Will the agreement between macron and merkel save europe from the abyss?

The COVID-19 pandemic, which had one of its epicenters in europe, widened the gap between the countries of southern and northern europe. It simultaneously made some EU members, such as z.B. Crisis-ridden italy, the battleground between the united states, china and russia. The proposal launched by the berlin-paris axis attempts to provide answers to these contradictions that threatened the fate of the european union.

The EU on the brink of the abyss

Already at the peak of the pandemic the EU was hit hard. With a severe economic crisis looming and economic recovery plans being put in place by each country to save its economy, the lack of solidarity and european disagreements may become even more apparent. The fact is that in the absence of a common response, uncoordinated national plans are coming to the fore, which could even point in opposite directions. This new situation threatens to bring the euro crisis, which has never been overcome, back to the surface. The single currency has not made it possible to strengthen cohesion between northern and southern europe, not to mention the measures taken in the wake of the sovereign debt crisis (2010-2012) after the 2008 financial crisis. But unlike the last european crisis, the current crisis affects all countries, including its strongest states. The various states have announced national stimulus programs that are necessarily inconsistent and risk exacerbating differences and increasing the fragmentation of the eurozone. As john springford of the centre for european reform explains:

There are several reasons why covid19 is more harmful for southern europe […] southern european countries tend to have higher debt and higher borrowing costs, making them less able to use their national accounts to protect businesses from bankruptcy or stimulate recovery. This means that northern european companies will be in a stronger position to capture greater market share when the pandemic subsides. 1

As a result of these contradictions, the national debt will also increase sharply, with the prospect that it will be very difficult for countries already in debt to raise funds for their stimulus programs. The extreme prospect of the explosion of the common currency by further speculation against italy, which will spread to spain and france, is not pure speculation. Although the ECB is trying to avoid this prospect by intervening further in the markets, the scale of the crisis casts doubt on the effectiveness of this strategy. It is in this critical framework that we are to understand the reaction of the franco-german axis and the turnaround of the german chancellor.

Merkel's turnaround: a hamilton moment in europe?

Berlin has long resisted french efforts to be the standard-bearer of a greater sharing of the tax burden for the countries of southern europe. The federal government has been immune to those arguments that claim that without this division, the stability of the eurozone is in danger. In this framework, the franco-german proposal for a 500 billion euro reconstruction fund to repair the economic damage of the coronavirus pandemic, which includes the principle of large transfers instead of loans to the hardest hit regions financed by the EU's community debt, is a major concession that speaks to the depth of the crisis.

For some, this is a "hamilton moment" – a reference to the first U.S. Treasury secretary, alexander hamilton, who succeeded in unifying the debts of the states with the most troubled treasuries from the war of independence. It was this historical reference that german finance minister olaf scholz used when defending the plan in an interview with the weekly newspaper die zeit. It is true that for the first time the two largest economies in the eurozone have agreed to propose a "common debt instrument" and that in order to service and guarantee hundreds of billions of euros in new loans on its own account, the EU will need more tax revenue than it currently receives. Therefore, the most enthusiastic representatives* see that the EU must raise new taxes on its own account for additional revenue, d.H. Pan-european taxes that should be based on economic activities that cross national borders: for example, carbon taxes or taxes on financial transactions.

But when it comes to europe, it is advisable not to praise the day before the evening. First of all, it is not a solidarity guarantee between european countries for the debts of the past, but the release of 500 billion euros of new money to fight the health, economic and social consequences of the coronavirus crisis. More importantly, the money will not come without strings attached: according to france and germany, EU support will be conditional on recipients pursuing "sound economic policies and an ambitious reform program". This simply destroys the nonsensical illusion of some leaders of southern europe, such as spanish prime minister pedro sanchez, that europe will bail him out in exchange for nothing. And while it is true that this money will not be returned directly by the governments that will use it, and that they will not continue to borrow from the markets, they are still loans taken out by the EU (through the commission) that must be repaid. For example, italy, which would be one of the main beneficiaries, will have to contribute to the repayment of the loans, albeit to a much lesser extent than germany (around 11% in the case of italy and 27% in the case of germany). More generally:

To create a true "hamilton moment," (EU) member states still have a long way to go in transferring significant fiscal powers to the european union, said shanin valle, a member of the german council on foreign relations. Nothing in the agreement even comes close… A real breakthrough for fiscal union would require the provision of much larger amounts of own resources… A fiscal union would typically have a single finance minister in charge of borrowing and spending. But the franco-german plan would do little to change the hybrid system of government in the european union. Just as national capitals will have the final say on the new EU taxes every seven years when the EU budget is adopted. 2

Between the internal fractures within the EU and the global geopolitical power struggle

The reality preventing progress toward a federal state is that the differences within the EU are structural in nature. The north-south divide is the deepest on the continent and today has italy as its weak link and, because of that country's weight, the entire foundation of the european union. As italian prime minister and former EU commissioner mario monti put it, "it's not about the dolce vita. It is a matter of life".

