The Euro: Sharpening capitalist rivalries

The summit of European Union heads of state in May was intended as a solemn finale to the introduction of the common currency, the Euro. The meeting, held in Brussels, was supposed to celebrate their victory over "nationalist egotism". The German Chancellor, Helmut Kohl, declared beforehand that the new currency was above all the incarnation of peace in Europe for the next century, and in particular an end to the historic and bloody rivalry between Germany and France.

 

But facts are stubborn, and it is often when least expected that they blow to pieces the fraudulent ideas that the ruling classes invent to deceive both themselves, but especially those that they exploit. Instead of an expression of mutual confidence and peaceful collaboration between European states, the Brussels conference quickly turned into a fisticuffs over an apparently secondary question: when should the Frenchman Trichet replace the Dutch Duisenberg as President of the new European Central Bank (ECB) - an arrangement which itself violates the solemnly adopted treaty on the Euro.

 

When the dust settled, and the French President Chirac had finished boasting how he had imposed Duisenberg's replacement by Trichet after four years, and the German Finance Minister Weigel was no longer contradicting him with the assertion that Bonn's Dutch favourite could perfectly well stay for eight years "if he wanted", an embarrassed silence fell over the European capitals. How to explain this sudden relapse into a supposedly anachronistic spirit of national "prestige"? Why had Chirac endangered the common currency's introductory ceremony for no other reason than to see one of his compatriots at the head of the ECB, especially when the man in question has the reputation of being a clone of Bundesbank President Tietmeyer? Why did Kohl hesitate for so long to make the slightest concession on such an issue? Why was he so strongly criticised in Germany for the compromise that he eventually accepted? And why did the other nations resign themselves to such a dispute, despite their unanimous support for Duisenberg? After much head-scratching, the bourgeois press came up with an explanation, or rather with several explanations. In France, the Brussels argument was put down to German arrogance; in Germany, to inflated French national pride; in Britain, to the madness of the continentals who are unable to stick to their good old traditional currency.

Are not these excuses and "explanations" a proof in themselves that a real conflict of national interest was played out in Brussels? Far from limiting economic competition between the participating national capitals, the introduction of a single currency means an intensification of these rivalries. More especially, the conflict between the "good friends" Kohl and Chirac expresses the French bourgeoisie's disquiet at the growing economic and political strength, and aggressiveness, of its German crony. Despite all Kohl's diplomatic caution, Germany's economic and imperialist rise cannot but alarm its French "partner". Foreseeing his own coming retirement, Kohl has indeed left the following message to his successors: "The expression "German leadership" should be avoided, since it could lead to accusations that we are trying to win hegemony in Europe"[1].

Increasing aggressiveness of German capitalism

In fact, May 1998 saw two important developments which concretise Germany's intention to impose economic measures that will ensure the dominant position of German capitalism at the expense of its weaker rivals.

 

The first is the organisation of the European currency. The Euro was originally a French project, forced on Kohl by Mitterrand in exchange for French consent to German unification. At the time, the French bourgeoisie rightly feared that the Frankfurt Bundesbank would use the leading role of the Mark and a policy of high interest rates to force the whole of Europe into financing German re-unification. But once Germany threw its whole weight into the project (without which the Euro would never have existed), what finally emerged was a European currency corresponding to German, not French, notions and interests.

 

After the Brussels summit, the German bourgeoisie's view was expressed in the Frankfurter Allgemeine Zeitung: "From the independence of the Central Bank and its establishment in Frankfurt, to the stability pact to support the Central Bank and the rejection of an "economic government" as a political counterweight to the ECB, in the final analysis France has been unable to impose a single one of its demands. Even the name of the single currency laid down in the Maastricht Treaty, the Ecu - which is a reminder of a historic French currency - has been abandoned on the road to Brussels in favour of the more neutral "Euro" (_) As far as its political prestige and ideas are concerned, France has come away empty-handed. Chirac played rough in Brussels in order to wipe out this impression, at least partially" (5th May, 1998).

