capital as well as the political goal of “ever closer union”. But behind the lofty phrases of the Treaty there lay a contradiction. Blocked on the world stage by the overthrow of colonial rule and the crushing dominance of American imperialism, the European imperialists had no option but to focus their efforts within the Common Market itself. The European project was therefore in essence the competition between the major European powers, in particular France and Germany, over the European market. Having been out-competed by her continental rivals, Britain fell into the EEC in 1973, a year before the world slump of 1974. By the 1980s, despite the aspirations of French capitalism, West Germany had emerged as Europe’s major economic power.

The Single Market reaches its limits

Following the global slump of the 1970s, a new era of ‘neo-liberalism’ opened up throughout the capitalist world. Contrary to the old Keynesian doctrine of the post-war period, this period was characterised by the ‘disciplining’ of the working class through the suppression of wages and trade union rights, the privatisation of state owned enterprises, and the de-regulation of the financial sector. Then, in the early 1990s, the collapse of Stalinism in the East and the reunification of Germany provided a huge impetus for the growth of the European (and world) market.

The Maastricht Treaty (which came into force in 1993) with its concepts of a “Single Market” and “European Citizenship”, the creation of the borderless ‘Schengen zone’ in 1995 and the creation of the euro zone in 1999 - arguably the three most important pillars of European political and monetary union - all arose out of these conditions. At this time, when capitalism appeared to be enjoying a boom amidst a frenzy of profit-making, many European leaders even envisaged the possibility of forming a unified European federation, along the lines of the USA. The European project continued to make new conquests, with the enlargement of 2004, the biggest in the EU’s history, in which 10 states (of which 8 came from the former communist Eastern Bloc) joined the Union.

However, even during this heady period of boom and expansion, the foundations were being laid for an almighty crash. In the years following the creation of the euro zone, German capitalism, already greatly strengthened by reunification, asserted its stranglehold over the European market. By binding weaker economies such as those of Portugal or Greece (which joined later, in 2001) to a single currency, thus removing the possibility of cheapening their exports by devaluing their currencies, the euro enabled German industry to strike down all competition.

Between 2000 and 2011, German industrial production grew by 19.7%. During the same period, Italy’s industry shrank by 17.3%, Spain’s by 16.4%, and Greece’s by an eye-watering 29.9%. As a result, many member states, particularly in the south, were transformed into mere importers of German goods, contributing to the staggering imbalance of trade within the EU which persists to this day. This imbalance, along with the continuous suppression of wages in order to sustain profitability, was propped up by an orgy of borrowing. Households, banks and even nation states continued to accumulate more and more debt in order to maintain the boom.

By the time the Treaty of Lisbon was signed in 2007, far from being a “family of democratic European countries, committed to working together for peace and prosperity” as stated in the Treaty, the EU was already beginning to strain under the weight of its bloated bureaucracy and the mountain of public and private debt which would later bring about the collapse of banks and threaten the bankruptcy of entire nations. European integration on a capitalist basis had already gone beyond its limits - it was only a matter of time before it would begin to unravel.

After the turning point of the 2008 financial crash, all of the factors which had driven the integration forward turned into their opposite. Whilst the euro had previously allowed states to borrow on the strength of the German economy, it is now a gigantic fetter on the southern “debtor” states which, one by one, are being broken on the wheel of austerity. Meanwhile, the free movement of people across the EU, which in the past had provided a wealth of cheap labour, has become a major point of dispute as crisis-ridden states seek a scapegoat and each try to export their unemployment elsewhere.

All of the fault lines running through Europe have now been exposed: North and South; East and West; euro and non-euro. All of these are ultimately testament to the fact that it is impossible to overcome the limitations of the nation state on a capitalist basis. In the last analysis, you cannot bind together economies which are moving in different directions; where this is achieved temporarily, the result is the domination of one by the other, rather than mutually beneficial co-operation – it is this which makes the idea of a capitalist United States of Europe a reactionary utopia.

For a Socialist Europe!

Likewise, a reversion to a simpler customs union without fiscal political union would not solve the fundamental problem – the ongoing global capitalist crisis. In or out of the EU, the epoch of reforms and rising living standards has ended. Today we face a future of cuts, inequality and unemployment along with the immense human cost which this entails. Between 2008 and 2010, infant mortality in Greece rose by 43%. Miscarriages tripled between 2010 and 2012. The “European family” is devouring its children, but it would be naïve to expect any better from the parasitic Greek capitalists who brought Greece into this crisis in the first place.

The integration of the people, resources and industries of Europe under a democratic and rational economic plan could bring an end to austerity and to the horrors being visited upon the people of Greece and elsewhere. It would represent a giant leap toward the liberation of the whole world from poverty and exploitation. In this sense the unity of Europe is a thoroughly progressive aim, but this will never be achieved under the anarchy of capitalism. The workers of Europe can rely neither on the bureaucrats of Brussels nor their own corrupt rulers but on their own strength. Therefore, the Marxists stand for neither European nor British capitalism, but for a Socialist Britain as part of a Socialist Europe!