Bloodless Coup d’Etat: The European Union’s Response to the Eurozone Crisis


The European Union presents itself to the world as an example for others to follow, a model of ‘good governance’ and democracy, and an ethical player on the world stage. Much of the academic debate surrounding it revolves around the question of whether the EU can be seen as a ‘normative power’, an idea promoted and regularly revised and discussed by the political scientist Ian Manners, his admirers and critics.1 Fewer and fewer progressive-minded people who live within its borders, however, maintain the view, once far more widespread, that the Union represents some sort of radical departure from the traditional behaviour of nation states as they confront each other on the international stage. Enthusiasm for the EU amongst working people has never been widespread, but there has always been a coterie of ‘left’ intellectuals, centred around most of the continent’s Green parties and the remnants of ‘Eurocommunism’ (in groups such as Greece’s Synaspismos and the rump of the PCI2) who have seen the EU as a potentially unifying force for the labour movement.3

Cross the Atlantic, however, and a positive view of the EU on the left of the political spectrum is much more widespread. Indeed, though the anti-capitalist left in North America has kept pace with the developing critique of the European integrationist project, move a little closer to the mainstream and Europhilia is almost a mark of a progressive, social democratic, open-minded worldview. This is based on a serious misunderstanding of the EU’s nature, perhaps best exemplified by Jeremy Rifkin’s The European Dream, a book which in its combination of factual inaccuracy and whimsical speculation is reminiscent of starry-eyed Western pro-Soviet travel writing of the 1930s. Rifkin understandably praises state social and welfare provision in northwestern Europe, but without noticing that his good friends at the European Commission are busy dismantling just that.4

For many left-leaning US intellectuals, the European Union simply offers a chance, as the Soviet Union once did, to offer ‘devotion to something afar, from the sphere of our sorrow.’5 The reasons for this are clear. The European Union has, as yet, no real armed forces of its own. It projects an image of itself as a promoter of peace, an image powerfully backed up by the apparent empirical evidence. Since 1945, peace has indeed been the base condition of Europe, with exceptions in the main constituting only of highly localized civil conflicts. True, the death throes of Yugoslavia were rather too protracted and cost too many lives to be covered by this description, and there has been one recent, mercifully brief war between two European nations (Russia and Georgia). But they, along with Serbia, Bosnia, Croatia, and the Kosovo protectorate, are all outside the European Union.

The EU also claims to be a guarantor of democracy. This is perhaps more believable if you live in one of the numerous member states which have lived relatively recently under authoritarian rule, or in an Italy which has appeared for some time to be teetering on the edge of fascism. While the main theme of this paper is the way in which the European Union has narrowed the policy space available to the member states’ democratically elected governments, it may plausibly be argued that the EU’s existence also makes less likely the abolition of formal democracy and establishment or restoration of outright dictatorship. As things stand, the EU is certainly, and is likely to remain, a club of twenty-seven parliamentary democracies, but the story does not end there.

In 2005, in two referenda separated by only a couple of days, the French and then the Dutch people comprehensively rejected a European Constitutional Treaty which they perceived as a major step towards a federal state.6 This should, according to the EU’s own rules, have killed the proposals. Instead, the document was simply re-presented, virtually unchanged, and the French and Dutch, as well as the British and others who had been promised a referendum on any major constitutional change, were denied the opportunity to vote on it again. The Irish Republic's people more recently rejected the substantially identical text, now known as the Lisbon Treaty, but were simply forced to vote again. The EU then poured massive resources into a 'Yes' campaign which took the form of organised bullying.7

The failure to respond to the treaty’s rejection by three separate electorates totalling around 85 million voters is symptomatic of the EU’s indifference to popular concerns. As is often the case with political elites, the Eurocracy seem to speak only to each other, developing a self-image wholly out of touch with the views of the general population, which range in the main from hostility to indifference. Again, however, there is much more to the famous ‘democratic deficit’ than that. The real problem is structural. Successive treaties from Maastricht in 1992 to Lisbon in 2010 have established an institutionalized neoliberalism scarcely amenable to reform. To change it will require revolutionary action, a sequence of events as difficult to imagine as it would have been in Cairo until very recently, or in Berlin a quarter-century ago.

