EU Constitution debacle - The real nature of European Union exposed

After eighteen months of trying to patch together an agreement between the member states, the talks on the EU constitution collapsed last weekend in Brussels. Different excuses have been given for the collapse, but the real causes are to be found in the fundamental economic contradictions that are emerging between the EU member states. And these are about to be made worse by the forthcoming enlargement of the EU, when a series of former Eastern bloc countries are about to join. The different levels of development between the present 15 members are going to be multiplied by the addition of countries like Poland, Hungary and the Czech Republic.

The stumbling blocks this time proved to be Spain and Poland, two states who were not prepared to accept changes to the decision-making system that had been agreed at the Nice summit in 2000. According to that system both these countries were to be allocated 27 votes. This caused some consternation for Germany and some of the other larger countries. Germany, which has twice the population of either Spain or Poland, was only allocated 29 votes at the Nice summit. This would give the German giant more or less the same say as little Poland.

Berlin and Paris are obviously not prepared to see their decision making powers curtailed in such a way and they backed the scheme of the draft constitution drawn up by Valéry Giscard d'Estaing, the former French president, for "double majority voting", in which decisions would require the backing of half of the EU nations, representing 60 per cent of the EU population. Such a scheme would have clearly strengthened the bigger countries like Germany, France, Italy and Britain. Such a scheme, would allow France and Germany to have a big say in EU policy development.

Some commentators have put the blame on Polish or Spanish "intransigence" or on the "hapless chairmanship" of Berlusconi. This is an attempt to hide the real issues involved. As we have said, the fundamental reasons for the failure are the growing contradictions between the European Union member states. These have been exacerbated by the prolonged economic crisis throughout Europe. But there is more to it than that. Different member states are pursuing contradictory foreign policies. This was revealed particularly by the way they lined up on the issue of supporting the USA in Iraq.

Poland and Spain pursued a different foreign policy from that of France and Germany during the war on Iraq, totally supporting US imperialism. This provoked the anger of Chirac, who back in February came out with the rather ungentlemanly outburst that the central Europeans should have "shut up" rather than support the USA over Iraq. These countries also came out against the proposal for a new European defence force put forward by Berlin and Paris.

These growing political tensions eventually erupted into an open conflict between the major powers, and within the European Union itself. As recently as only two or three years ago some form of compromise was usually reached. We would observe a period of bargaining over different points of this or that Treaty or Pact that would end up in some sort of compromise. One country or other would give up its "principles" in exchange for some monetary compensation elsewhere. This is no longer possible.

Now some pundits have even highlighted the fact that Chirac wanted to teach the Poles a lesson. He wanted to punish them for their support for US imperialism, and for daring to stand up to French imperialism. Germany has added its weight to this way of dealing with things. Previously German-Polish relations had seemed rather cosy, but lately things have cooled between the two countries. This reflects the changed situation in Germany. Its economy has been stagnating for some time. On the home front it is facing a situation of growing social conflict as the ruling class tries desperately to claw back all the concessions it was forced to give in the past.

When Germany was at the height of its boom it could tolerate an EU where it was the main contributor to central funds that were used to subsidise the poorer parts of the Union. Now Germany is putting demands on the EU budget. It wants to curb spending, as it wishes to cut its own contribution to the central funds. France supported Germany in calling for a freezing of the EU budget, which would have the effect of reducing subsidies to countries such as Poland and Spain.

This gives us an indication of how "diplomacy" will work in the future. We will no longer see the velvet glove. Rather, there will be threats and open clashes in a situation where the strongest countries will use all their strength, with good or bad manners, to prevail over the others. Just as US imperialism has been behaving like an uncontrollable bully around the world, so France and Germany will attempt to use their weight within the EU to bully and cajole the weaker members of the EU into accepting their policies.

The "Growth and Stability Pact" collapses

This state of affairs was openly revealed with the collapse of the unfortunately named "Growth and Stability Pact" a few weeks before the debacle over the constitution. When the German economy was booming and the German bourgeois were full of confidence they insisted on inserting a clause into this pact that established heavy fines for any country whose budget deficit went above the limit of 3% of GDP.