The coronavirus has deepened the same tectonic fracture that went through the EU during the euro crisis, with the debacle of greece as a spectacular warning for the future. The reality is, as heterodox economist juan laborda says:

… The basic problem of the european union lies deeper, because it was tailor-made for germany from its origins. On the one hand, the entry of southern europe into the euro, with the approval of its elites, has led to the destruction of our industrial sector, which was not yet ready for the free market. But that is not all. To date, germany has not sought to reduce its current account surpluses through policies that allow families to consume more. It also did not want to assume the consequences of the price risk of the investments of its banks. They diverted the savings of germans into assets and assets without conducting an appropriate risk analysis, forcing z.B. The spanish and irish to bail them out by socializing the losses of banks. To make matters worse, germany still has not accepted a fiscal union that would allow a process of communitization of debt within europe and taxation of mechanisms to resolve the bank bailout at the expense of creditors, not taxpayers. Ultimately, contrary to popular belief, the euro actually equals a subsidy to germany from southern europe, as it has become a pure creditor-debtor relationship. 3

Within this unequal relationship, the netherlands says out loud what germany thinks but doesn't say. Its economy is entirely based on exports, which account for up to 84% of national wealth, compared to 31% for france and italy, the lowest levels in the EU. Northern europe, with the exception of finland, has export percentages above the average GDP and is also a net contributor to the brussels budget. They are fully integrated into the german economy, in the case of the netherlands, for example, supplying much of the steel for the automobile industry or consumer goods through the port of rotterdam, a true german port of call on a par with hamburg. Just like the german government, or even more so, they therefore have no incentive to change the status quo. Your politicians, like the current prime minister mark rutte or the former prime minister jeroem dijsselbloem, serve, as the economist paul de gruawe recently pointed out, "… Anti-spanish, anti-italian prejudices and in general against latin and peripheral countries. They are convinced that they are financing the spanish feast and italian debauchery with their savings" 4 . The other side of this moral sermon is that this country has a tax system that is in no way inferior to the caribbean: the netherlands is a tax haven in the heart of europe. The daily el confidencial puts it this way: "multinationals save millions of euros that should be going into the coffers of governments in different countries if they channel the profits of their subsidiaries through the netherlands before this money is returned to the accounts of the parent company. Dutchman arjan lejour of the economic policy analysis bureau (CPB) of the dutch ministry of finance explains that the netherlands is responsible for 15% of global tax evasion. 'Assuming that global corporate tax evasion amounts to about $150 billion, about $22 billion is diverted via the netherlands,' explains the tilburg university professor of public finance, who is also a professor of public finance. "5 .

However, there is a major difference in this structural framework compared to the 2010-2012 crisis. At that time the epicenter was in the periphery: portugal, greece, ireland, cyprus. Therefore, germany tried to limit the bailouts to what was absolutely necessary, it had much more bargaining power to impose reforms in exchange for the "aid". In the current crisis affecting europe as a whole, germany has to maintain a difficult balance: on the one hand, it must facilitate the distribution of liquidity within the union, especially towards the south, in order to save the single market. Because this is the instrument that allows germany to export so much. At the same time, germany must keep the distribution of debt as low as possible in order to maintain its role as guarantor of last resort. Merkel's turnaround attempts to respond to this difficult equation. For this reason, in the face of praise from the french press for macron as the author of the agreement, merkel reaffirmed that germany is at the forefront of the EU thanks to its unique ability to make deals, due to its size, geographical location, economic success and strong general consensus in favor of the EU in europe. The much vaunted revival of the franco-german axis only serves to mask germany's growing dominance in the EU with parisian accents. Along with this more global element, the prospect of the collapse of northern italian industries (mechanics, chemicals, pharmaceuticals) integrated into german value chains poses a threat to major german industrial production, starting with the automotive industry.

But while these elements within the EU undoubtedly had a major influence on germany's decision, the ongoing geopolitical struggle over the pandemic may have been a crucial element. The crisis has reinforced previous trends: the return of keynesian government spending, the tendency to bring back certain sectors of production considered strategic, the intensification of the confrontation between china and the united states. The latter makes it difficult for germany to maintain a position of equal distance to maintain both markets (in terms of supply and sales markets). If merkel had hoped last year that germany would better protect EU interests by reaching an understanding with china, COVID19 has shown that such an understanding is impossible, just as the election of U.S. President donald trump had already shown the german chancellor that the U.S. Had become an unreliable ally. In this framework, the stated goal of france and germany is not only that the EU survives the economic crisis caused by the COVID19 pandemic, but that the EU emerges from it "stronger than before". For this they want to "act as europeans and join our forces in an unprecedented way".