This ‘democratic deficit’ is no accident of design, but a quite deliberate means to destroy the political results of two centuries of struggle, in order that the economic and social achievements of resistance might follow them into the dustbin of history. There is some truth to the proposition that Europe has a special social model which guarantees economic security. It is the fruit of three things: a protracted struggle by working people and their organisations; a class and international alliance which resulted in the defeat of Nazism; and fear of the Soviet Union and the attractions of its model, a fear born when upwards of a third of French and Italian workers were voting Communist. The resultant social democratic post-war settlement offered genuine security and the chance for the mass of the population to lead decent, even prosperous lives. Despite a sustained assault, it is still largely intact in most of northwestern Europe and has been of particular benefit in providing an automatic ‘stimulus package’ in the face of the current crisis. The model has produced societies which are as near to being genuine representative democracies as will ever be possible under capitalism. It has enabled a relatively high degree of social mobility based on broad access to education, socialized and solidarity-based healthcare systems, progress away from extremes of gender inequality, and the freedom to organize. The model, however, was developed entirely at national level and is threatened by European integration as designed and implemented by the current political hegemony.

The basic structures of the EU are technocratic much more than they are democratic. Macro-economic policy is determined by the European Central Bank (ECB), which is defined in the Lisbon Treaty and its predecessors as a body entirely beyond the influence of elected politicians. The European Court of Justice (ECJ) takes binding precedent decisions and is equally impervious to electoral influence. The unelected European Commission has the exclusive power of legislative initiative, and within a broad mandate laid down by the member states, exercises day-to-day control over external trade. The European Parliament has limited powers, and the Council of Ministers and European Council meet behind closed doors.8 At every treaty revision, moreover, voting weights are skewed ever more in the direction of the big member states at the expense of the small.

This undermining of democracy has a number of purposes, principal amongst which is the step-by-step creation of a federal state which would never win approval if it were put to the test of popular consultation. Such a state would be merely a means to an end. The nature of the goals which it encompasses is revealed most starkly in the ongoing, seemingly inescapable crisis of the euro, and in the European Union’s seizure of the opportunity this crisis has presented to complete the job of recording a massive victory in the class war, one which would be disastrous for Europe’s working people and indeed, anyone from outside the ruling-class elite.


Eurozone crisis

As a recent report from the progressive economics think-tank Research on Money and Finance (RMF) Eurozone Crisis: Beggar thyself and thy neighbour9 argues, the Greek crisis is ‘fundamentally due to the precarious integration of peripheral countries in the eurozone.’ Joseph Stiglitz, who has acted as an adviser to Greece’s centre-left government as it seeks ways out of the crisis, described one aspect of this early in 2010:

Greece has been condemned by European officialdom for its huge deficits. "No government or state can expect from us any special treatment," comes the warning from Jean-Claude Trichet, president of the European Central Bank. But Trichet failed to note that there had long been a double standard – in effect two Maastricht treaties, one for the large and powerful countries, another for the smaller and less powerful. When France broke the EU edict not to let the deficit exceed 3% of GDP, there were strong words, but little else.10

Greece was the victim of an attack by foreign financial institutions, and the EU took the side of those institutions rather than of its member state, revealing its true nature. Far from being a means whereby individual states can pool their resources to their mutual advantage, it is a structure which enables more powerful countries to control their weaker neighbours, and international disciplinary neoliberalism to impose its diktat.

Speculative mortgage lending and trading of derivatives from the beginning of the century created a 'bubble' which precipitated a global crisis and recession. In a true union the economically weaker member states would have been bailed out by their stronger partners. Brussels and Frankfurt would be putting their expertise at the Greek people’s disposal to help them find a socially equitable way out of their debt-related crisis, along the lines suggested by the recent broadly-backed Call for an Audit Commission on Greek Public Debt.11 Instead, the EU threatened to hang Greece out to dry if it did not accept what looks a lot like a classic Structural Adjustment Program – in other words, shock treatment. The country’s unemployment rate stood at 12.5% in August, 2010, lower than Ireland or Spain but up from 7.5% two years previously. By March, 2011, in the wake of a downgrading by credit agencies, Greece had seen its jobless total reach almost 15%.12

Stiglitz argues that Germany’s export surplus is largely responsible for the crisis afflicting Greece, Portugal and Spain. Having been the most enthusiastic backer of a currency union which has these countries in an economic straitjacket, the EU’s biggest member state has failed to develop its domestic market, allowing wages to stagnate, while flooding the rest of the Union with its exports. It is doing, in fact, more-or-less what China is berated for doing. China, however, has not been able to establish a single currency which locks its trading partners into what is effectively a partnership with an undervalued Deutschmark.13

