Prediction is very difficult, especially when it’s about the future.
By the time the COVID-19 virus reached Europe in January, governments of the EU Member States and the European Commission had been warned, but had neglected to take preventive measures against its spread. Italy and Spain, whose healthcare systems had been emaciated by decades of austerity policies, were most tragically affected and left to fend for themselves. Instead of providing immediate assistance, the finance ministers of the EU countries granted a temporary suspension of the Fiscal Compact—a temporary solution to a problem that would have been less severe in the first place were it not for the Fiscal Compact.
Walter Baier works as the coordinator of the research network transform! europe, where this article originally appeared.
The Schengen Agreement no longer exists, not as a result of any decision taken collectively to provisionally close borders, but because of the individual, uncoordinated decisions taken by European governments. At the beginning of March, Germany even blocked the export of protective medical equipment,which not only made a mockery of European solidarity but violated otherwise sacrosanct domestic market rules. Quod licet Iovi…
The coronavirus crisis has exposed the crass contradiction of the EU treaties assigning social and healthcare policy to the member states yet constraining their financial bases through EU legislation, primarily the Growth and Stability Pact. It is doubtful whether the damage this has done to the EU’s prestige, especially in the states most affected by the epidemic, can be repaired.
The existential crisis in which the EU now finds itself is mercilessly revealing its structural flaws: an incorrect prioritization of the European treaties—whose main concern is not the wellbeing of the populations but the unobstructed functioning of the markets—and the wrongheaded division of competencies between the EU institutions, which substitutes the principle of the democratic, parliamentary formation of will at the national and European levels with a non-transparent interaction between governments and the EU bureaucracy.
We are standing at the beginning of an economic crisis, the extent and duration of which nobody can be sure. Reputable economists, however, are warning that it could be the biggest economic crisis capitalism has ever seen in peacetime. It is reasonable to think that the EU, with its economic governance and the prevailing neoliberal, supply-side economic doctrine, is ill-prepared to protect Europeans from the effects of the crisis. What ought to have been the hour of European solidarity threatens to become “a Walpurgis Night on the nationalist Bald Mountain” —a moment for the radical right, which is already trying to capitalize on the crisis by escalating its aggressive discourse.
However, the nationalist idea that a crisis of global dimensions can be solved by nations competing with each other for scarce resources is completely irrational, above all for the small and medium-sized states. The more the absurdity of the nationalist view becomes obvious, the greater will be the tendency towards authoritarian methods of rule. The path from illiberal democracy to dictatorship may now prove to be a short one.
The current state of emergency, with its medically recommended restrictions of liberty, is preparing favourable psychological ground for this shift. We are already now seeing the political and cultural backlash, which is expressed in the increase in domestic violence and in the displacement of women from public discourse, paradoxically at a time when work in care and reproduction, which today is mainly performed by women, is proving its systemic importance.
We need to face the seriousness of the situation. Capitalism is coming up against its systemic limits. But if this statement is to serve as anything more than ideological self-affirmation, we need a debate about the alternatives that Europe’s people now have available to them, and to open a path to a new mode of production and culture. The last few months have reminded us that the balance of forces inside national states is still decisive. However, they also have demonstrated the tragic and perilous nature of the desire for European solidarity. As a transnational, European network we have to confront this aspect of the debate and its potential consequences for European integration.
The lockdown will be followed by a global recession. What is not known is whether it will lead to a longer-lasting depression. Despite the number of victims it claimed, the last financial crisis did not lead to the collapse of capitalism; rather, the richest one percent of the world’s population was able to push its levels of wealth to undreamt of extremes, and, via the financial markets, it now has the populations and states more firmly in its grasp than ever. The current recession, by contrast, has not been triggered by a collapse of the hypertrophic financial sector but an abrupt break in the supply and demand sides of real economies.
In theory, one could imagine a kick-start of national economies after the end of the pandemic’s acute phase and a quick return to normality. What speaks against this is the fact that the real economy, burdened by geopolitical tensions, was already in a downturn before the pandemic. The attempts by central banks to use expansive monetary policy to stimulate investments and real economies has proven not to be effective in a lasting way. Above all, however, in view of digitalization and the environmental crisis, capitalist economies are at the threshold of a comprehensive transformation that requires strategies other than those contained in neo-classical economics textbooks. Thus, it is very questionable that there will be a return to the status quo ante.