The second important expression of Germany's aggressive economic expansion lies in the international buy-out operations being conducted by the main German motor manufacturers. The merger of Daimler-Benz and Chrysler will create the world's third largest car builder. Unable to survive as the third US manufacturer behind General Motors and Ford, and having already been saved once from bankruptcy by the American state, Chrysler had no choice but to accept the German offer, despite the fact that this gives access to its shares in NASA projects and the US armaments industry to Daimler, which is already Germany's biggest armaments and aeronautics manufacturer. The ink on this agreement was barely dry when Daimler announced its intention to buy Nippon Trucks. Although Daimler is the world's largest truck manufacturer, it still only holds 8 % of the important Asian market. Here again, the German bourgeoisie is in a position of strength. Although Japan knows full well that the Stuttgart giant intends to use this merger to increase its market share to 25 % - at Japan's expense' - it can hardly prevent the agreement, since the once proud Nippon Trucks is facing bankruptcy.

 

To complete the tableau, there is the dispute over the purchase of the British Rolls-Royce from Vickers, currently being fought out between two German companies, which in the light of history places the shareholders before an unpleasant choice. A sale to BMW would almost be a sacrilege to the memory of the Battle of Britain, where the Royal Air Force equipped with Rolls-Royce engines fought off a Luftwaffe largely supplied by the same BMW. "The idea of BMW owning Rolls-Royce breaks my heart" declared one venerable gentleman to the German press. Unfortunately, the only other choice is Volkswagen, a company created by the Nazis and which would oblige Her Majesty the Queen to get around in a "People's Car".

 

This is only the beginning of a process which will not be limited to the car industry. The French government and the European Commission in Brussels have just concluded an agreement on a plan to save the Credit Lyonnais, one of the main French banks. One of the plan's principal objectives is to prevent the most profitable parts of the Credit Lyonnais from falling into German hands[2].

During the Cold War, Germany, a major capitalist nation, was divided, militarily occupied, and deprived of complete sovereignty. It was politically unable to develop an international presence for its banks and businesses to match its industrial strength. When the world order born at Yalta collapsed in 1989, the German bourgeoisie no longer had any reason to tolerate this state of affairs, at least as far as business was concerned. Recent events have confirmed that the thoroughly democratic successors to Alfred Krupp and Adolf Hitler are just as capable when it comes to pushing their rivals out of the way. Scarcely surprising that their capitalist "friends" and "partners" should be so irritated.

The Euro: a tool against "look after number one"

Kohl understood earlier than his German colleagues that the disintegration of the imperialist blocs, but also the anxiety aroused by the re-unification of Germany, were likely to provoke a new wave of protectionism and an economic "look after number one" - something that until then had been restrained by the discipline of the American bloc. It was clear that Germany, as Europe's greatest industrial power and champion exporter, risked being the main victim of any such development.

 

The majority of the German bourgeoisie - so proud of the Deutschmark and so scared of inflation[3] - was brought round to Kohl's position by the European monetary crisis of 1993 (which had begun a year before when Britain and Italy left the European Monetary System). The crisis was provoked by substantial international currency speculation - itself an expression of capitalism's chronic and general crisis of overproduction. It almost led to an explosion of the EMS set up by Helmut Schmidt and Giscard d'Estaing to prevent the uncontrolled and unforeseen currency fluctuations which threatened to paralyse intra-European trade. As the crisis advanced, the inadequacy of the system was revealed. Moreover, in j 993 the French bourgeoisie - which often demonstrates more determination than good sense - suggested replacing the German Mark with the French Franc as Europe's reference currency. This proposal was certainly unrealistic, and was unanimously rejected by France's "partners", notably Holland (Duisenberg's country'). All this convinced the German ruling class that there was a danger of an uncontrolled free for all. This is why they rallied round their Chancellor. The common currency was thus intended both to put an end to monetary fluctuations between the various European "trading partners", and to counter a potential tendency towards protectionism and the collapse of world trade. After all, Europe is, with the United States, the main centre of world commerce. Unlike America, however, Europe is divided into a multitude of national capitals. As such, it is a potential weak link in the chain of world trade. Today, even the most convinced advocates of a "United Europe", like the German CDU and SPD, are convinced that there is no alternative to a "Europe of nations"[4]. However, they can set up the Euro in order to limit the risks at the level of world trade. This is why the Euro is supported by most fractions of the bourgeoisie, not just in Europe but also in the USA.