Since their currencies were abolished and entered the euro at overvalued rates (ostensibly considered necessary to counter the threat of inflation), peripheral economies such as Greece have acquired massive deficits. Growth, as in the US, has been based on consumption financed by debt and speculation. Although wages have been subject to downward pressure in the peripheral countries too, the wage gap between Germany on the one hand and poorer member states on the other has narrowed, again adversely affecting the latter’s competitive position. Labour costs form a component of the final price of goods, so the relationship between wages in countries competing for markets is indeed a factor in determining competitiveness. German economists confirm that ‘real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined.’14 Former German Federal Finance minister Heiner Flassbeck, who helped oversee his country’s transition to the euro, sees these disparities as lying at the root of the Eurozone crisis. For while German wages stagnated, in Greece, during the first decade of this century:

Real compensation to labour increased at 1.9 per cent per employee annually, a little less than productivity. Unit labour costs, the most important measure of international competitiveness between members of a currency union, advanced at a rate of 2.8 per cent per annum and reached a level of 130 in 2010 if 2000 is 100.15

The comparable figure for Germany is 105. The gains experienced by Greek workers do not reflect either folly or greed on their part, as the increases actually failed to keep pace with productivity growth. What this means is that ‘the production of a comparable good or service that was produced at the same cost in 2000 in all the member states of EMU [i.e. the Eurozone] and could be sold at the same price now costs 25 per cent more if it comes from Greece than if it is produced in Germany. The difference is similar for Spain, Portugal and Italy.…’16 It is not wage increases on the periphery which per se cost jobs in Greece and other poorer Eurozone states, therefore, but the success which the German bourgeoisie has had, aided by a compliant trade union leadership, in holding down wages at home.17

Rising unemployment throughout the Eurozone has occurred despite what we were told would be the effects of the EU's 'European Employment Strategy', which has encouraged greater labour market flexibility, precarious contracts and part-time and temporary work18. This, together with a number of EU measures and European Court of Justice (ECJ) rulings, have weakened organised labour and exerted downward pressure on pay and conditions. As Lapavitsas et al explain:

German competitiveness has thus risen further within the eurozone. The result has been a structural current account surplus for Germany, mirrored by current account deficits for peripheral countries. This surplus has been the only source of dynamism for the German economy throughout the 2000s. In terms of output, employment, productivity, investment, consumption, and so on, German performance has been mediocre.19

The story of how American financial institutions provoked the crisis which became apparent in 2007 has been well told and need not be rehearsed here. It was not, however, only US banks and financial institutions which precipitated these events. European banks were also exposed, in part through their loans to borrowers in the poorer countries of the EU's periphery, including Greece. The ECB's response was to provide liquidity, allowing the banks to reduce the gap between loans and assets. This meant that these banks also had to reduce their lending, and the result was a shortage of credit which deepened the European recession.

States rich and poor were in varying amounts of trouble as revenues from taxes declined just as money had to be found to finance rising demands on the welfare state as well as to bail out banks. Greece, however, was particularly vulnerable. It had run a deficit ever since joining the European Community in 1981; it had little financial credibility globally; and it had a huge problem of corruption as well as a government (now thrown out by an angry electorate) which had simply lied to cover up the unsustainability of its budget deficits. Just as predators select the weakest members of the herd, speculators attacked the Eurozone at its weakest point.

The recession touched every member state, and though it is now officially over in most countries, this is scant consolation to the millions who have lost their jobs. This is a recovery which is producing little employment and which everyone admits is fragile. The response of the EU and the majority of its member states is reminiscent of the early 1930s and can be summed up in the word 'austerity': further and more intense downward pressure on wages and public spending; a harder push in the direction in which the EU has been going since the beginning of the century, towards more flexible labour markets; reductions in pensions and other benefits; and selling off of state-owned assets in such sectors as public transport, healthcare and education. This is the 'leaner, fitter' state that the right on both sides of the Atlantic has been devoted to for three decades, and the crisis has provided them with the perfect opportunity to wage a class war of aggression and regain what they had lost to the working class in two centuries of an undulating war of position.

A federal Europe by the back door

The West European model will not be dismantled without resistance, as Central and Eastern Europe’s welfare systems were in the 1990s. The battle will largely be fought on the streets, in workplaces and educational establishments, but there is likely also to be a parliamentary level to this struggle. Should electorates begin to turn out the conservatives who currently govern most of the member states, popular resistance may be translated into alternative programs which take a very different approach. On the other hand, there is also a growing hard right which seeks to blame immigrants for the problems Europe is facing and which at the same time opposes what it sees as 'hand-outs' to economically weak members of the Eurozone. The influx of refugees from the upheavals in North Africa and the Middle East can only add fuel to these fires, making it more urgent than ever that opponents of capitalism make their voices heard, offer clear explanations, listen to people’s urgent concerns and organise intelligently and effectively.