Meanwhile, unemployment rates have reached dramatic heights. According to the ILO, 2.7 billion workers were affected by partial or full lockdown measures globally. The social time bomb created by the millions of temporary labour relationships unprotected by labour laws and social rights is in danger of exploding. To pre-empt the immediate social and economic effects of the lockdown, governments have passed special programmes of a hitherto unheard of scope. For example, the German government is incurring debts to finance a package of measures decreed at the end of March amounting to 10 percent of GDP. These are correct decisions. The question is whether they are enough. Economists are expecting a rise in debt levels in relation to the GDP of the Eurogroup members by 10 to 15 percentage points.
In this fiscal-policy activism of the states the rules of the EU treaties on State Aid and the Growth and Stability Pact have been done away with overnight. While the European Commission limited itself to legitimizing ex post the decisions taken by states, by contrast the European Central Bank at least acted by indicating its readiness to buy up state bonds at a total value of 750 billion euros.This can provide temporary relief. However, through exorbitant new debt levels, countries will become even more dependent on finance capital, which demands tribute in the form of interest; despite the low rates offered, these will significantly strain individual states. Thus, without a big hair cut, today’s coronavirus crisis is setting the course for tomorrow’s state debt crisis and austerity policy.
The effects of debt accumulation will hit countries in diverse ways, since the interest rates give an advantage to the financially powerful states and discriminate against the weaker ones. Thus, indebtedness will further aggravate inequality between the deindustrialized regions in Southern and Eastern European and the economic power centres of the EU. Yet, some important things remain unpredictable. The economic structural transformation will alter the position of industries, regions, and states within capitalist competition and change their financial clout, also expressed in the level of interest, and add new contradictions and rivalries to the already existing East/West, North/South fault lines, which may even affect the core of European integration.
Nine governments—among them France, Italy, and Spain—have demanded the issuing of Eurobonds in order to mutualize the costs of crisis management. Yanis Varoufakis has said that one trillion euros is the sum that has to be raised by these bonds. Through Eurobonds the joint financial strength of Eurogroup members would be deployed to create low-interest loans, making them available to the states in proportion to how affected they are by the pandemic and the subsequent economic recession. The proposal’s brusque rejection on the part of the German government throws a dark shadow over the future of European integration in the post-corona era. So, if the finance ministers of the Euro-group cannot agree on the proposed Eurobonds due to the objection of a group of countries why shouldn’t a coalition of willing governments—including France, one of the EU’s heavy weights—issue common bonds autonomously?
Eurobonds could provide relief, but the general problem of the states’ high debt levels and their negative effect on the division of material and political resources among the states and classes will persist, unless a radical haircut on the European debt and a change in the distribution of resources and income is achieved. Additionally any economic reconstruction after the end of the acute phase of the pandemic, which must be linked with the ecological transformation of the industrial and energetic basis of the economies, will demand unprecedented investing. The financing of private and public debt, which is again growing exorbitantly during the crisis, will therefore become the key problem of the post-corona period. Coming up with an answer to this is the most important task the left now needs to face.
The financing of state debt through inflation would meet fierce political opposition in some of the EU member states. The alternatives then are either to unload the burdens onto populations through austerity and privatization programmes, as in the last crisis, or to make the owners of great wealth, who hold the lion’s share of loans, bear the interest burdens of public budgets themselves through debt forgiveness, confiscatory capital levies, and a capital gains tax.
To carry out such a policy, it needs to be accompanied by imposing capital controls and by guaranteeing the claims on capital-funded pension and health-insurance funds. This should be accomplished by the public sector’s takeover of these funds, which must be enacted by the member states, yet supported and coordinated on a supranational level. In the coming months even mainstream economists will not tire of assuring us that they were never neoliberals. The left can build from the cracks that the crisis in public discourse has opened up. However, we have learned from the last financial crisis that this window of opportunity will remain open only until a consensus forms within the ruling classes, mainly of the large European countries, on how to deal with the crisis. Therefore we must not limit ourselves to just becoming the left wing of the liberal mainstream. This is not about a doctrinal contest. The crisis is posing the question of hegemony regarding the social interests that should be crucial in dealing with it.
