The Euro and the Economic and Monetary Union – Constraints and Ruptures

30 March 2015

Excerpts from Closing Speech by Ângelo Alves, member of the Political Commission of the CC of PCP

Dear Comrades,

At the close of this seminar organized by PCP’s representation in the European Parliament and by the GUE/NGL, let me begin by thanking the participation of all and valorise the contributions brought to us here by the various speakers at this seminar. Thanks that on behalf of PCP’s leadership I would like to address in a special way to our foreign guests, representatives of the Izquierda Unida from Spain, AKEL from Cyprus and Sinn Fein from Ireland.

Comrades

Our seminar laid bare a fundamental idea. The Euro and the Economic and Monetary Union proved to be not a factor of balance, cohesion, economic convergence, social progress, stability, but that of economic domination, created to address the interests of big European transnational capital and the directory of powers led by Germany, an instrument of concertation and inter-imperialist rivalry, creator of asymmetries, injustice, inequality and increasing instability at various levels.

As once again demonstrated here today, the policies and pillars associated to the process of capitalist integration in Europe, some of which systematized and enhanced, especially in terms of economic policy, in the EMU project, among other aspects, were an attempt to respond to the structural crisis of capitalism and in particular the downward trend of the profit rate

And this is a central issue of our day. As was stated here today, the crisis we are experiencing in the European Union is an expression of the crisis of capitalism in Europe and at the same time a crisis of the European Union itself and of the Euro. A crisis to which big business, the right and social democracy are responding with further exploitation and with an even greater deepening of the three pillars of the process of capitalist integration.

The Memoranda of Understanding that three of the four countries represented here were subjected to are a good demonstration of what we have just said. the memoranda of understanding were a way to accelerate and concentrate in time the application of policies that have come from behind and support the process of capitalist integration. Furthermore, if it is true that these programs were a kind of shock therapy dictated by the magnitude of the crisis, an accelerated continuation of old projects, it is simultaneously true that they shaped lines of experimentation at a new level of exploitation and oppression with which to give continuity to the project of the European Union and the Euro.

That is, the policy of the memoranda is the same as that of the European Union and the Euro and vice versa. Any illusion of contradiction between the austerity policy and the Euro is just that, an illusion, which can only lead to the struggle of the people to dead ends or to huge disappointments. Or it is pure hypocritical propaganda as was the case of declarations by Juncker, whose only aim is to try trying to conceal the umbilical connection between the policies of the troika and the pillars, guidelines, strategy and policies of the Euro and the European Union.

If the results of three years of the pact of aggression are illustrative of the class nature and objectives of these policies, the same applies if we extend the analysis to a wider period. In the case of Portugal we are able to see – looking back to the period from the membership of Portugal to the EEC in 1986 or the EMU in 1999 - this policy and the constant strategy of concentration and centralization of capital, social regression and, with particular impact since the creation of the Euro, the attacks on the social functions of the States, withdrawal of rights, depreciation of the value of work, weakening of the productive apparatus, attacks on democracy and sovereignty.

This finding regarding Portugal is easily illustrated with some figures. In terms of employment around 630,000 jobs were destroyed since the entry into circulation of the Euro, the number of unemployed increased 145%, as already mentioned today. With regard to the evolution of GDP, from 1996 to 2014 Portugal grew a meagre 1.2%. If we consider the period since joining the Euro we then find that this anaemic growth becomes pure and simply stagnation, the reality of the last 17 years, a period in which the fall of public and private investment was steady and sharp. Looking at the rate of Gross Fixed Capital Formation in terms of GDP percentage, an indicator that tells if the country is acquiring goods and equipment to develop the productive capacity, we find that in 2000 it stood at 28%, today it is 15.3%, almost half! Meanwhile the profits of capital during this same period grew 60% more than the wages, that is, in a context of contraction of production a very significant decrease in the value of work.