In any case, the kind of ‘left’ which would emerge as a dominant parliamentary force in any turn away from the current hegemony of conservative politics would be unlikely to abandon the federalist project. We have seen quite clearly over the last three decades how European social democracy has embraced neoliberalism and learned to do the bidding of the ‘markets’. Though pressure from an angry electorate and a resurgent radical left may succeed in returning social democratic parties to their roots, it must be remembered that the centre-left gave up any idea of challenging capitalism long before neoliberalism became the central ideology of the hegemon. It is the essence of social democracy that what it seeks are solutions within the system, and a federal Europe offers just such a solution.

The drive to a federal Europe is being accomplished in steps, each of which makes the next inevitable. The euro was introduced without popular consultation or even any real explanation. All that Europe's population were fed, as at every stage of integration, were pseudo-internationalist fairy stories about love, peace and no more war. In the case of the currency, this was accompanied by a stress on the simple practicalities of not having to exchange money when you travel abroad. The reality behind this, however, was that the process of economic and monetary unification was and remains the principal weapon in an intensified class war designed to drive down wages and destroy the welfare state, thereby shoring up profits.

Opponents pointed out that a monetary union which preceded an economic union was a recipe for disaster, a prediction which has now been borne out. In a genuine monetary union, such as the UK or the USA, a political and economic union enables the prevailing authority to correct imbalances. Even a relatively liberalised economy, which both of these countries could be said to have, provides mechanisms by which this is achieved. Regional, social and industrial policies can be employed to compensate for economic shocks which increase the rate of bankruptcy and unemployment. Such compensation may also occur automatically: if a worker loses his or her job, various benefits may be available. A newly unemployed worker in a depressed town or region will in most developed countries qualify for unemployment benefits, retraining opportunities, and so on. This becomes an automatic ‘stimulus package’ for the lagging region, putting cash into the pockets of those who have been deprived of their salary. National funds to support such payments are inherently redistributive: relatively prosperous areas will pay in more than they get out, and poorer regions will receive more than they pay in. In general, this form of redistribution is found acceptable because of shared political traditions and a feeling of nationhood. They are open to reform, moreover, by elected governments and legislatures. They are policed by employees of the state answerable, however indirectly, to the citizens.

The European Union shares none of these features. Economic union would have been unacceptable to voters in the more prosperous member states because of an absence of such unifying national traditions or features. The level of redistribution which is acceptable is small, and more than accounted for by regional funds far less significant than those which exist at national level. There are no democratically elected institutions empowered to oversee Europe-wide redistributive mechanisms, the European parliament having little power in this policy area. In the north, there is a general belief that the Mediterranean and Central and Eastern European countries are riddled with corruption. This may be enhanced by cultural prejudices, but it has been dramatically confirmed in recent years by revelations of graft, influence-peddling and bribery in, amongst others, Greece, Italy, Romania and Bulgaria. Until democratic institutions are in place capable of controlling redistributive mechanisms, as well as enabling the people to influence economic policy in a broader sense, opposition to economic union will be a progressive position. Yet it remains the case that monetary union without economic union leaves the component parts of that union, the member states, exposed to speculation and economic bullying, to, in other words, the unrestrained dictatorship of capital.

This argument however, although intended to persuade people to oppose the EMU plan, could logically be turned on its head, for if a unified currency cannot work without an economic union, why not have just that? Looked at in this way, it becomes an argument for federalism – which in the European context means centralisation of powers, a much stronger Union – and honest federalists used it in just that way. The dishonest majority, however, saved it for the rainy day they knew would come. Commission President José Barroso now insists that ‘you can't have a monetary union without having an economic union,’20 but this obvious fact played no role in the pro-unified currency propaganda of the run-up to the euro’s launch. The monetary union and unified currency established at Maastricht would, its supporters knew, not only disfranchise member states, effectively taking any control (or even influence ) over macroeconomic policy out of the hands of democratically elected parliaments; it would at some point in the economic cycle lead to massive structural problems.

The only way to make a monetary union work is to equip it with the economic tools needed to offset imbalances. In the European context this means, amongst many other things, enabling the kind of fiscal transfers between richer and poorer regions which are routine in a true union, even one such as the United States where the economy is largely liberalised.