Although temporarily ousted from public discourse, the epochal challenge posed by the ecological crisis remains. An alternative in the interests of the majority of the populations has to link the solution of this acute crisis to socio-ecological transformation. The decisive criterion is not to reach an agreement among broad circles on general goals—this already exists—but on the tools needed to implement them. At issue are the institutions and the balance of power between classes. We must have the courage to talk offensively and prominently about a new role for the states, about property, about the socialization of the financial sector, about capital controls, about economic democracy and the strengthening of wage dependentsat the level of enterprises, municipalities, countries, and the EU. This is the only way in which we can take advantage of the opportunities to expand social space for a new hegemony.
The significance of Great Britain’s exit from the EU cannot be undervalued. It will not disappear from the European agenda. Brexit will not only change the lives of the 3.5 million EU citizens within the UK and the 1.2 million UK citizens living in the EU Member States but the EU as a whole.
The loss of the UK’s membership dues has made the gap between the demands made on the EU budget and its already woefully low level become more obvious than ever before and has so far prevented the EU Council from coming to an agreement on the Medium-Term Financial Frameworks (2021-2027). The UK has been the EU’s third biggest national economy and is one of the five ‘official’ nuclear powers holding a permanent seat in the UN Security Council. The fact thatit has conducted parallel negotiations on a far-reaching free trade agreement with the US spells out the geopolitical dimension of Brexit. Given the emphasis on trade and competition laid by the EU in the negotiations, it seems the latter not being sufficiently taken into account.
The European Commission is arrogantly counting on the UK’s economic dependency on the EU greatly outweighing the EU’s dependency on the UK. But this alone does not tell us anything about the Commission’s actual negotiating strength. Behind the mandate that the Council has given to the Commission there are considerable conflicting interests among the Member States.
The UK side has also a big problem; it is interested in the continued unobstructed access of British financial services companies to the EU market. This will involve concessions to the detriment of other sectors in Britain, for example fisheries, which will not be easy to achieve. In addition, exit from the EU is aggravating tendencies towards disintegration within the UK, with Scotland thinking seriously about holding a referendum on its independence and then, depending on the outcome, re-joining the EU, something that will fuel existing separatist tendencies in other parts of Europe. At the same time, the danger of a revival of hostilities in Northern Ireland cannot be underestimated, since it is not impossible that Brexit could even put the Good Friday Agreement in danger.
Following neoliberal logic, the British government would prefer an agreement with the EU similar to the free-trade and investment protection agreements between the EU and Canada (CETA) and the EU and Japan (JEFTA).
By contrast, in view of geographic proximity and the intensive economic interlinkages, the European Commission is demanding guarantees of a level playing field in competition and is pushing for a treaty that goes farther than a conventional free-trade and investment protection agreement. Its goals in any future partnership, it says, are to establish sustainable development and climate protection, and set high labour-law and social standards. Although the protection of labour rights and the environment in some of EU member states is far from satisfactory, the left and trade-unions cannot but critically support this intention.
The European Trade Union Confederation is trying to interpret the “level playing field” as a commitment to workers’ rights that “must provide for a non-regression clause”. In its November 2019 manifesto for the parliamentary elections, the Labour Party avoided this semantic exercise and demanded a ‘dynamic alignment on workers’ rights, consumer rights and environmental protections so that UK standards keep pace across Europe as a minimum […]”.With the argument of a level playing field, the EU wants to hold the UK not only to social and ecological standards but also to continued adherence to the EU’s legal determinations on state aid and tax policy. This makes sense from the point of view of competition policy. Weas internationalists, however, cannot support forcing the UK to conform to a policy which we ourselves oppose within the EU.
This is connected to the question of the dispute settlement mechanisms to be created. The European Commission wants to limit dispute settlement to questions of competition. This is inconsistent with the assertion that the ecological, social, and labour legislation standards are at the centre of its negotiation strategy. Moreover, the Commission wants to establish that in disputes over matters subjected to EU law, the Court of Justice of the European Union (CJEU) is the final arbiter. This sounds reasonable from an abstract rule of law perspective. Yet the same holds for the UK government’s position to reject an extension of EU jurisdiction to its own territory. Is it rule of law versus rule of law? Could the left on both sides of the English Channel be separated by an unconditional adherence to their national rule of law and that of the EU?
