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Democrat January-February 2010 (Nuber 116)

Euro in deep crisis

EU's solution - unemployment and privatisation

Report by Brian Denny

falling apart

Both Ireland and Greece each have a massive economic crisis. Greece has a 13 per cent budget deficit and Ireland 12 per cent of GDP deficit. The EU's Growth and Stability Pact states a maximum deficit of 3 per cent of GDP must be achieved. Although both countries are members of the eurozone they will not be bailed out by the European Central Bank. Better off member States have made clear they will not be lending a hand either.
   Normally the economic levers used to bring the deficit down are interest and exchange rates this is not possible for an EU Member State within the eurozone where the ECB controls these rates. All that is left for these governments is to cut public sector spending which simply means cutting public services and wages. These cuts would be huge and are already stirring up public resentment and growing opposition from trade unions.
  Both countries have increasing unemployment. Ireland currently has unemployment of 450,000 out of a  workforce of 2.2 million and it looks as though there will be a resumption of emigration. Part of the Yes! side's propaganda in the recent referendum on the Lisbon Treaty was "Vote Yes! for Jobs" but there have been none so far except to keep the government in office!
  In Greece there has been public unrest as the economic and fiancial crisis bites deeper. Other Member States using the euro which are in trouble include Italy and Spain. Newer EU Member States in Central and Eastern Europe are also in crisis.
  The problem with the euro must be worrying the political elite with the prospect of a two speed eurozone. The ECB has a legal working paper looking at the possibility of Member States leaving the euro: "Dissatisfaction with the single monetary policy could start to grow in the peripherals by the end of next year, making the prospect of exiting monetary [union] more tempting.”
  Significantly Britain which has stayed outside the eurozone does not have identical problems but does have a financial crisis because of all the money paid over to the banks and bankers. The resolution lined up to solve the problem is the same: cuts in the public sector and a reduction in the wages bill.
  No doubt one solution to be offered is for Britain to take the last step and join the euro. The Minister for Europe Chris Bryant in an interview with Le Monde has refused to rule out Britain joining the euro. When asked if Britain should join, he said, "First of all, a series of economic conditions must be fulfilled". He added that many British homeowners take out loans for homes at variables rates, so even a small change in those rates has a big impact on their lives and "As long as that is the case, we will not be able to put ourselves in the hands of the European Central Bank".
  The objective of vested interests whether they be by the strongest Member States like Germany and France or big capital are the same. It is to remove weaker competitors and dominate politically and economically the weaker Member States. Part of the plan is to create a situation where it looks as though the private sector had better take over all that is in the public sector. Unemployment and ECJ rulings against trade union rights force wages down and make conditions worse.
  All this has to be resisted and keep Britain out of the euro which would be a disaster for the peoples of Britain.