The creation of the mechanisms and accumulation of the funds necessary to enable such fiscal transfers now forms the basic programme of a growing social democratic federalism which could be presented as the alternative to the neoliberal integrationism which has become the EU’s ideology and practice. Social democrats would seek to back this up with an active investment strategy and an industrial policy based on the kind of interventionist principles which have become unfashionable since the 1970s but which might be expected to come back into vogue as the ongoing crisis simply refuses to go away. A minimum wage expressed as a proportion of average national incomes – so that workers would be guaranteed to receive say 60% of the average wage in their country of employment – has also been suggested. In order to realise any of this, however, entirely new mechanisms would be needed, for nothing which would make such solidarity possible was included in the system of Economic and Monetary Union which underpins the single currency, or in the Lisbon Treaty reforms.21

The social democratic trade unions which are effectively the only voice which the working class has at European level are enthusiastic about this kind of programme,22 but no centre-left party has as yet fully embraced it. In part this is because its implications, while far from revolutionary, are truly radical; social democracy, born from the rejection of revolutionary struggle by Europe’s mainstream labour movement as it became incorporated (at different times in different countries) into mainstream politics, now shuns anything which smacks even of real reform of the capitalist system.

A further problem stands in the way of anything recognisable as a renaissance of European social democracy. As Lapavitsas et al emphasise, a relaxation of fiscal discipline, which would clearly need to be part of any social democratic strategy, would jeopardise the euro's position as a potential rival to the dollar. This would have no significance for the Marseille refuse collector, the school cook in Munich, or the teacher in Galway, all of whom would benefit from a relaxation of fiscal policy, but it would weaken the position of European banks on international markets. I will leave you to guess which of these considerations has more influence in Brussels and Frankfurt.

Lapavitsas’ report also poses the question of why countries under pressure don't simply leave the Eurozone. Why doesn't Greece back out and introduce the New Drachma? This would enable it to devalue, improving its competitiveness by lowering the price of exports and raising the price of imports. This is the strategy favoured by much of the radical left. The problem for Greece in this scenario, however, is that the country is heavily dependent on imports, so prices would rise for the poor as well as the middle class. It is also hard to see how devaluation could be anything but a temporary remedy. Permanent improvement can come only through technological or other efficiency advances, the potential for which in Greece is limited, in no small part as a result of its exposure to unrestrained competition from Germany and other more advanced EU member states.

A more combative strategy would be to accompany withdrawal and devaluation with default and restructuring. This would require banks to be nationalized and capital controls introduced, while public ownership of key sectors would have to be effected in order to protect employment. This would make it possible to develop an industrial policy based on socially and environmentally beneficial investment.

Such a programme is, in the conditions of modern Europe, a call to revolution rather than reform. Hardly any of it would be legal in the European Union, and much of it would fall foul of broader international institutions such as the World Trade Organisation (WTO). It would, moreover, be far too easy for finance capital, organised as it is on an international level, to wreck any strategy of which it did not approve.

This is not a case, however, of social democratic realism versus ultra-left adventurism. Consider Stiglitz's prescription for Greece's economic woes:

The EU could and should show support for the honesty and integrity of Greece's government and its efforts not only to bring the budget under control, but to increase transparency of the entire budgetary framework and to reduce corruption. The EU can go further: institutions like the European Investment Bank should undertake countercyclical investments in the country, to offset the deflationary impacts of the budget cuts.... The provision of such support might lower interest rates, and make it easier for the country to reach budgetary balance. The EU, the euro, and the premise of European solidarity is being tested again. The measure of Europe will not be in the harshness of its actions, but in the spirit of solidarity that it shows in assisting its neighbour.23

Stiglitz’s thought, however, is constrained by his reformist perspective, which under current circumstances renders it unrealistic, even utopian. Brilliant economist though he is, the fact that the European elite sees the crisis not as a threat but as an opportunity to further its agenda could not be incorporated into his political understanding. Yet this is what has clearly been demonstrated as the crisis and the Euro-elite’s response to it have unfolded. Though it may have begun in some disarray, this response has in the longer term taken the form of a considered and programmatic series of measures designed finally to remove any influence which parliamentary democracy may have afforded the peoples of the member states over their own economic governance.

This was finally confirmed in March, 2011, with the publication of a plan to enable the ‘oversight’ of member states’ economies and its endorsement by European finance ministers.24 The plan involves six legislative measures. Fearless in the face of cliché, the ministers dubbed their plan the ‘Six-Pack’, describing it as a “quantum leap of economic surveillance in Europe.”25 Taken together these legislative measures will represent a transformation of the Stability and Growth Pact, the existing agreement which obliges EU member states to limit their annual deficits to 3% of their total GDP, and their accumulated public debt to 60%. These limits, which go back to 1997, have, however, never been properly enforced. In 2005, both France and Germany exceeded the ceilings and successfully pressed for a relaxation of the rules. Now, not only have the rules been tightened, they will be backed up by clearly enforceable sanctions.