The CJEU is not a sacrosanct institution, however. In some of its prominent judgements it has appropriated a market-radical interpretation of the four domestic-market freedoms, treating them as EU law to be directly applied above, and in contradiction to national labour and social legislation (see CJEU decisions on Viking Laval, Rüffert and Commission versus Luxembourg in 2007 and 2008). To assign the CJEU a decisive role in the relationship between the EU and the UK risks combining the worst of two worlds, paving the way to a radicalization of the neoliberal bias of European integration through case law.
The left has to pursue an alternative approach. On the one hand, it must put forward demands for the incorporation of consumer protection and ecological standards as well as labour and social legislation into dispute settlement. On the other hand, a mechanism needs to be created—following the model of Austria’s labour and social courts, for example—that also integrates representation of the interests of both “social partners” into dispute settlement.
The left certainly favours a fair and just deal between UK and EU. It is not certain that the negotiations will be successfully concluded. If they collapse amidst mutual accusations, this will boost nationalists on both sides. The left should, if necessary and if the British and Irish left agree, propose an extension of the interim agreement.
The treaty on the UK–EU partnership—whenever it is established—must be ratified by the European Council, the European Parliament, and Britain’s Parliament. It is possible that its ratification by the national parliaments of EU Member States will also be required. The process could extend far into 2021 and beyond. It will, at any rate, proceed simultaneously with the discussion of the EU’s future that the European Commission has announced .
At the end of 2019, the European Commission and the European Parliament announced a promise to hold a Conference on the Future of Europe involving citizen participation.
The crisis of integration has occupied European policy since the financial crisis. In 2017, the European Commission published the White Paper on the Future of Europe. Does anybody remember the five scenarios, which in essence amount to outlining a new Europe without changing the old one? In September of the same year, at the Sorbonne, French President Emmanuel Macron announced in a keynote address the Initiative for Europe, which called for the abolition of unemployment, ecological transformation, a financial-transaction tax, a digital tax, the establishment of a minimum tax wealth rate, the ‘convergence’ of social standards, a clear increase in the EU’s budget, and the democratization of EU institutions. Macron omitted none of the EU’s deficits in calling for a “refoundation of Europe”! Yet, only a little later, when the heads of the German and French governments met in Paris for the 55th anniversary of the Élysée Treaty for the friendship between France and Germany, the closing statement contained nothing of Macron’s proposals. The debate had already come to a standstill before the European Parliament elections.
The “flagship projects” on which it was possible for Member States to reach an agreement were the armament programmes and the expansion of Frontex—the European Border and Coast Guard Agency. Military spending and defence against refugees are apparently always feasible, while the completion of the banking union, which implies a financial obligation on the part of the large banks to fund a European Deposit Insurance,is put on hold. Also disappointing this year in its scope and mode of financing was the European Green Deal, through which the Von der Leyen Commission intended to react to the climate crisis.
The EU’s failure in social and climate policy should not be surprising since the integration of capitalist states into a single union cannot occur other than primarily through markets, which have no feel for society-wide needs. The EU milestones—the Treaties of Rome, the Single European Act, the Treaty of Maastricht, and the Treaty of Lisbon—have continuously deepened the EU’s market-economy character. And, in contrast to his aforementioned innovative gesture in his keynote address at the Sorbonne, even Emmanuel Macron has called the domestic market “the real soul of Europe”.
However, integration via markets was, from the very beginning, opposed by a social counter-tendency based on the priority given to centrally planned political decisions taken by the European institutions—critically supported also by that part of the left that chose the democratic road to socialism strategy with all its structural changes and ruptures at both a national and European level—to embed the economy within policy goals by means of state and supranational institutions. Indeed, the history of European integration is constituted by the clash of these two tendencies.
The European Coal and Steel Community was founded in 1951, replacing the International Authority for the Ruhr, which after the war had placed West Germany’s heavy industry under allied control. Alongside trade in the products of heavy industry without customs barriers, a High Authority was created with far-reaching dirigiste powers.
The “politics-market” conflict reached a climax in 1984 when the first directly elected European Parliament accepted the draft of the treaty establishing the European Union written under the guidance of Altiero Spinelli. It provided for the European market economy’s subordination to social targets, explicitly named as full employment, the overcoming of inequality, protection of the environment, and cultural progress. Moreover, the initiative in the shaping and further development of the union was to be shifted to the European Parliament—without restricting the rights of the national parliaments.
