Greece’s entrance to EMU: gains for capitalists, losses for workers

Greece’s entrance to EMU:

gains for capitalists, losses for workers

Stavros D. Mavroudeas

A short historical account

On January 1st 2001 Greece formally entered the European Monetary Union (EMU) and euro substituted the drachma as monetary unit. This was a crucial moment for the longitudinal and sustained effort of the Greek bourgeoisie to participate in the European imperialist integration. This effort had begun with the entrance in the then European Economic Community (EEC), immediately after the fall of the military dictatorship in 1974. This was ‘sold’ to the people by the Right, the Centre and a part of the reformist Left (the euro-communists of the Communist Party of the Interior) not only as a boost for the Greek economy but primarily as the securing of democracy. On the other hand the major part of the reformist Left and centre-left (Communist Part (CP) and Panhellenic Socialist Movement (PASOK)) were against as well as the Revolutionary Left. However, when PASOK was first elected in government in 1981 it swiftly changed position and supported eagerly the participation in the EEC.

For the Greek bourgeoisie the entrance to the EEC secured not democracy but capitalist domination and exploitation in an era when the struggle between East and West was continuing and the capitalist system was disputed after the fall of the dictatorship. Moreover, with the eruption of the 1973 world structural crisis of capitalism – which coincided in Greece with the fall of the dictatorship and the beginning of an era in which the Left and workers’ militancy was on the ascendancy – the participation in the European integration promised to support economic performance and capitalist profitability. First, the European integration offered the prospect of a wider market, comparing with the rather small size of the Greek one. Second, and even more important, it offered to Greek capitalism the clout of an at least second class imperialist power (comparing to its lesser status before) which enabled it to exploit better other economies and regions. Third, and equally important, it provided a superior economic mechanism and a powerful ideological weapon, at the same time, in order to increase the exploitation of the Greek working class: the participation to the EEC was presented as the entrance to paradise (or an new era where ‘the people will eat with golden forks’, to remember an older slogan used by the bourgeoisie during the Greek civil war in order to make US anti-communist aid popular).

Moreover, Greek capitalism entered the EEC at a rather lucky moment. At that time EEC was eager to attract more members and thus was willing to ‘sweeten’ the integration process and make-up for its costs by offering packages of economic aid. Thus, capitalist activities but also small-scale self-employed professionals and peasants prospered by taking advantage of these packages. Particularly peasants and the agricultural sector – which was until recently organized predominantly on a family basis – benefited from these packages. This constructed a popular appeal around the EEC and obscured its burdens. On the other hand the majority of the population and mainly working people started to bear these burdens through successive austerity programmes. This process started to erode the popularity of European integration.

Things started to change rapidly in the 90s. The collapse of the Eastern block, the internal defeats of the workers’ movement and the continuation of the capitalist structural crisis changed the situation. Capital became both nationally and at the European level more aggressive and at the same time more pressurised. First, the continuation of the crisis, despite the victories over the workers’ movement and significant gains in profitability, made capitalism more eager for a decisive breakthrough. Thus, austerity policies – now under the rubric of convergence and stability programmes – became more aggressive. Second, the collapse of the East led to the emergence of the till then latent intra-capitalist antagonisms between the US, Germany (and some other European powers) and Japan. This intensified intra-capitalist and intra-imperialist rivalries. Germany, the basic power behind European integration, pushed for a stronger both economically and politically European integration under its hegemony. At the same time the opening of the Eastern European countries – the true backdoor of German capitalism – lowered the importance of South European less developed economies. This led, together with the intensification of crisis and competition, to a tendency to curtail aid packages to less developed countries and problematic sectors. This affected the agricultural sector – where the Common Agricultural Policy (CAP) is an obvious failure sustained for political reasons only – and those capitals, small businesses and self-employed that prospered through EU aid packages. All these led to a steep drop in the European Union (EU) popularity because increasing sections of the Greek people started to realize that it was not the paradise promised but a trap in which their incomes and living standards were rapidly deteriorating.

