The 99% lose out all over Europe
In the end, the “choice” was between a British government determined to protect the City of London at all costs and the rest of the European Union agreeing to allow bureaucrats to impose co-ordinated spending cuts on their increasingly angry populations.
Thus the “interests” at stake in the all-night crisis summit in Brussels were essentially the same – whatever side of the Channel the member states happened to be located. And they weren’t those of ordinary people, the 99%.
Prime minister Cameron used Britain’s veto to try and keep the City free from any new EU taxes and regulations, while chancellor Merkel and president Sarkozy were driven by the financial markets towards a so-called fiscal union to save the euro. The 1% are the only potential winners here.
Cameron’s talk of “national interests” is in any case somewhat hollow, considering that the City is dominated entirely by global investment banks and dealers. Individuals in the UK own just 10% of the shares traded on the London stock exchange compared with 54% in 1963. Foreign investors, of all types, are the biggest group and now own 42% of shares on the London stock market.
All Cameron is concerned about – just like his New Labour predecessors – is protecting the tax revenue from a financial sector that was itself bailed out in 2008 to the tune of billions (while cutting the budget deficit at our expense). All Merkel and Sarkozy are worried about is cutting sovereign debt deep enough to appease the financial markets. Same difference.
The political breakdown in Brussels cannot disguise the summit’s failure to agree on a rescue plan for the single currency, or at least one that might impress the financial markets. The European Stability Mechanism (ESM), the permanent rescue mechanism due to come into force in July 2012, will be capped at €500bn while Germany opposed giving it the banking licence sought by Herman Van Rompuy, president of the European Council.
Running in parallel is a profound banking crisis. Yesterday, “stress tests” showed European banks had a shortfall of €115bn compared to €106bn in October. Germany's banks were found to need more than double the amount of capital anticipated. And French banks are also under pressure. The rating agency Moody’s has downgraded three French banks including Societe Generale, which it says may need government support.
The banking crisis is directly connected to the sovereign debts overwhelming countries like Greece, Italy, Spain, Ireland and Portugal. Many banks are exposed to loans to these countries and do not have sufficient capital to handle a default, let alone the collapse of the euro. In a desperate move, the European Central Bank has cut interest rates, given loans to cash-strapped banks and is accepting virtually any collateral for loans, including the notorious mortgage-backed securities that drove the 2008 meltdown. ECB chief Mario Draghi admitted that a new credit crunch was under way, with banks refusing to lend to each other.
The EU was until the 2008 crisis a cosy, corporate, bureaucratic, undemocratic club run increasingly on free-market lines. It was the European arm of capitalism’s globalisation project. Deregulation of the financial system applied throughout the continent, not just in Britain.
Because the global economy’s growth was fuelled by debt, the recession exposed its soft underbelly and wrecked the finances of national governments. It wasn’t deregulation that did it for the capitalist economy but the in-built drive to grow or die to sustain profits that ultimately broke the back of finance.
A democratic Europe run in the interests of ordinary people, the disenfranchised majority, is a goal worth struggling for. The chances of the EU as presently designed being the vehicle for such a project are precisely nil. Cameron, Sarkozy and Merkel have made that abundantly clear.
9 December 2011