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EU plans the \recovery\ after Covid

2020-03-25 | EU

The European Commission President, Ursula von der Leyen, barged into the Spanish television evening news last night. This time she did not rehearse an empty, almost pope-like message as she did on the Italian TV. Instead, she deployed a series of judgements that could only shock the audience. This picture completed the results of the emergency meeting of the finance ministers. Germany is in the process of providing "Greek-style treatment" to the states most affected by the pandemic.

labor power

But if the comments about the health crisis were hurtful, those pointing to economic policy were even more so. Two brutal ideas: the kindness and "flexibility of EU rules" would have been demonstrated by allowing Sánchez's "shock plan" and, in the face of Sánchez's demand for a "Marshall plan" based on "Eurobonds", a Merkelian black humor: "the EU budget is a Marshall Plan".

What does the debate on Eurobonds mean for workers?

Wage share in Spanish GDP since 1978 (including profit shares disguised as wages) The labor share only grows when capital crashes and has not yet had time to attack wages, spending on labor power maintenance and working conditions even more.

Yesterday, the EU's Council of Finance Ministers met . The tools that will shape the economic policy of "recovery" Are under discussion. They are basically in agreement, which is why all the shock plans are so similar: the aim is to revive national capital through a massive transfer of income from labor to capital. This is nothing original. As we see in the graph above, every recession and crisis of national capital has ended up with a transfer of this kind... the accumulated result in Spain has been that the share of wages -which does not only include those of the workers- in the national income fell by 20% between 1978 and 2018.

Even before the epidemic, it was clear that European and global capital, almost twelve years after the 2008 crash, was still not recovering . And if at that time they were discussing the "green deal" as the way to organize a shock transfer , now the fall in global demand and the halt in activity that confinement entails are speeding up the planning of "recovery" plans at our expense.

The question is how the burden is shared out between countries, that is, how much is taken from the workers in each state. The alternatives are the same as in the face of the debt crisis in Greece in 2009: a financial cushion that mutualizes risk between states. The first option is the famous "Eurobonds", now re-baptized "coronabonds", the second one is the "European Stability Mechanism" (ESM).

Eurobonds would mutualize risk between states, i.e. the "country risk" of those most affected would not increase significantly and therefore the interest rate that states would pay to finance themselves would not be too far removed from the German one that serves as a reference. As a result, attacks on living and working conditions - including cuts in the health system - would be relatively homogeneous across the states. National capitals would not lose "competitiveness" by being a little less draconian.

The ESM option would in the first place entail much less volume... which would push states to be more aggressive against the conditions of their workers. It would also increase the "country risk" of those affected. This means first of all that Spain, Portugal, Italy or France, would have to pay higher interest on their public debt... and therefore, to recover the health of national capital, they would have to be even swifter and more brutal in assaulting the real earnings of the workers. Secondly, the difference in rates would cause gigantic flows of speculative capital to seek refuge in Germany, the Netherlands and other lower-risk Northern European countries. Yes, German capital became stronger and obtained billions of euros on account of the Greek disaster. So now the German bourgeoisie started playing the game of denying that the epidemic was really affecting the country and consequently refusing to take measures against the spread and that is why the Netherlands and Germany are the heads of the resistance against Eurobonds. They are already playing a strategic position thinking of a capital transfer in their favor.

The future of the EU and the workers

A partnership between states and capitals with a more conflicting basis than today's EU is difficult to conceive of: the harder things get for their partners and captive customers, the better the balance sheet of German capital will be. It is not that, as we are told in the media, the coronavirus is going to encourage the irrationalist fever of "anti-European populism", it is that the national bourgeoisies, especially in the countries that suffer most from the epidemic, are going to be increasingly reluctant of the balance they can obtain if they continue working within EU mechanisms that are tailored to Germany.

revolutionary defeatism|the main enemy is within the country itself.