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Quo Vadis Europe? The Failure of EU's Neoliberalism

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While the new year has arrived, the dark clouds of economic crisis remain in the European sky. There are questions which need clear answers: Will Greece default? What's the future of Irish economy? Is the crisis going to spread in Portugal and Spain? Will the eurozone continue to exist in 2011? No matter what the answers are, one thing is sure: Europe is in a deep socio-political crisis, as a result of financial neoliberalism and its bankrupt policies.

Having as an official excuse the public deficit and the "fixing of their fiscal policies", the European leadership try to apply outrageous austerity measures to their people. The two weakest links of the eurozone, Greece and Ireland, are facing the consequences of a new economic imperialism which spreads across Europe. In this context, the austerity policies imposed on Greek and Irish people will spread in other eurozone countries, stampeding away from the Stability Plan and thus creating a domino effect of financial, social and subsequently political instability.

The neoliberal bureaucrats in Berlin and Brussels use to blame the governments of Ireland and Greece (later, they will do the same for Portugal and probably Spain) for the ongoing crisis. However, the EU leadership along with the European Central Bank were among the first who contributed 1 trillion (euros) in order to prevent the collapse of the banking system, when the 2008 financial crisis ellapsed. And when the crisis reached the eurozone - when Greece was facing the financial terrorism of international speculators - EU's response was this: austerity, austerity, austerity.

"Peoples of Europe, Rise up!", banner unfolded by members
of the
Greek Communist Party (KKE) at the Acropolis rock,
May 2010 (REUTERS).

During the previous three months, mass demonstrations took place in many European cities against EU's plan to pass the bill to the working and middle classes. I quote the report by the Associated Press: "European unions orchestrated a crescendo of anti-austerity protests across the continent yesterday, sending workers ranging from Greek doctors to Spanish bus drivers out to vent over job cuts, higher taxes, soaring unemployment, and smaller pensions. [...] Waves of demonstrators clad in bright red, green and blue union jackets marched through Brussels toward European Union buildings, aiming to reinforce the impact of Spain's first nation- wide strike in eight years. Unions estimated the turnout in Brussels at 100,000 people." (September 30th).

On November 29th, almost 100,000 people marched in Dublin while a week later thousands of Italians gathered at Rome to protest the government's proposed austerity measures for 2011. In Spain, the socialist Prime Minister Jose Luis Zapatero faces a mounting reaction from the labor unions as he struggles to reduce budget deficit through the implementation of harsh economic policies. Nonetheless, as the peripheral eurozone states (Greece, Ireland, Portugal) shrink in recession, the strengths of european capitalism will be severely tested. Moreover, the signs for the world economy seem contradictory. Economist's recent assessment of the situation isn't optimistic:

"If the outlook is for years of low economic growth, then this gloomy dividend assessment will probably be correct. After all, the rebound in profits in 2009-10 owed much to an improvement in margins. Companies were able to shed staff while improving productivity in the remaining labour force. But this does not seem sustainable in the long term. Either the economy will recover, and labour costs will rise, or the high level of unemployment will weigh on demand and revenues will suffer."

The major problem is that the only language the Eurocrats speak is the one of neo-liberalism. They should come out of their offices and see what is happening in the streets of Dublin, Athens, Lisbon or in Rome. These elites, today represented by the German leadership under chancellor Angela Merkel, refus to see the truth: that the imposed tough austerity policies, the dissolution of the social state and the creation of a 'two-speed' EU lead to a political deadlock within the Union.

The stance of chancellor Merkel's government seems hypocritical: despite the rhetoric about confronting the crisis, it prevents the European Central Bank from lending money to Ireland or Greece with 1% interest rate. Unfortunately, the present policy pushes national governments to borrow from private speculators (e.g. Commercial banks) with interest rates of 5% up to 10%, depending on their "status" as it is determined by notorious agencies like Fitch, Moody's or Standard & Poor's. I quote Daniel Cohn-Bendit, French member of the European Parliament, during his speech on May 5th earlier this year:

"I have the impression that, at one time, people would say, people would hear: 'I want my money back'. Now, I have the impression that, at government level, it is a case of: 'I want to make money on the back of Greece'. For that is also the problem: by borrowing at 1.5% or 3% and lending to Greece at 3%, 5% or 6%, money is being made on the back of Greece. That is unacceptable!"

The policy directed by Berlin leads to a totalitarian financial model of governance, especially in the countries where the International Monetary Fund is already involved: thousands of firings, extensive privatization of services, reduction of public sector, rapid decrease of salaries and pensions, dissolution of the labor rights in private and public sector. The nations become even more dependent on foreign markets, the masses have to deal with the lowering of living standards and the vested social rights of the working and middle classes are clearly in danger. How about a big applause for this achievement?

At the moment, two european nations, Greece and Ireland are used as the "guinea-pings" of extreme neoliberal austerity. However, the crisis is deeper and has its roots in the structures the values of the European capitalism itself and obviously in the international neoliberalism under the hegemony of the USA. And who is benefited from the austerity policies imposed to people? "Its the banks" says the known Canadian author and journalist Naomi Klein and she adds:

"People witness a huge, egregious and flagrant robbery. That means to take (money) from the working people in order to offer revenues to the very wealthy ones who created the crisis - and everybody knows that."

Everybody knows that - except from those who turn a blind eye to reality. During the last decade, the European leadership has submitted to the logic of neoliberal economics thus devitalizing the 'social state' in favor of an uncontrolled capitalist model of development. And when the crisis "touched" the borders of the eurozone, when a nation couldn't pay off its speculative creditors (mostly German and French banks), they demanded strict monetary policies and even more austerity and anti-social measures. Why? London-based economics Professor Costas Lapavitsas was writing in the British "Guardian" three months ago:

"The austerity measures are part of the plan to rescue the banks again. Governments throughout the eurozone have succumbed to an alliance of banks and large holders of public debt who are desperate to avoid the implications of their foolish lending. Expensive funds were made available to Greece and others with the ultimate aim of protecting core banks." (The Guardian, October 1, 2010)

Indeed. The IMF-EU "rescue plan' of Greece is actually intended to protect the interests of those european banks which hold a significant share of the country's bonds. Even if the harsh austerity policies are implemented as planned, the predictions about Greek economy are ominous: the EU Commission itself predicts unemployment's rise up to 15% in 2011 while the state's debt will be increased (156% by 2012).

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Aris Claras is a writer based in Greece.

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