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Plan B - The sleepwalkers of the eurozone - Intervento a Berlino

The historian Christopher Clark called “sleepwalkers” the elites leading-up to the First World War. As those sleepwalkers, Europe’s ruling classes go on without acknowledging reality even though they have been sent clear messages. Clear messages have been delivered by working classes and middle classes in the regional elections in France, in the presidential election in Austria, in the elections for mayors in Italy. Clear messages are audible in the votes shrinking the grand coalitions ruling in Germany. Finally, mirroring the dramatic political developments on the other side of the Atlantic where Donald Trumps leads the opinion polls, the vote for Brexit illustrates the economic, social and democratic unsustainability of the neoliberal order for increasing numbers of working families and the middle class. US and UK: not accidentally, anti-establishment feeling is highest where the establishment, on both right (Reagan and Thatcher) and left (Clinton and Blair), has characterized itself most strongly by implementing neoliberal programs.

In this context, Brexit in 2016 could represent for neoliberalism what the fall of the Berlin Wall represented for socialism in 1989. The neoliberal order is not falling apart, but it is unequivocally unsustainable for a democratic society, for middle classes democracy, for the pillars of the Constitution written after the II World War.

The unsustainability of new-liberalism is even more severe in the Eurozone. For a very simple reason: we have “constitutionalized” an extreme version of neoliberalism that not even the triumphant conservatives in the heyday of Reagan and Thatcher would have dared propose: the Statute of the ECB on one hand and the Fiscal Compact on the other, in the framework of the devaluation of labour begun in Germany by the so-called “Hartz reforms”, by far the most anti-European act perpetrated in the post-war era within the EU.

Despite the evidence, the discussion in the European Union and in the eurozone remains prisoner to Europeanist conformism, as if the culture, the treaties and the political agenda driving European integration and still running the show weren’t deeply rooted in neoliberalism. The informal summit of the European Council in Bratislav last week is the most recent example.

Neoliberalism has failed, but for the most extreme neoliberal manifestation, the euro-zone, it's business as usual. We keep hearing rhetorical invocations of the United States of Europe or, at least, “more Europe”, and calls for a eurozone treasury minister. On the left, and even more so in a significant part of the so-called “radical left”, it’s even worse: what’s being proposed is a completely unrealistic democratization of the EU and whoever urges reflection on a Plan B for moving beyond the euro in order to save the EU is dismissed as a sovereign-tist, a neo-nationalist, a populist, and consequently associated with 5 star Movement, the Northen League, the Front National, Ukip and AfD.

The poverty of analysis underlying the political agenda is truly embarrassing, particularly in the socialist camp, despite the positions taken by more and more progressive and even mainstream economists. Last August, an authoritative intellectual, an icon of the left, basically mainstream, one certainly above suspicion of anti-European sympathies, Joseph Stiglitz, provided an in-depth explanation for the unsustainability of the economic and social order of the eurozone. In the book "The Euro: How a Common Currency Threatens the Future of Europe", the 2011 Nobel economics laureate explains how the euro produces divergent dynamics among the participating countries, generates stagnation and, in the best of cases, thanks to a desperate monetary policy, shores up precarious equilibriums of high unemployment.

In sum, the contraction or prolonged slump of the eurozone economy is not the result of an inadequate response to an exogenous crisis or consequence of fiscally irresponsible national governments. The fundamental problem of the eurozone is not austerity. The key problem is the very physiology of the euro system: mercantilism fuelled by devaluation of labour.

Solutions do exist on paper for re-directing the single currency onto a pro-labour route. A good summary of them is found in Stiglitz’s book: from imposing tight regulations on capital flows and the banking system to force them to service the real economy to restructuring public debt; from shelving the Fiscal Compact in order to finance a green New Deal to raising incomes in countries with trade surpluses. The problem, clear to Prof Stiglitz but unnoticed by our blinkered followers of Altiero Spinelli’s dream of a United States of Europe, is the absence of the minimum consensus required in national contexts to approve the necessary corrections. Unfortunately, a European demos doesn’t exist: the demos is national because of deep cultural, historical and social roots. In other words, democracy is either national or it is not.

In this context, for the peripheral countries of the Eurozone to clash with Berlin and the European Commission over a few tenths of a percentage point of bigger fiscal deficits is ridiculous. So are calls for further supply-side measures to spur further labour devaluation in the attempt to improve competitiveness and to bank on the domestic demand of neighbors. This policy, recommended to and implemented by all the euro countries, is useless for improving the relative position of an individual economy. But it's very effective in depressing domestic demand in the eurozone, perpetuating stagnation and pushing working families and middle classes into the grasp of nationalistic, xenophobic forces so preparing the perfect storm, in a context of fear and insecurity generated by terrorist attacks and immigration flows.

As difficult as it may be, the political and policy debate should face the uncomfortable truth before us and discuss the alternatives to adjustments of the euro. Progressive European leaders should find the intellectual and political bravery to admit that the euro was a political blunder of historic proportions.

Against this background, the left should define a way out of the trap in order to revitalize democracy, promote full employment/decent jobs and reduce inequality. In the current eurozone order, there is no breathing space for the Left. The Left can only play at the margin. Prof Stiglitz articulates a couple of alternatives to the current stance of "muddling through": an "amicable divorce" to arrive at a euro of northern Europe and a euro of southern Europe; the exit of Germany and its satellites from the eurozone. In sum, prof Stiglitz describes a possible definition of the "Plan B", the wide range political program we started to discuss in Paris, in September 2015. Other possible definitions of "Plan B" have been tabled by Oskar Lafontaine around the re-introduction of the European Monetary System, but in the version 2.0. Others ideas are discussed in several forum.

What shall we do?

First, we need share the assessment of the current economic dynamics: the unsustainability of the Eurozone. Second, we need to share the assessment of the current political dynamics: the marginality of the forces for pro-labour corrections of the single currency.

Second, we need walk two parallel tracks as a way to unite the "critical left": the track for the "Plan A" and the the track for the "Plan B". The corrections implied by the Plan A are clear. We keep reading them in economist papers and politically correct appels. Some need Treaties' changes. Others not. In the short run, without any Treaties changes, the most effective policy under the Plan A agenda is increasing wages of German workers so to increase German imports. This U-turn would make possible improvements of BoP for countries in desperate quest for growth so to allow them to spend on public investments, mainly infrastructure and green programs.

In parallel with the initiatives for Plan A, we need an intensive, multilateral activity on elaborating a "Plan B". Let me crystal clear here. In my view, under the possible definitions of the Plan B there is not an unilateral, uncoordinated, isolationist exit of one country from the single currency. The Plan B objective is dual: save each Eurozone member and save the Eu. In my view, we should try to be egemonic. We should try to have on board not only progressive parties, movements and intellectuals. We should try to involve in supporting the Plan B even conservative forces provided by enlightened self-interest. The wreckage of "Titanic Europe" is in the interest of no one.

Concluding,  it's now mostly up to us, the "critical left", progressive parties, movements, trade unions, academics saving Europe from the euro and relaunching the battle for full employment, decent jobs, social justice, sustainable development.

Let's move on.

Stefano Fassina

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