Even if the deficit is within the 3% threshold, borrowing will be limited by Brussels decree. Recognising that the crisis has created a ballooning of public debt, the new agreement will impose an obligation on member states which exceed the 60% limit to reduce their debt by at least 5% per annum over three years. These rules will apply to all EU member states but, for the seventeen Eurozone countries, they will be backed up by sanctions. Any transgressive Eurozone country will have to pay 0.2% of its GDP into a non-interest bearing account. This will be returnable, but should the culprit fail to mend its ways, the money will be retained as a fine, a process which may be repeated up to a maximum of 0.5% of GDP. As Leigh Phillips, one of the most intelligent journalists reporting from Brussels explains,

…for Spain, a country on the frontline of debt concerns, such a fine would amount to €5.25 billion. In Vigo, Galicia, a new hospital is being built for €315 million. A total of 16 such hospitals could be built, with change left over, for this same sum that could be grabbed by Brussels without recourse.26

The reforms also make such sanctions much more likely to be applied. To date, countries could be punished only if a majority of Eurozone countries voted to approve. Henceforth, the opposite will apply: sanctions will be automatic unless a majority votes to suspend them. This was a compromise, with some smaller countries arguing that any get-out would enable the big member states, which have more votes under the system of qualified majorities, to escape punishment. Possibly even more significant than the weight of their vote is the influence which the bigger countries’ size, and in the case of France and Germany their wealth, gives them over the decision-making of smaller neighbours.27

In addition to tightening up on enforcement of the debt and deficit limits, the new system will also enable far broader surveillance of member states’ economic policies than has previously been possible. The aim is to prevent ‘macroeconomic imbalances’ from arising or becoming more severe. These are defined so inclusively that countries may be taken to task not only for imbalances of trade, but for paying wages or wage increases seen as too high, or for adopting ‘imprudent’ policies on such essentially domestic matters as allocation of resources between sectors, ‘unsustainable levels of consumption’ and mortgages on housing.28

In practice the concept of ‘imbalances’ is still broader. The Commission defends this vagueness, which in terms of supposedly democratic politics translates to a thoroughly undemocratic lack of transparency, by arguing that the importance of different imbalances cannot be predicted in an immutable blueprint. Undeniable as this is, such opacity will not only reinforce the exclusion of any popular influence on policy, it will again hand the game to the big and powerful member states.

This has already become evident. While it is clear that Germany’s running of a permanent trade surplus has at the very least contributed to the current crisis, the EU’s biggest member state nevertheless succeeded in resisting the Commission’s proposed recognition of the fact that such a surplus can, as much as a deficit, create dangerous macroeconomic imbalances. Only the poor, the small and the weak can, apparently, be guilty of disturbing the harmony of the economic spheres.

The irony is that had this system been in place as the Eurozone descended into crisis, it would have done nothing whatsoever to mitigate the acute difficulties in which the EU and its member states found themselves. On the contrary, the range of policies available to member states, many of which temporarily increased public spending in order to combat aspects of the crisis, would be narrowed, despite general agreement that this initial response had been at least partially successful.

Although member states outside the Eurozone will not be subject to the punitive aspects of the surveillance regime, much of the system established by the six new pieces of legislation will apply to the twenty-seven as a whole. The ‘European fiscal framework’ will cover the entire Union, and will enjoin non-Eurozone countries to avoid excessive deficits, though Britain, which objected to the wording on sovereignty grounds, will be required only to ‘endeavour’ to avoid them.

These developments are the culmination of a process which began with the 1957 Treaty of Rome and has taken at least two great leaps forward since: The Treaty on European Union signed in Maastricht in 1992 created the framework of a federal union and institutionalised neoliberalism; the Treaty of Lisbon signed in 2009 deepened both of these aspects, while further establishing the foundations of what will in the space of a few years become a ‘European’ armed force capable of pursuing the interests of European capital outside the continent while assisting with the maintenance of order within. The new system of economic surveillance builds upon these two treaties, reducing the ‘sovereignty’ of the member states to the level of that enjoyed by the United States’ fifty individual component entities. Unlike the United States, however, the EU has no collective polity, no elected executive or powerful legislative assembly, and no common non-state institutions such as genuinely super-national trade unions or other bodies capable of organising or coordinating resistance.