But if there is such widespread support for the Euro, how does this express a sharpening of capitalist competition? What is the particular interest of the German bourgeoisie? Why is the German version of the Euro an expression of aggressive self-defence against its rivals? In other words, why does it annoy Chirac so?

Euro: the strong impose their rules on the weak

It is well known that during the last thirty years, the crisis has hit the capitalist periphery more quickly and more brutally than it has the heart of the system. However, there is nothing natural or automatic about this. The greatest and most explosive accumulation of capitalist contradictions lies precisely at the heart of the system. In this sense, the fact that after 1929 it was Germany and the USA, the two most developed capitalist countries that were the first victims and bore the brunt of the world crisis, corresponds much more to the natural and spontaneous course of decadent capitalism. During the last three decades, by contrast, we have witnessed the economic collapse of Africa, Latin America, Eastern Europe and Russia, and lately of South-East Asia. Even Japan is beginning to waver. Despite everything, North America and Western Europe, and more particularly the USA and Germany, have been better able to resist. This has been precisely because they have been able to prevent, up to a point, the economic free for all which dominated the 1930s, and because they have been able to impose their own rules on capitalist competition. These rules are there to ensure the survival of the strongest. In capitalism's shipwreck, they ensure that it is the weakest pirates that get tossed overboard first. The bourgeoisie presents these rules as being intended to civilise, or even eliminate, competition between nations. In reality, they are a brutal means to organise competition to the benefit of the strong. As long as its imperialist bloc remained, the USA imposed the rules by itself. Today, although the USA is economically dominant worldwide, within Europe it is more and more Germany that makes the rules, at the expense of France and the others. Eventually, this will lead Germany to a head-on confrontation with the USA itself.

The conflict in Europe over the Euro

It is true that the common European currency serves the interests of all its participants. But this is only a part of the reality. For the weaker countries, the protection offered by the Euro is much like the generous protection that the Mafia offers its victims. Confronted with Germany's superior exporting power, most of its European rivals have, during the last thirty years, had regular recourse to currency devaluations (eg Italy, Sweden, Britain), or at least to a policy of economic stimulation and a weak currency (France). In Paris, the conception of fiscal policy "at the service of economic expansion" has been no less a state doctrine than the Bundesbank's "monetarism". At the beginning of the 1930s, such policies, and abrupt devaluations in particular, were amongst the European nations' favourite weapons at Germany's expense. Under the new Germanic law of the Euro, this will no longer be possible. At the heart of this system is a principle that France finds it hard to swallow: the principle of independence for the ECB, which in fact means its dependence on the policy and support of Germany.

 

The weaker countries - Italy is a classic example - have slight means to maintain a minimum of stability outside the Euro, without the access to the capital, currency markets, and competitive interest rates that the system offers. Britain and Sweden are relatively more competitive that Italy, and less dependent on the German economy than France and Holland, and will be able to survive longer outside the Euro. But within its protective walls, the others will have lost some of their weapons against Germany.

Germany could compromise on the issue of Trichet and the presidency of the ECB. But it has accepted no compromise on the organisation of the Euro, any more than it has on the international expansion of its banks and industries. It could not be otherwise. Germany is the motor of the European economy. But after thirty years of open crisis, even Germany is a "sick man" of the world economy. It is enormously dependent on the world market[5]. The number of unemployed is approaching that of the 1930s. And it has a further, extremely expensive, problem to resolve: the economic and social costs of reunification. It is decadent capitalism's irreversible crisis of overproduction which has shaken the German economy to its core, forcing it, like the other capitalist giants, to fight mercilessly for its own survival.

Kr, 25th May 1998

 

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[1] Declaration by Kohl at a meeting of the Bundestag parliamentary commission on the finances and business of the European Union, 21/4/98.

[2] It is worth noting the important role played by the highly respectable Trichet in the Credit Lyonnais affair: that of hiding the bank's insolvency from the public for several years.

[3] The German bourgeoisie has not forgotten 1929, but nor has it forgotten 1923 when the Reichsmark was not worth the paper it was printed on.

[4] The world's division into competing national capitals can only be overcome by the world proletarian revolution.

[5] According to the OECD, Germany's exports were $511 billion in 1997, second only to the USA with $688 billion, and well ahead of Japan with $421 billion.