Of course, this marked decline has national responsibles - the PS, PSD and CDS – the executors of the right-wing policy in our country. And these were exactly the devout advocates of common policies, the rules of the common market and the Euro, factors that exposed the national productive apparatus to a competitive pressure for which it was not prepared and contributed greatly to the escalade of the country's debt.

The current reality and the evolution of the country in the last 17 years confirm the correctness of these words. (...). The country de facto lost sovereignty. Lost monetary sovereignty, of course, lost budgetary and fiscal sovereignty and lost economic sovereignty. Many of those who advocated, and some still advocate, continuing like the maestro leading the orchestra while the ship sinks, the Euro and the various instruments of the European Union, argue that yielding sovereignty was the price to pay for access to this market of 500 million, and that this yielding was offset by European funds and common policies, namely the CAP. Now reality shows us exactly the opposite, besides Portugal increasing its condition as an importer country along with several other countries from the so-called periphery which were given the role of absorbing the production of the great European monopolies and exports from major powers like Germany, the balance of transfers from the European Union between 1996 and 2014 is lower by about 25 thousand million euros in the balance between entry and exit of dividends, distribution of profits and interest in this same period. That is, the countries of the European Union have already withdrawn from Portugal in this period, 50% more than the balance of the community transfers. How? Simple! Through the policy of privatization.

The development of the process of capitalist integration, the creation of the Euro, the Stability Pact and the successive Treaties - particularly since Maastricht to the Treaty of Lisbon - led, together with increasing economic dependence of countries like Portugal, to an unprecedented concentration of political power in the directory of powers with the emptying of the role of national sovereignty bodies and the creation of a political and ideological straightjacket now deepened with the package of economic governance, the European semester and the Budgetary Treaty. A straightjacket that does not allow any alternative policies to those framed by the pillars of the European Union. This factor, as we have been long denouncing, contributes to an almost full usurpation of national sovereignty and configures a serious attack on democracy by imposing relationships of domination almost of a colonial type and erasing the will of the people, as is being evident in the case of Greece. The Portuguese case also shows the extent to which these constraints are used to enforce the same policy and to condition the will of the people. As we have seen, Portugal is faced with very serious social and economic problems which undermine the dignity of the Portuguese people and the future of this country, but is being shown as an example of success of the application of the memorandum and the government itself uses up the ECB's manoeuvre of injecting huge sums in the financial system to boast of drop in interest rates on Portuguese debt, hiding that it continues every day to suck huge national resources and with the current level of growth will continue to increase. But while in this pre-election period the Government and even the European Union try to hide the sun with a finger, Portugal is placed under increased surveillance by the Commission in the scope of the European Semester process, for what reasons? The high level of indebtedness of the Portuguese economy and the continuing problems with the high level of unemployment. (...) Besides laying bare the speeches of success, this decision "condemns" Portugal precisely for the consequences of this "success" by imposing measures – the so-called reforms – by enhancing these same problems. That is, this is a vicious cycle that feeds big financial capital that continues to earn, and a lot, with the debt market and privatization at bargain prices in various sectors and pushing the country to an increasing dependence and further impoverishment of its population.

This is what was under preparation during the past years, in various aspects, including in the banking sector with the institution of the Banking Union and the Single Resolution Mechanism. A project that had an important experience in Cyprus and is intended to centralize the process of support to the financial sector and especially the protection of mega European banks.

But there is a problem, and that is the depth of the crisis at international level and the persistence of very serious problems in the so-called real economy across the whole European Union - as proven by the deflationary trend that the ECB and the Juncker plan try to hide - and the continuing spree of financial speculation. The evolution of the economic situation in France, Italy or Belgium leaves no room for doubt about the seriousness of the situation.