Difficulties of language, compounded by differences of perception arising from massive differences in cultural, political and institutional traditions, make the development of such organs extremely difficult. Indeed, I would argue after twenty-five years of attempting to engage in the construction of an effective transnational response to European neoliberalism, that these difficulties are, under current circumstances, insurmountable. Instead, each of us must concentrate on the reconstruction of organs of resistance in our own countries. Only successful trade unions, left political parties and radical social organisations on the national level will develop the will and the resources to create a potentially successful international movement.

The European Union forms perhaps the most intensive and, from the point of view of capital, successful example of what Stephen Gill has called ‘the discipline of capital in social relations’ or ‘disciplinary neo-liberalism’. This in turn rests upon the ‘imposition of new constitutional and quasi-constitutional political and legal frameworks – with respect to the state and the operation of strategic, macroeconomic, microeconomic and social policy’, which Gill dubs ‘new constitutionalism’. Nowhere has Gill’s use of this term been more appropriate than in the Europe of the EU. For Gill,

the crucial strategic significance of new constitutionalism is how it seeks to provide political anchorage for the power of capital in the long term. This is achieved through political and legal mechanisms that are difficult to change: moreover such mechanisms also limit democratic influence in the political economy. These long-term mechanisms include legal and quasi-legal agreements, the institutionalisation of standards and constitutional changes. Such mechanisms take on both national and transnational forms, in effect forming a liberal constitutional structure for the global political economy.29

These words, written in 2000, precisely predict the course that the European Union would take over the new century’s first decade. Since Maastricht the state’s ability to defend itself from disciplines imposed by the market has been weakened and now finally, in the face of Eurozone countries, completely removed. These disciplines may be imposed directly by the market, or indirectly through two institutions, the ECB and the European Commission, designed to be impervious to electoral pressure. The European Council, in which meet the heads of government, is for its part as far removed from such pressure as is possible short of the formal abolition of democratic forms. Instead of seeking to implement policies which will appeal to their electorates, member state governments find themselves in a situation in which ‘public policy has been redefined in such a way that governments seek to prove their credibility’ to capital, their policies judged ‘according to the degree to which they inspire the confidence of investors.’30


In conclusion, the European Union is now quite simply a device for creating permanent economic and political structures which are given ‘constitutional’ status by binding treaties which are essentially impossible to reform or revise in any direction but that of neoliberal integration. To move in the opposite direction could be achieved only by a unanimous vote of twenty-seven very different member states, an unlikely scenario.

EU Economics Commissioner Olli Rehn has called the Eurozone agreement a ‘silent revolution’. The description is justified, though I would prefer, in recognition of the considerable achievements of Western European social democracy, to call it a ‘silent counter-revolution’. Perhaps, however, ‘bloodless coup d’état’ is the best summation of what the leaders of the EU member states, the European Commission and the European Central Bank have effected.

In removing from our elected parliaments all effective influence over core political-economic decisions, these governments and centralised bureaucracies have exposed themselves to massive civil unrest. This is already evident, and in Greece and elsewhere, already taking violent forms. Violence born of frustration is understandable, but not the way to resist in this situation. The enemy is simply too heavily armed, so that what we need are superior tactics, and mass popular involvement. Unless and until every major city in the European Union resembles the Cairo of January and February, we will be left with a parliamentary democratic system within which important decision-making is limited to issues to which capital is in the final analysis indifferent, or one which is only able to effect reforms with which capital can live.

One fear is that resistance to these developments will prove unsustainable. There is a danger that, given the apparent impossibility of making any inroads into the dictatorship of capital, activism will focus exclusively on areas in which progress appears achievable. Such policy areas exist: those member states which depend on nuclear power could scale it down or phase it out; the treatment of homosexuals could be greatly improved in Eastern Europe, and abortion legalised where it remains heavily restricted; progress could be made on a range of environmental issues, on any in fact which will not cost corporate capital too deep in the purse; racism could be eroded in those countries where its most egregious forms remain acceptable; and so on. These are all important matters, yet in relation to each of them victories could be won which would leave all power in the hands of big capital. Such struggles are therefore likely to draw the radical energies of a rising generation which will not relish banging its head against a brick wall, or a policeman’s truncheon.

Because they do not threaten capital’s rule, these issues allow space for the incorporation into the power structure of ideas and of the activists themselves, a process which Gramsci famously referred to as trasformismo. We have already seen this at work in the reaction, for example, of the European Commission to specific acts of persecution of gays in the new member states, and in its frequent condemnation of discrimination based on race or gender. The revolving door in Brussels does not join only the corporate world to the Commission and Parliament. It also operates between the EU institutions and NGOs pursuing desirable environmental and other goals. It goes even further than that, in fact. One current Commissioner was until recently the editor of a journal not unlike this one.