What followed was completely different to Spinelli’s aspirations. In 1985 the heads of states and governments passed the Single European Act, which set the goal of quickly realizing an all-encompassing European internal market, which signified the victory of the market-economy tendency. When the heads of states and governments met for the 1992 summit at Maastricht, once the situation in the world economy and geopolitics had fundamentally changed following the historic events of 1989 and the establishment of neoliberalism, they felt confident to complete this victory through the creation of an economic and monetary union with the now famous criterion of ‘convergence’.
The conflict flared up again in 2005 when the heads of states presented their new construction, a draft of the Treaty for Establishing a Constitution for Europe, for ratification by the populations of all member states, and were rebuffed in three countries. That the failed constitution was passed by an intergovernmental conference two years later as the Treaty of Lisbon—bypassing popular ratification—certainly did nothing to improve the EU’s standing.
The most recent dramatic climax in the battle between market and democracy came in 2015 when Syriza, having come to government in Greece, sought to break out of the straitjacket of neoliberal austerity policy. The harshness with which the attempt to find an alternative way out of the crisis was quashed by the creditors, and the brutality of the austerity programmes forced on it—much harder than those imposed on Ireland and Portugal—horrified many throughout Europe; but it also reanimated the differences in attitude towards the EU that had always existed within the radical left.
Europe’s left, along with the lefts of each country, has to pose the question of the scale and form of a certain type of European cooperation or integration, different to that of the present EU, that it sees as appropriate for confronting contemporary capitalism. The answers will vary depending on whether the focus is Europe as a whole or the individual states, and depending on each country’s situation.
In addition, the UK’s exit from the EU reminds us once again that pan-Europeanism cannot be defined by the borders of the actual EU. The right of countries to leave the European Union or the Eurozone is incontestable. Despite the growth of disintegrative tendencies, a disorderly breakup of the EU in its 27 or more components, at least under conditions of peace, is a rather improbable scenario. More plausible would be a re-emergence of old lines of conflict in Europe between a Central European bloc under the aegis of Germany and a Southern and Western bloc led by France. It is doubtful whether this new kind of order can lead to more stable social and political relations.
It is a fact that in many countries the longstanding disillusionment with the European Union has evolved into a conviction that it cannot be reformed. We cannot ignore this change of mood, nor attempt by way of compromise to conceal the differences in how the EU is perceived, since it constitutes a point of departure for the strategic debate that now needs to take place.
If the strategic task is to recover the sovereignty of the peoples—not to pit them against each other, but together in the face of the financial markets—then the democratic self-determination of national populations and their control of their states have to be defended. This implies the right of every progressive government to disobey any rules that hamper the wellbeing of their states and societies. We must therefore demand that the Growth and Stability Pact, inactivated during the coronavirus crisis, should not come back after the crisis is over, but be abrogated. In its place the EU’s financial instruments—the ECB, the European Investment Bank, and the European Stability Mechanism—must be available to finance national programmes for reconstructing the healthcare and social systems and, beyond this, support the ecological transformation of the economies.
The strengthening of social infrastructures, the reconstruction and ecological transformation of Europe’s industries, the elimination of regional disparities, and the building of effective energy and transportation nets through mobilization of the necessary financial capacity reaching beyond the scope of the current EU budget—all this requires long-term and resilient supranational cooperation. If this is not to be left to the markets it also needs rather close supranational political cooperation. The left should build a strategic project for this cooperation. Today the EU is present as a strange hybrid: on the one hand a free-trade zone with a bureaucratic apparatus, which proved incapable of action in the crisis, on the other hand a parliament that does not have the power to manage the market and bureaucracy.
This leads to the question of political leadership. Europe’s left needs to be active also on the European political scene as a power that stakes a claim to leadership. A claim to political leadership requires conducting a struggle for the expansion of democracy. The argument of the liberals—that the deficit of European democracy consists in the lack of a European public opinion—is weak. It is more accurate to say that European civil society, the trade unions, and social movements only have limited capacities to influence European policy, for which the decisive factor—apart from the structural neoliberal and non- democratic characteristics of the EU—is still dependent on the hierarchy of its member states as determined by their relative economic and political weight.