Last year Portugal breached the agreed limit and was in fact heavily fined. The problem is that the budget deficit is growing in most EU member countries. And this year France and Germany saw their own budget deficits go well over the 3% limit fixed by the Maastricht agreement, reaching the figure of 4%. Now it is one thing for the big boys (France, Germany…) to bully the little ones. But who is going to impose the rules on the big ones? Chirac and Schroeder therefore decided that the rules don't apply to them. To all intents and purposes this marks the death of the Maastricht agreement, which had been put together so meticulously over the past few years. We must remember that it was precisely Maastricht that has been used in all the EU member countries as an excuse to privatise practically everything, to attack the living standards of the working class, to dismantle the welfare state and to launch a general onslaught against all the gains that the working class had managed to wrench from the hands of the capitalists over a period of decades.

As we have pointed out, this internal tension within the EU has its parallels in the breakdown of all the international bodies that had been painstakingly built up since the Second World War. The fact that most of the summits of these bodies in recent times have resulted in fiascos or in open rifts is not an accident. From Cancun to Doha and Seattle, from the UN Security Council to NATO, to the recent EU meeting the failures are a reflection of a deep change taking place in the relations between the world powers both on a global and local level. The entire world order that was put together so carefully after World War Two is cracking and splintering at the seams. The US, EU, Japan, China, Russia, are all striving to shape the new balance of forces that is beginning to emerge. They are all jostling for positions. This is an inevitable process that cannot be stopped by sitting round tables at world or European summits.

It is within this greater worldwide crisis that we have to view the tensions within Europe. There is massive excess capacity throughout the capitalist world. The USA is adopting an aggressive trade policy. It is trying to win wider markets for its goods. It desperately needs to increase its share of world trade. This can only be done at the expense of the other powers, which is bad news for Europe. Europe is stagnating and also desperately needs to export itself out of the present slowdown. And within the EU each country is trying to get a bigger share for itself.

Here is where we see the contradictions of Maastricht, the Growth and Stability Pact, etc. These pacts have reduced the room for manoeuvre for each member state. And the introduction of the euro has forced economies that are on completely different levels (Greece and Germany are two glaring examples) to apply the same policies. This is making the economic crisis afflicting Europe even worse. Now we have the added pressures on Europe that derive from a dollar that is steadily being devalued. This is making it more difficult for the European capitalists to export to the USA, which up until recently had played the role of engine of the world economy, sucking in exports from the rest of the world.

The introduction of the euro has meant that weaker capitalist economies, like Italy or Greece, can no longer use their own currency's devaluation to boost exports. The euro is becoming a nightmare not only for working class families, but also for sectors of the middle classes as well. The small businesses are being ruined because they cannot hope to compete on the international markets against the bigger and more productive multinational corporations. The dilemma is: what was the alternative for the EU member states? We have to remember that the creation of a united economic area with a common currency was the only way for the European multinationals to strike back against the US and Japan. Although each national bourgeoisie within the EU has its own particular interests that bring it into conflict with its partners, none of them could stand up to the US, Japan, and more recently to China, if they stood alone. They are forced to hang together.

We wrote nearly two years go, when the Euro was about to be introduced: "Contrary to the hopes of the European bourgeois, the Euro has been a weak currency from birth. The need to maintain its level is one of the reasons why interest rates in Europe have not been reduced as fast as in America. This will aggravate the crisis in Europe and increase unemployment in the coming months. Paradoxically, the Germans, who were the most adamant in demanding strict adherence to the Maastricht rules, are now suffering the consequences in the shape of four million unemployed. The German economy, which ought to act as the main motor-force for Europe, is hopelessly stalled (…) This will lead, not to European integration, but to increased tensions and antagonisms between the national states." (The Launch of the Euro- Towards European unity? By Ted Grant and Alan Woods).