This is not to denigrate the issues themselves or the activists who focus their attention on them, but only to point out that in the absence of a broad movement for a revolutionary destruction of the dictatorship of capital, reforms would leave intact the exploitative, carcinomatous system which is destroying our world. 


1. See e.g. Ian Manners ‘The normative ethics of the European Union’, International Affairs 84(1) 45-60, 2008. I would like to thank my student Kristian Kopp for drawing my attention to Manners’ work.

2. Rifondazione Comunista, Comunisti Italiani and Comunisti-Sinistra Popolare. Rifondazione is the most EU-critical of the three, none of which enjoys mass electoral support. Sinistra Popolare is a recent split, but the other two parties lost their representation in the European Parliament in the election of 2009.

3. See e.g. European Parliament Greens/European Free Alliance Group, ‘The Greens in the European Parliament 2004-2009’,

4. Jeremy Rifkin The European Dream (Jeremy P. Tarcher/Penguin, 2004); see also Steve McGiffen ‘A Really Bad Book by Someone Who Should Know Better’, Spectrezine, Dec.6, 2005,

5. Percy Bysshe Shelley ‘The Desire of the Moth for the Star’, Posthumous Poems 1824 (edited by Mary Shelley)

6. BBC News ‘French say firm 'No' to EU treaty’, 30 May 2005,; BBC News ‘Dutch say 'No' to EU constitution’, 2 June 2005,

7. Martin Banks ‘EU Commission ‘interfered’ in run-up to Lisbon vote’, The Parliament, Sept. 10, 2010,

8. See Steven P. McGiffen, The European Union: A Critical Guide (London: Pluto, 2005), Ch. 3 ‘The Institutions’ and Ch.4 ‘How the European Union Makes Law’

9. C. Lapavitsas et al, Eurozone Crisis: Beggar thyself and thy neighbour (Research on Money and Finance [RMF], 2010), The ‘Eurozone’ or European Monetary Union (EMU) refers to the 17 EU member states which have adopted the Euro: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia,  Slovenia and Spain.  A ragbag of statelets and protectorates also uses the currency, but no non-member state is represented on the Eurozone decision-making bodies. The ten remaining EU member states have not adopted the Euro either because they have taken a policy decision not to do so, or because they cannot yet meet the criteria. The new member states are obliged to join the Eurozone once they have done so.

10. Joseph Stiglitz, ‘A principled Europe would not leave Greece to bleed’, The Guardian , Jan. 25, 2010,


12. Eurostat statistics on Google Public Data,; Earth Times March 9, 2011 ‘Greek unemployment jumps to 14.8 per cent’,unemployment-jumps-148-cent.html

13. Joseph E. Stiglitz ‘Can the Euro be Saved?’, Project Syndicate, May 5,2010,

14. Karl Brenke, ‘Real Wages in Germany: Numerous Years of Decline’ DIW Berlin, German Institute for Economic Research Weekly Report, 2009, 28, 193-202,

15. Heiner Flassbeck, ‘Cry Wolf but do not ignore Tomorrow's Tigers’, IDEAs, March 12, 2010,

16. Ibid.

17. Engelbert Stockhammer ‘Peripheral Europe’s debt and German wages. The role of wage policy in the Euro Area’, RMF Discussion Paper no. 29, March 2011,

18. See European Employment Strategy pages on European Commission website,

19. Lapavitsas et al, Eurozone Crisis

20. ‘Brussels tables plans for closer EU economic union’ Euractiv May 18, 2010,

21. For examples of this type of approach, see Stehan Collignon ‘Miliband Must Take Britain Back Into Europe’, Social Europe, Nov.6, 2010,; and Socialist Party of the Netherlands, ‘Weeklog Dennis de Jong: Debate with a Christian Democrat’,, which includes a plea for minimum wages expressed as a proportion of each country’s national average.

22. See European Trade Union Confederation (ETUC), The Seville Manifesto

23. Stiglitz ‘A principled Europe would not leave Greece to bleed’ (note 10).

24. Council Press Release 7690/11

25. ‘EU's Rehn: 'Quantum Leap' For Econ Surveillance In Europe’, iMarketNews, March 15, 2011,

26. Leigh Phillips, ‘EU ushers in “silent revolution” in control of national economic policies’, EU Observer, March 16, 2011,

27. Ibid.

28. Ibid.

29. Stephen Gill, ‘The Constitution of Global Capitalism’, contribution presented at the International Studies Association annual convention, Los Angeles, 2000, available at

30. Ibid.