Left responses to the euro crisis


What stance should the European left take towards the euro and its galloping crisis?

This issue, which began as a theoretical discussion among radical economists in late 2009, has increasingly acquired practical political urgency: left parties are being challenged to define their position in the face of rising popular resentment at governments forking out billions in taxpayer euros to bail-out banks and indebted “Club Med” countries.

The most immediate result has been the growth in influence of populist right-wing and xenophobic parties, such as the True Finns (PS), the French National Front (FN) and the Dutch Party for Freedom (PVV).

Within the European left, the debate over how to relate to the euro crisis crosses old battle lines: for example, partisans for leaving the common currency can be found among the Communist Parties and also organisations with a Trotskyist background.

The question of leaving the euro arises most immediately in the indebted “periphery”, such as Greece and Ireland, but left supporters of a euro exit are also prominent in “core” countries such as France.

Nikonoff and Lavaplastis

The big challenge for the left is what to counterpose to neoliberal, capitalist Europe, with its relentless drive to make working people pay for the debt and bank crisis through higher unemployment, reduced wages and stripped-back welfare.

Is leaving the euro necessary to build a real fightback?

In France, Jacques Nikonoff, former president of anti-neoliberal group ATTAC, argues in his book  Let’s leave the Euro! that “a left policy is impossible with the euro”.

He says this is because the European elites, especially Germany’s exporters and bankers, designed the currency as a global reserve competing with the US dollar. They set up the European Central Bank (ECB) with an anti-inflation charter biased towards higher interest rates and, hence, an overvalued exchange rate.

The result has been depressed exports, increased imports, downward pressure on wages and accelerated offshoring of firms. Only Germany, the country that has most squeezed wages, has won out.

What about the objections that leaving the euro and adopting a new and devalued French franc would lead to ballooning debt, increased inflation and higher fuel prices, and be the first round of a tit-for-tat war of devaluations?

Nikonoff says there should be a partial default on debt, as with Argentina (2002) and Dubai (2009), a fuel price compensation fund should be set in place and a war of competitive devaluations is excluded because other countries would remain in the euro.

He says any similarity with the FN leader Marie Le Pen’s proposal to leave the euro is illusory. Proof that Le Pen isn’t serious is that she proposes a 6-8 month negotiation period for exit — during which time capital flight would cripple the French economy.

By contrast, Nikonoff says the political basis for exit could only be the victory of an electoral alliance committed to that course, followed by a referendum on leaving the Treaty of Lisbon.

That would be followed by ending the independence of the Bank of France, nationalising banks and insurance companies, imposing capital and exchange controls, and devaluing the franc and making it non-convertible.

The door would then be open to cancel austerity plans, raise the minimum wage and unemployment payments, introduce a sliding scale of wages and close the bond market.

Within the Trotskyist tradition, economist Costas Lavapitsas of London’s School of Oriental and African Studies has been the staunchest advocate of euro exit. In “A left strategy for Europe”, published in Socialist Register 2012, he says: “Much of the continental Left is still in the grip of Europeanism, and is concerned to develop strategies that have a European rather than a socialist character.”

Lavaplatsis argues that “exit is an important component of a radical Left strategy that could annul austerity while restructuring economies in the interests of labour”.

Lavapitsas says the central error of both “ardent” and “reluctant” left Europeanists is their inability to grasp that there is no simple technical and/or institutional solution to the debt crisis. If the creditors agree on debt reduction (as in the case of Greece), the reduction will be paltry. If the debtors impose debt reduction, the resulting chain of bank collapses will lead to a crisis of the European and world economies.

He says the remedies advanced to avoid this — amounting to the ECB and/or Europen Financial Stability Facility issuing eurobonds to fund member states and themselves — would devalue the Euro as a reserve currency (and be opposed by the German ruling class).

In any case, he says, they would not solve the problem of bank recapitalisation, which requires not just extra liquidity but actual spending by government (such as the US $700 billion Troubled Assets Relief Program) — increasing public deficits and the pressure for cutbacks.

Lavapatsis says that, given the likelihood of an ongoing vicious circle of low growth and rising debt, “continued membership of the eurozone would be put on the table, partly by core countries, and partly by defaulting peripheral countries themselves”.

