Europe after the Global Financial Crisis

Marcello Musto

In 2007, the United States was hit by one of the gravest financial crises in history, which soon affected Europe and plunged it into a deep recession. As the soaring public debt increased the dangers of insolvency, many countries had to resort to credits from the (so-called) Troika, consisting of the European Commission, the European Central Bank, and the International Monetary Fund. Nations at risk of default were granted loans in return for the introduction of rigid austerity policies, besides which the ‘restructuring’ measures of the 1990s seemed quite restrained.

The very term ‘structural reforms’ underwent a radical semantic transformation. Originally, in the vocabulary of the workers' movement, it had indicated a slow but steady improvement in social conditions, but now it has become synonymous with a profound erosion of the welfare state. The pseudo-reforms in question–regressions would be a better word–have cancelled a host of achievements and re-established legal and economic conditions reminiscent of the rapacious capitalism of the nineteenth century. This was the setting for a terrible recession.

The dominant classes fought with great determination against the subaltern classes, while the resistance of the latter has often been feeble, disorganised and fragmented. This has been the case both in the most developed capitalist heartlands, where the curbs on workers' rights have exceeded anything imaginable thirty years ago and in the periphery of the world economy, where corporations (many of them multinational) exploit their workforce in extreme forms and ruthlessly strip countries of their precious natural resources. This has led to a huge growth in inequalities and a major redistribution of wealth in favour of the wealthiest inhabitants of the planet. Social relations have undergone profound changes, driven by job insecurity, competition among workers, commodification of every sphere of life, social warfare among the most impoverished strata, and a new, more invasive capitalism that corrupts people's lives and consciences in ways never seen before.

At the same time, the crisis in Europe has rapidly spread to the world of politics. In the last thirty years, decision-making powers have been increasingly transferred from the political to the economic sphere; economics now dominates politics and is often depicted as a separate realm unsusceptible to change, setting the agenda and ensuring that the key choices are outside popular control.

What used to be seen, not so long ago, as a field for political action is now governed by economic pseudo-imperatives, which, behind their ideological mask of non-politics, actually present a dangerously authoritarian form and a totally reactionary content. The most emblematic case in point is the Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union (TSCG)–the ‘fiscal compact’, as it is widely known, that rammed the obligation of balanced budgets into the law of EU countries.

In building a wall to prevent national parliaments from taking independent decisions on political-economic objectives, the TSCG thus serves to undermine the social state in the most heavily indebted EU countries and threatens to deepen still further the economic recession.

Already the shift from proportional electoral systems towards others based on majority ‘bonuses’ of one kind or another, as well as anti-democratic tendencies to strengthen the executive against the legislative power, have undermined the representative character of national parliaments. But this latest transfer of power from parliament to the market and its oligarchic institutions is the gravest impediment to democracy in present times.

Stock exchange indices, rating-agency assessments and the yield spread between government bonds are huge fetishes for contemporary society: they have acquired greater value than the people's will. Hence the decisions that cause the most harm to the mass of the population are presented as absolutely indispensable for the ‘restoration of market confidence’.

At the most, politics is summoned to lend support to economics, as in the case of the banking bailouts in the US and Europe in the wake of 2008. The representatives of high finance needed public intervention to mitigate the devastating effects of the most recent capitalist crisis, but they stoutly refused to reopen discussion on the underlying rules and economic options.

Not even the rotation of center-right and center-left governments has changed the basic social-economic direction since it is increasingly economics that determines the formation, composition, and purpose of the administrations holding the reins of power. Whereas, in the past, the main factor was the large sums of money given by ‘vested interests’ to the governments or parties they sought to control, as well as the shaping of the mass media in their service, the key element in the twenty-first century is, rather, the edicts issued by international institutions.

The clearest evidence of this came with the season of ‘technocratic governments’. Luca Papademos and Mario Monti were appointed as prime ministers of Greece and Italy respectively, without the benefit of elections. During those years, some forces in the Socialist International took a path that ended in a similar way. Ideologically convinced that there was no alternative to neoliberalism, they allied with the forces of the European People's Party (EPP) group of center-right parties and uncritically adopted the main elements of its approach to the economy and society.

The prototype of this tendency was the Grosse Koalition in Germany, the agreement whereby the German Social Democratic Party, in supporting Angela Merkel as chancellor from 2005 to 2009 and from 2013 to the present, has to all intents and purposes given up its autonomy. Other experiments in ‘national unity’ have occurred in southern Europe.

Since the election of Jean-Claude Juncker and Ursula von der Leyen as presidents of the European Commission, the grand coalition between the European People's Party and the Progressive Alliance of Socialists and Democrats (S&D) has continued to govern the main institutions of the European Union.

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Frontier
Vol 57, No. 5, Jul 28 - Aug 3, 2024