It is in a way trivial to say that the left’s essential power bases are located in the nation-states. Protecting them from the destructive tendency of the uncontrolled market economy is strategically necessary in any case. Therefore it is crucial to emphasize that in all conceivable systems of European cooperation/integration, the states continue to be economic and political powers in their own rights and remain so for the foreseeable future; this needs to find expression in a transparent and efficient system of defined jurisdictions and checks and balances between them and the Union.
However, since political developments in the individual states proceed at different paces and influence European developments to different degrees, the excessive weight of the national governments in European policy acts as a filter that obstructs social changes. This produces the stalemate we are in. The only way to overcome the stalemate is through the diffusion of democracy to all levels of decision-making, which means that it is also the European level at which diverse and antagonistic parties need to compete for influence, cooperate with each other, or confront each other.
A prerequisite in the long process towards the refoundation of a Europe built on a post-capitalist vision, is a sovereign, freely elected parliament interacting with the trade unions, the social, ecological, and civic movements. In place of the European Council comprised of heads of state and governments, the European Parliament must become the centre of the decision-making in those affairs for which the EU has authority. In it the key factor would be the intervention of political parties at the European institutional level. The Party of the European Left should seriously consider advocating their upgrade by asking them to run for the elections of the European Parliament with European lists.
The pandemic has made clear that the most dangerous threats facing societies are not military but social and ecological, and this is slowly being understood by people all over the world. The left should not miss the historic challenge to put forward its strategic plan for a radical social transformation. In this framework, if the expected recession actually takes on the dimensions that many experts are predicting, then the left should propose that the funds earmarked for an increase in military budgets be redirected as a matter of necessity towards an expansion of public services.
Protection from military aggression is, moreover, primarily a political task consisting in the strengthening of international law and cooperative structures. The creation of new nuclear weapons of mass destruction as a result of the abrogation of the INF Treaty on the part of the US and Russia, and the imminent expiration of the START Treaty, represent a continuing danger to Europe.
The disastrous effects of the pandemic on several African states, hardly noted in Europe, demonstrate that the social question operates on global level. The migratory movements of recent years have made Europeans aware that the EU can only shirk its global responsibility at the price of dehumanizing its internal relationships.
Especially in times such as the present acute health crisis, the fate of the tens of thousands of refugees detained at the EU’s outer borders under miserable conditions must not be ignored, since they are one of the most vulnerable groups of people. The 2016 EU-Turkey statement on migration must be rescinded and replaced by a policy that implements the right to asylum guaranteed by the UN’s Human Rights Covenant.
The pandemic and the global ecological crisis remind us that neoliberalism’s world market project has failed as a civilizational model, and has cost human lives not only in the Global South but also in the developed world, including Europe. It is now time to stop and reverse the neoliberal trade and investment agreements that the EU has concluded with most countries of Africa, Asia, and Latin America, and to critically examine the social and ecological damage they have caused.
We have to think about the really existing European Union in a new way. The EU is not a universal European entity and will not be one for the foreseeable future. It therefore cannot claim a monopoly on the issue of Europe’s cooperation/integration, and not merely due to its deficits. It is misleading to think of it as a continuously expanding state on the model of the US. This is so not least because, due to China’s increasing importance as a world power, new forms of international cooperation have been established, for example the China–Middle East–Europe Summits (16 + 1 format) that have taken place since 2012 involving members and non-members of the EU in dialogue with China’s heads of state.
The end of the arms race and the management of the ecological crisis require international cooperation on a global scale, in which Europe has to redefine its role. This also requires the reanimation of those European forums that from the public’s point of view have disappeared behind the European Union: the United Nations Economic Commission for Europe, the Council of Europe and the Organization for Security and Co-operation in Europe, to which all states on the continent belong. They should be seen as forms of cooperation/integration, with no less long-term importance for security on the European continent than economic and social cooperation/integration within the framework of the EU.
 By publishing this paper, the board of transform! europe intends to start a debate inside and outside the network. Our endeavour is not only to define more clearly our own strategy but also to explore the possibilities of a strategic cooperation with trade unions, progressive parties and political foundations in Europe and on the European level. In this regard, we think it is necessary to again foster our links with the social movements, particularly with the feminist and the ecological movements which so impressively emerged onto the political scene in recent years.
 Luxemburg, Rosa, “Fragment über Krieg, nationale Frage und Revolution“, p. 367 f.