The move towards a common currency has proven incapable of overcoming one of the fundamental contradictions of capitalism: the nation state, with the different interests of the national bourgeoisies.

Europe's GDP grew at annual rate of only 0.4% in the last quarter, and industrial production fell by 1.8% in the year to September. Germany, the most powerful economy on the Old Continent, is lagging behind, with an annualised growth of 0,9%. Although the latest figures paint an even gloomier picture with Germany's GDP falling by 0.2% in the last quarter. The French economy has also been slowing down for the last two and a half years.

When the economy was on the upturn, the EU and the Euro may have seemed a very nice idea for a layer of workers and youth in different parts of Europe. There could be room for some illusions that the euro could provide greater growth and therefore alleviate the problems of the individual member states. Now that the perspectives for a recovery seem very grim, the European Union is revealing its true face. It is a tool in the hands of the multinationals and of each national bourgeoisie with which to impose their attacks on the living standards of the masses.

France and Germany perceive the new members of the European Union purely as markets and sources of cheap labour. Both countries have massive spare capacity and they need an outlet. They also need the cheap labour. Countries like Poland will get very little from joining the European Union. Most of them will not be allowed to join the Euro and their citizens for a period of three or four years will not have the full freedom to travel to other EU countries. The new member states will only receive 25% of agricultural subsidies that are presently available. Poland's industrial base is still lagging far behind that of countries like Germany and its economy is heavily dependent on agriculture. Entering the EU will mean bankruptcy for hundreds of thousands of Polish farmers.

It is not only the Polish workers and small farmers who are going to be in for a shock. Workers from other countries will also be badly hit by EU enlargement, as the Economist (November 22, 2003) is compelled to admit.

"One shock for many people may be the discovery that EU entry does not in itself bring wealth. The countries of central Europe will take a very long time to catch up with their western neighbours. The Economist Intelligence Unit, a sister company of this newspaper, has calculated that if the 15 countries of the current EU enjoy economic growth of 2% a year, and the countries joining in 2004 and 2007 (including Bulgaria and Romania) grow by about 4% a year, then it will take the new members, on average, more than 50 years to draw level with the old ones. If the new members manage only 3% growth, it will take them 90 years to catch up." We might add: will the workers of these countries be prepared to wait two or three generations before they see any benefits?

At the moment most of the countries that are preparing to join the EU (mainly Eastern European) are enjoying growth rates higher than the average of the EU. But of course, this is growth after a major collapse of these economies. To sustain this growth they are looking to integration into the wider EU market. But this growth will not last. Again it is The Economist that is forced to reveal the real picture.

"Any central European country where the growth rate sags, on the other hand, will find that the pleasures of EU membership turn sour. That country will be saddled with the rules and expenses of a club meant for rich people, while its income per person remains far below the average and may even decline in relative terms." (The Economist, November 22, 2003)

Thus we can already predict what is going to be the leitmotiv of every government of these new member countries: cuts in pensions, wages and social services, privatisations and complete liberalisation of their markets. All, of course, justified by the big dream of Europe. The stage is set for an explosion of the class struggle, in the east and in the west.

The ruling classes in Eastern Europe are in for a big shock, once they discover the real plans of Chirac and Schroeder. Far from the "integration" of the whole of the European continent into one unified block, they are developing another line of thought. The old worries that led Germany to insist on the Growth and Stability Pact in the first place are coming back to haunt them. They are waking up to the fact that all these national economies, at different levels of development, and growing at different speeds, cannot be brought together to form one harmonious body.

A "two-speed" Europe?

After this latest failure over the European Constitution at the Brussels summit, and with the de facto collapse of the Growth and Stability Pact, they seem to be pushing for a multi-speed Europe, one that would consist of a wider loose federation (the 25 member European Union) and an inner core of stronger countries led by Germany and France. Schröder has spoken of a "two speed" Europe, while Chirac has made reference to a "pioneer group". Faced with the present impasse a section of the more powerful national bourgeoisies within the EU may be considering this as the only way out. This would involve a coming together of the more powerful core members, with the hope that these might be able to influence the other members with their economic power. In reality it would amount to the domination of the weaker members by the more powerful. Such a solution not only would not solve any problem, but it would also prepare new conflicts.