Thus, the franco-german document, together with the novel proposal for a common debt described above, states that the challenges of the future require that the european union develop a "resilient and sovereign economy and industrial base" – as well as a "strong internal market" – and proposes that the european union become the true global advocate of an "ambitious and balanced free trade agenda with the world trade organization at its heart". Put even more bluntly:

France and germany reached a rare high-level political agreement monday to push for the creation of european industrial champions as part of the recovery from the coronavirus, charting a course that runs completely counter to the european commission's antitrust policy. Paris and berlin are in agreement after brussels blocked a rail merger between siemens and alstom in 2019 […] in contrast to capitulating to brussels, paris and berlin are doubling down on betting that the EU will change its competition rules. 6

But despite these grandiose statements, which testify to a new willingness on berlin's part to free itself from certain obstacles due to its contradictions and strategic limits, both internally and externally, this will most likely happen only very slowly and with great difficulty.

In summary, the european union is teetering between various internal and external forces on which its future depends and will depend largely on intergovernmental relations in the years ahead. While the bitter geopolitical struggle is drawing european states closer together, internal forces, such as nationalist impulses and the narrower economic interests of individual member states, are driving the EU apart. As we have shown, the internal forces are still tremendously strong and will not be easily overcome. Although the merkel-macron front reinforces the two internally – especially macron, who was hit hard (gilets jaunes, strike against pension reform), as well as showing a disastrous management of the health crisis – at the same time it opens a series of contradictions that can be exploited by the proletariat if it pursues an independent policy.

This is not our union: for the expropriation of the banks in the perspective of a europe of the workers*

As soon as the declaration of merkel and macron was published, the german trade union federation DGB and the five french umbrella organizations CFDT, CFTC, CGT, FO and unsa launched a platform of critical support for this initiative. In doing so, they regret "that the initial lack of coordination among member states led to uncoordinated decisions, thus diminishing the impact of the measures," and condemn "in particular the isolated xenophobic incidents on the franco-german border, which are a chilling reminder of the darkest chapter in our history."At the heart of your proposal, "we need an effective strategy for recovery that must go beyond the 500 billion euros now proposed by france and germany. The recovery plan must be accompanied by a significantly larger multi-year financial framework amounting to 2% of european GDP".

Taking advantage of the push from the franco-german axis, these trade union leaders* continue the reactionary illusion that they have displayed a thousand times in recent years, but which could prove fatal in the coming months – namely, that it is possible to "expand social europe" -, and added that support for the plan should not mean "abandoning the ambitions pursued by a green deal for a socially just environmental transition and a fairer, more sustainable economic model that puts people first. "7 . These different variants of reformism and class reconciliation assume that unity of interest is possible between the large multinationals for which the EU governs and the workers*. Given the role of the bureaucratic european trade union confederation (ETUC), whose function is to cloak the reactionary role of the EU in social terms – and which will only multiply given the scale of the current crisis – we will continue to denounce that it is an association of countries with interests opposed to those of the workers, that it has no progressive character and is not reformable. In other words, we will continue to charge that it is not possible to improve the EU without changing its class content and at the same time liquidating its imperialist character. Because under the burden of imperialism, after the collapse of the former USSR, many eastern european countries had to go into semi-colonial dependence to the EU, as well as all those peoples on the capitalist periphery, forced to emigrate due to the policy of plundering the various imperialisms, to find themselves on the borders of "fortress europe". This means we need to build something completely different.

In view of this openly reactionary way out and the failures of capitalist globalization, the various variants of sovereignism see their theses confirmed. But the economic patriotism of the old imperialist powers, as in the past, can only lead to more wars. Now we are witnessing the incredible paradox that, given that the big bourgeoisie internationalized its capital and took up the banner of globalization (without ever leaving its national base), the sovereigntists today present the idea of the nation as a novelty. However, as trotsky said against the rise of reactionary nationalism in the 1930s:

Patriotism in its new – more precisely: civic – sense is a product of the 19th century. However, the economic development of mankind, having brought down the medieval particularism, did not stop at the national framework. World trade grew in parallel with the formation of the national economy. The trend – at least for the more advanced countries – has been to shift the focus from the internal to the external market. Was for the 19. While the twentieth century was characterized by linking the fortunes of the nation with those of the economy, the basic tendency of our century is the growing contradiction between the economy and the nation.