He concludes: “There is no need for such a strategy to lead to isolationism and nationalism provided that the European Left regained a modicum of confidence in itself and in its historic arsenal of socialist ideas. Indeed, the danger of a nationalist backlash is likely to become worse as long as the Left continues to disappoint working people…

“A strategy that confidently detached itself from the failing project of monetary union would provide a basis for solidarity among European people.”

A euro exit is supported by the Greek Communist Party (KKE), which calls for “disengagement from the EU and cancellation of the debt with people’s power”.

Husson’s reply

French radical economist Michel Husson replied to Lavapatsis by saying: “[T]here is a very big risk of giving a left legitimacy to populist programs … which combine a xenophobic discourse with an analysis that makes European integration the exclusive source of all economic and social evils.”

He stresses: “To make out that leaving the euro could in itself improve the relationship of forces in favour of the workers is at bottom a fundamental error of analysis. It is enough to consider the British example: the pound sterling does not form part of the euro, but that does not protect the population from one of the most brutal austerity plans in Europe.”

Husson says, “the competitiveness of a country rests on material elements: productivity gains, innovation, industrial specialisation, etc. To think that manipulating foreign exchange rates can be enough to ensure competitiveness is largely an illusion.”

Husson concludes: “There is almost no experience of a devaluation which did not result in increased austerity, which in the last analysis hits the workers. For devaluation to be a means for putting in place another distribution of wealth and another type of growth, the relationship of social forces would already have to have been profoundly transformed.”

As for the complementary measures proposed by partisans of euro exit, “all these measures should be imposed even before any project of exit”.

What Europe-wide alternative?

The two European left parties that have most stressed a Europe-wide counter-attack against austerity are Die Linke and the Portuguese Left Bloc.

A May 2010 Left Bloc document called “On the crisis and how to overcome it” said “the left must argue for national alternatives which are also European”.

It said that, “unless Europe is rebuilt by means of an employment pact overruling the Growth and Stability Pact’s clauses and institutions, as well as the Lisbon Treaty, there will be no European policy to react adequately to the crisis and there will always be European policies to make it even worse”.

The Left Bloc alternative focuses on reversing attacks on wages, working conditions and social welfare; increasing tax revenue “to deal with the debt snowball and the financial markets” by attacking tax avoidance and making capital pay its share; and a policy of industrialisation aimed at exports combined with promoting employment-creating high quality public services.

At European level, it argued for regulating financial markets, and taxing financial transactions, a rise in the share of state banking and capital controls to curb speculative attacks.

In June, the Die Linke euro crisis working group produced a detailed proposal along the same lines.

The document included a comprehensive set of measures to tackle the debt and banking crises, contain speculation, restructure the banking system and fund Europe’s crisis-hit economies. 

Such measures point to the need to refound Europe by overturning the existing frameworks.


Earlier this year, the Scientific Committee of ATTAC Germany wrote: “At this stage it is crucial to work for mobilising the working people across Europe for a joint struggle … rather than having now a premature and technical debate around the currency.”

This addresses the core issue. The European left lacks the strength to advance its agenda, either in Europe or at the national level.

The danger for left European projects is that the association with “Europe” is so hated by working people, they will act and vote out of hatred for the actual Europe rather than hope for a refounded Europe.

“Europe”, the level of government furthest from people, means the authoritarian, unaccountable and bureaucratic imposition of poverty or the robbery of hard-earned euros.

When elected national governments meekly do “Europe´s” bidding, that hatred is intensified.

This can only be turned around by increased Europe-wide struggle. So what demands and forms of organisation have a chance of mobilising that struggle?

The 700-strong European Conference Against Austerity in London on October 1 settled on five points: resistance against austerity policies and cuts; a radically progressive tax system and capital controls; nationalisation and democratic control of the banking system; the renunciation of illegitimate debt;  and an alternative economic and political strategy embodying a green approach to public spending and job creation.

The coming months in Europe will show how strongly working people will rally to those slogans.

[Dick Nichols is Green Left Weekly’s European correspondent. This is the last of a three part series. A longer version can be found at Links International Journal of Socialist Renewal.]


There are many different ways that everyone feels these financial crisis needs to be handled.

The problem is that there are so many different ways that it is hard to tell which is actually going to work.



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