The advocates of the Euro try to launch a new rush ahead to further concentrate political power and economic power. Once again the right and social democracy unite in defence of the so-called federalism, arguing with the unfinished nature of the Economic and Monetary Union which lacks the features of a European economic government, a European fiscal policy and a European banking system. There is underway the so-called deepening of the Economic and Monetary Union (...). That is, an even greater enhancement of the pillars of neoliberalism and federalism. But if the consequences of the introduction of the Euro in countries with very different economic situations, with different levels of development and therefore with different needs, had the consequences it had, at this point, with the deepening of these asymmetries of development and even more different needs than in the past, then this path can only have the effect of intensifying the already described vicious cycle and condemning many countries to a status of a poor and underdeveloped region of an imperialist superstate (...).

It is based on this assessment that the PCP considers it necessary to put an end to this vicious cycle that the EEC/EU process feeds and the Euro enlarges.

As the reality in Latin America proves, the processes of cooperation and even of integration are not harmless from a class standpoint. The internationalization of the economy, the deepening of the international division of labour, the growing interdependence of States and their economies, among other factors, draw the States to these dynamics and processes. And so the question that arises is how to open those paths. The answer to the question lies on two levels that interrelate dialectically - national and international.

At this stage of reflection it is important to look at Greece and draw three lessons. The first is that a change of policy in favour of the people and workers, if only to deal with a humanitarian crisis, is inevitably confronted with the constraints of the European Union and in particular of the Euro.
The second is that in this confrontation the European Union remains totally unyielding and responds with an arrogant attitude and an action of blackmail and pressure unacceptable in light of the most basic principles of sovereignty and democracy.

The third resulting from these two is that the degree of development of the process of capitalist integration has reached such a high degree of heightening that the clash between the rights of the people and workers and the EU policies, and in particular of the Euro, that there seems to be no possible conciliation because these factors are increasingly antagonistic from a class point of view.

What to do then at the international level? It is obvious that the logical and ideal solution would be to reverse the causes of the serious situation faced by many countries and peoples. Measures like a European conference for the renegotiation of the debt according to the needs of workers, peoples and member States; like the adoption of programs to correct the effects of a mistake that was the establishment of a single currency in an economic and monetary area without conditions for this; like the approval of special structural funds as compensation for countries that suffered from speculation regarding their debts and with the intervention of the troika; like the convening of an intergovernmental conference for the revision of the Treaties and the repeal of the Budgetary Treaty and like the adoption of a European program for an orderly and controlled dissolution of the Economic and Monetary Union, are examples of paths that could be followed. But unfortunately this path is exactly the opposite of the path that the directory of powers and big business want to force. In other words, the European Union is proving PCP right when we say that the latter is not reformable, nor does it want to reform, quite the contrary.

Hence, another path of cooperation will inevitably have to assume a rupture with this process of capitalist integration and immediately and in the first place with the Euro. How to do it? By changing the correlation of forces necessary in each country to enable at the European level to reverse and defeat the process of capitalist integration and pave the way for a process of cooperation among sovereign States to enhance social progress and harmonious development, respecting mutually advantageous economic relations, defend peace and cooperation and defend democracy and the sovereignty in the various countries of Europe.

Those who claim that this is a very distant and even idyllic setting, we answer with the reality in other continents and with the remarkable progress achieved in particular and especially in Latin America, as indeed it is shown by the violent reaction of imperialism in trying to destabilize some of the main motors of these processes, like the States of Venezuela and Brazil.

But as I said, the relationship between the national and international level of struggle is dialectical. And in trying a change in the correlation of forces at the national level that allows initiating the process described above, the clashes, as stated above, will be inevitable. And in these clashes it is necessary to know exactly which path to follow.

That is why the PCP affirms that in Portugal one of the conditions for the development of an alternative patriotic and left-wing policy is to get rid of the constraints arising from the European capitalist integration and in particular from the Euro. It is a courageous stand, which always requires a broad popular support and participation, but it is the only possible position. Just as the capitalist restoration, the counter-revolution, the destruction of April achievements, the decades of right-wing policies, found in the integration in the EEC / EU and the Euro a factor of fundamental support for their class option, a patriotic and left-wing policy will surely and inevitably have to make a rupture with the capitalist integration and, in a first phase, with some of its core instruments like the Euro.