This contradiction, after the phenomenal internationalization of productive forces that has developed since the second world war and that has accelerated in recent decades, is now incredibly acute. It is no coincidence that the merkels, the macrons and other leaders of the bourgeoisie, every time they use the word "sovereignty", use it in the context of an extension of the sovereignty not of france or germany, but of the europeans. The idea that it is possible to return to the national framework – given that the world economy is dominated by large poles – will prove as effective for the organization of production as the national borders that the right-wing sovereigntists have erected to prevent the spread of COVID19. This task is not impossible, however, given the degree of europeanization of productive forces, supranational links at many levels, tendencies toward cultural unification; all these are real advances that should not be sacrificed on the altar of nationalism, protectionism, and probably a new militarism as well. As trotsky said:

Theoretically, this task can be formulated as follows: how to achieve the economic unity of the european territory with complete freedom in the cultural development of its peoples?? How to insert the united europe in a balanced economy of the whole world? The solution of this question will not take place on the way of the deification of the nation but, conversely, on the way of the complete liberation of the productive forces from the fetters which the nation-state imposes on them.

Only the proletariat, the only truly universal class, can solve this task in a progressive way and in the service of all humanity, allowing an expansion of technological advances, respecting nature and in the service of reducing the burden of human labor. This is the meaning of our struggle for a united and socialist europe, a europe of the workers.

In the next period, taking into account the weight that the issue of the debt burden and the parasitic revenues of the financial system will acquire, we must raise loud and clear the expropriation of the big private banks, the hedge funds and the capitalist insurance companies, as well as the nationalization of the credit system. The following excerpt from the transition program is more relevant than ever in the face of the crisis, which has one of its most outstanding facets in the enormous and monstrous development of financial capital:

Imperialism means the domination of finance capital. Next to corporations and trusts, and often above them, banks concentrate in their hands the real command over the economy. In their structure, the gangs reflect in a concentrated form the whole structure of today's capitalism: they combine the tendencies to monopoly with the tendencies to anarchy. They organize technical wonders, gigantic companies, powerful trusts, and they also organize inflation, crises, and unemployment. Impossible to make even one serious step forward in the fight against the despotism of the monopolies and the capitalist anarchy (which complement each other in their work of destruction) if one leaves the control levers of the banks in the hands of rapacious financial magnates.
In order to create a unified investment and credit system that operates according to a rational plan that meets the needs of the entire nation, it is necessary to combine all banks into a single national institution. Only the expropriation of private banks and unification of the credit system in state hands will provide the state with the necessary, effective – and d. H. Material – not just imagined bureaucratic – means for economic planning. The expropriation of the banks does not mean in any case the expropriation of the small bank deposits. On the contrary, for the small savers, the united state bank can create more favorable conditions than the private banks. Likewise, only the state bank can give preference to the peasants, the artisans and small merchants, d. H. Get cheap credit. More importantly, the whole economy, especially heavy industry and transportation, will be managed by a single financial staff to serve the basic needs of workers and all other working people.
However, nationalizing the banks will only bring these favorable results if the state power itself passes completely from the hands of the exploiters into the hands of the workers.

A campaign for the expropriation of the banks on the part of the radical left would make it possible to raise an independent voice against the bourgeoisie, whose various proposals are designed to maintain the current domination of big finance and the capitalists*, as is the case with the merkel-macron agreement. At the same time, such a proposal would turn against the nationalists* who only blame brussels, but in the worst case continue with the same neoliberal policies, as was the case with salvini in italy, or as is even loud from the left camp when in france the "french sovereignty" was raised against germany. Those proposals defend national capitalists* as not participating in the orgy of debt and exploitation of their peoples and the plundering of colonies and semi-colonies. Such a campaign, which z.B. Which could be carried out in france by the NPA and the LO, would bring the workers* closer to the fact that only a government of the workers* of their own can offer a way out of this catastrophic situation which, beyond all the plans and agreements of the summits between the capitalist governments, will hit the entire old continent hard.

1. "The EU recovery fund is a historic step, almost", john springford, financial times 21/5/2020.
2. "Is the franco-german plan europe's 'hamiltonian' moment??", financial times 21/5/2020.
3. "Como el sur de europa ha financiado a alemania y holanda", juan laborda, vozpopuli 14/5/2020.
4. Ebda.
5. Furthermore, the newspaper continues: "how is this achieved? Using the dutch sandwich. Money flows through shell companies – physical offices with no employees or real activity – set up by the multinationals themselves in the netherlands. These funds enjoy a perfectly legal "tax cut bath" in the eyes of the state. Since most european countries have regulations that make it difficult to transfer profits directly to tax havens, companies first shift them to the netherlands, where they are taxed – but much less than if they had declared the income in the country of the actual headquarters or subsidiaries located in other countries. And once legalized in this way, the profits can already be transferred to the company's chosen tax haven where they will swell the clean capital. The total of these tax losses is at least 22 billion.""Como holanda deja sin impuestos a media europa gracias a un 'sandwich'", el confidencial 29/4/2020.
6. "Macron and merkel defy brussels with push for industrial champions," politico 18/5/2020.
7. "Seule une reponse europeenne ambitieuse pourra nous eviter des annees de croissance morne, voire de recession," le monde 20/5/2020