Some of the national governments (for example Spain, Italy and all the other countries that are lining up for membership, the so-called "new Europe" as Bush and co like to describe it) have obviously drawn the conclusion that the EU boat is not so safe after all and during the Iraq war they clearly indicated that they see the more powerful US cruiser as a sturdier vessel. So these countries are being pulled in two directions. On the one hand they want to lean on the USA as a counterweight to the two powerful countries at the heart of the EU, France and Germany, but on the other hand they cannot do without these two powers and so they remain indissolubly linked from an economic point of view to the rest of Europe.

Those countries that joined the euro now face a dilemma. It is clear for all these national ruling classes that to leave the euro now would be a complete disaster. It would represent an enormous step backwards and the de facto failure and collapse of the very essence of the European Union. What this means is that they are all locked in together. They are like 15 cats in a sack with their tails tied together. They can scratch and bite each other, but they must move together. (And now another ten, and rather emaciated cats are to thrown into the same sack!). The Italian, Greek, Spanish or Portuguese bourgeoisies cannot survive outside of the euro.

One EU country after another has experienced a downturn in the economy over the last few years and a corresponding rise in the class struggle. Maastricht, the euro, and all the other agreements, have had the effect of internationalising the class struggle within the borders of the EU. Everywhere the workers are coming up against the same policies. Everywhere, pensions, welfare benefits, education, public transport, are all under attack. And everywhere we see strikes and demonstrations against these measures, from Austria to Greece, from Italy to Spain. No country is immune from this process.

A new period is opening before us. It will be a protracted period of conflicts between the members of the EU. We will see new alliances that will form between different countries as they attempt to defend their own little patch. These same alliances will break down as their conflicting interests come to the surface. The whole edifice of a capitalist European Union will be revealed for what it is: a reactionary adventure. It will also become clear that it is the working class of all these countries that will have to foot the bill for the crisis of European capitalism.

A wave of strikes has already shaken countries like Italy, Greece and Spain in the last two years. Before that we saw an anticipation of what was to come with a spate of strikes in France. This wave is now reaching the more developed parts of the EU, such as Germany, Sweden and Austria.

Throughout Europe, whether it be the "right", the "centre" or the "left" who are in power, all governments are attacking the gains of the working class. As we have already underlined, the attack on the pensions is the most glaring of these. Pensions are now considered by the bourgeois of all countries as a concession of the epoch of the post-war boom that they can no longer afford if they wish to compete on the world market.

However, the bosses in Europe are facing an undefeated working class and one that is organised in powerful trade union organisations. If the European capitalists have managed so far to secure some temporary victories, and have managed to impose a series of cuts, this is only due to the role of the leadership of the trade unions and of the left-wing parties. They are still living in the past thinking that some kind of compromise is still possible. They believe that by making some concessions now they can avoid a greater onslaught in the future. These so-called leaders have understood nothing. They do not understand the epoch we have entered. There is a general crisis of the system now. The capitalists are forced to keep up the pressure on the working class. Today they will take an inch. Tomorrow they will take a mile.

Through painful experience, the working class will understand this. They will also understand the need to change these leaders and replace them with genuine class fighters. The workers will attempt to defend the gains of the past. They regard a decent pension as a right, not a charitable concession on the part of the bosses. They have worked and paid in to the pensions scheme. It is theirs, and they aren't going to give it up without a fight. This struggle will go on inexorably. Each attack will be met with a counter-attack. Through the struggle to defend their pensions, wages, jobs and working conditions, they will draw the conclusion that it is the system as a whole that is sick. From this they will conclude that what it is needed is the overthrow of this rotten capitalist European Union and they will replace it with the Socialist United States of Europe.