As was stated today, the many problems of Portugal are not confined to its association with the Euro. We have structural problems and deficits that need addressing, like the development of the productive apparatus, the recovery of domestic consumption by way of a significant improvement of wages and pensions or the solution of the Portuguese debt problem which is unpayable in the light of current conditions. So it is important to clarify that the recovery of monetary sovereignty - and by extension of the exchange, budgetary and fiscal sovereignty - is a necessary condition, but it is not the solution to all our problems. On the contrary, an exit from the Euro in the context of maintaining the options which have guided the right-wing policy would have negative consequences for the workers and peoples. And that's exactly why the main proposal of the PCP is the preparation and study for the exit from the Euro. A preparation that will prove that this exit will only bring benefits to Portugal if carried out in a framework of developing a set of other measures included in PCP’s political proposal of development of the national productive apparatus, restoration of rights, wages and pensions, valorisation and restoration of public services, diversification of the country’s economic relations, investment in training and valorisation of the workforce, investment in education and research, among many others.

An exit from the Euro, controlled, negotiated and assumed by the Portuguese State would enable to free the State from dependence on financial markets for their funding as last resource, would adjust monetary and budgetary policy of the State to the situation and needs of the country, would enable to end unacceptable restrictions to public investment and the financing of the social functions of the State and would create conditions for the promotion of national production and serious and determined combat against two of the greatest scourges of this country, the rate of unemployment and poverty.

But the exit from the Euro cannot be a sudden act, devoid of measures at the source to prevent immediate negative consequences and protect the workers, the people, their income and property. It will have to be integrated with another set of very specific measures.

Thus arises as the first and immediate need for a combination of three policy action lines.
The preparation of the country to exit the euro - as a form of liberation from constraints that would prevent the development of a patriotic and left-wing policy;

The renegotiation of the debt in accordance with the needs of the country, its sovereign development and according to the needs of the workers and people – an essential factor to ensure budgetary space and investment to put in motion the restoration of the national productive apparatus and the restoration of the living and purchasing conditions of the Portuguese. (...). A renegotiation which should result in a political and diplomatic action of the Portuguese State putting national interests and the interests of Portuguese above the interests of those who have already gained much with the usury and speculation on Portuguese public debt;

Finally, the need for reconsolidation of the national banking system and public control of the financial system, in particular by means of nationalization. A measure that would ensure effective regulation, supervision and oversight of banking, which would put serious difficulties to flight of assets and, in a broader perspective, could guarantee the fight against financial speculation, enabling to channel savings and financial resources for investment in domestic production .

These are three measures that constitute a first response to the severe situation of the country. Objectives to be applied in their own time, but thought out and prepared together, articulated and integrated into the broader formulation of an alternative patriotic and left-wing policy, the first stage of the alternative policy that the PCP advocates for Portugal of an advanced democracy, integral part of the struggle for socialism in Portugal.

Some people ask us if we are sure that our political proposal would solve all problems. We are well aware of the difficulties, boycott attempts and complexities that we will face. But there is another thing we know is that the current course of the country and of Europe itself is unsustainable, if this course of difficulties is maintained, impoverishment, submission, humanitarian catastrophe would be an inevitability. And since we do not believe in inevitabilities, then the path is the struggle, integrating our action and struggle at the national level with the action and struggle of all those who in other countries are willing to follow the path of the necessary ruptures to build a Europe of Workers and Peoples.

These are times are of struggle and great clashes. Capitalism is pushing Humanity to a rather dangerous situation from many different points of view, but the people resist in a tough struggle. The class struggle, the old class struggle, is more alive than ever. And it requires courage, uprightness, coherence, determination and solidarity. (...) As we tried to demonstrate in this debate and we know well what we want for Portugal, we know which path should be set, we have concrete proposals that are not only possible to materialize but are urgently needed. We are prepared to assume the highest responsibilities in this decisive phase of life of the Portuguese, in particular, the Government of Portugal.