The entrance to the EMU led to the final disillusionment. It was professed as a ‘national goal’ and under its banner the last two PASOK governments (which represent an even more reactionary turn of this party) were re-elected. However, as soon as the entrance was achieved the true face of the EU appeared: instead of a relaxation of austerity and a boost to people’s incomes and welfare the Pact of Stability dictated new – even more harsh – rounds of austerity. At the same time the euro is being proven as extremely problematic. The price level has increased significantly particularly for the basic consumption goods and Greek families start to realize that it constitutes a drain to their pockets. Additionally, the international competitiveness of Greek products has deteriorated because of the euro in crucial sectors such as tourism. Finally, the old bastion of pro-european feelings – the agricultural sector – has become a hotbed of anti-EU mobilisations as the successive changes of the CAP has eroded its incomes and is leading towards the annihilation of small peasants and family farming. Last, the aggravation of the crisis has led to a new pan-european wave of enterprises’ mergers and acquisitions, which was facilitated by the EMU. Greek capitalist enterprises are not faring very well in this wave, as they are ‘small fish’ comparing to their European partners and competitors. Thus, sections of Greek capital are becoming restless as their bigger foreign counterparts are buying them cheaply.

The class character of the European integration

The European integration is a capitalist and imperialist project. It began as an economic, social and political buffer against the workers’ movement and the Eastern block, which contained intra-european rivalries under the US and NATO auspices. Against the ‘internal enemy’ – the workers’ movement – it helped reconstruct and secure capitalist relations of production after the 2nd World War and against a militant working class. It set a framework constraining intra-capitalist struggles to functional levels and securing capitalist development. The latter had spillover effects to the working class in the sense that a part of the new surplus produced by workers was allowed to return to them in the form of better wages (which however did not cover the full contribution of labour). These better wages helped the system to dominate ideologically the working masses against both internal disputes and the external challenge of the Eastern bloc. Also against the ‘external enemy’ the European integration helped to keep Western European countries together and not falling one after the other under the influence of the Eastern bloc (as it had happened with several centre-european countries).

With the end of bipolism Germany, the main hegemonic power, started aspiring to a stronger international role. Thus, in accordance with France’s similar aspirations, it pushed for a stronger, more tightly knit integration. It is indicative that when the Maastricht Treaty was signed the then French president Francois Mitterand declared that now Europe becomes the first global power.

Thus, beginning even before the collapse of bipolism, a common monetary architecture was added to the common market of the EEC. This is supposed to be able to challenge the global hegemony of the US dollar, which is one of the main American economic weapons. The common monetary structure was supplemented with the further political integration of the member-countries and the strengthening of centralised mechanisms. The transformation of the EEC to the EU marks this process. Of course, the bigger powers (Germany etc.) are the true hegemons behind this process and, lately, they create openly directorates (where they participate only them) that dictate resolutions to institutional bodies.

On the other hand, the US becomes even more suspicious towards European integration as it considers it as a possible imperialist competitor. Hence, it uses all its power to undermine it. The US does not strive to dissolve the EU. Rather, they push for a loose and weak economically and politically (and after all militarily) European integration that would not be able to challenge their dominance. Thus, contrary to Germany and the other more antagonistic to the US European powers, they favour a broad expansion of the EU (through the entrance of many new countries-members) that would make difficult any closer integration and a more tight control by Germany. On the other hand, Germany and France attempt to side-step the problem by delaying the entrance of many new-comers and by moving towards a two or even three-levels European integration where the more advanced countries would constitute the hard core and the other one or two zones the periphery. The latter would have a limited impact on the main decision centres.

In a nutshell, the European integration is a capitalist-imperialist project that facilitated the better exploitation of the working classes of the European countries, the containment to acceptable levels of intra-capitalist and intra-imperialist antagonisms and the enhanced imperialist dominance over other countries and regions.

From the common market to the EMU

The beginning of the European integration was the common market. However, it soon moved on to the construction of a common monetary structure. It began in 1971 with the Werner plan, which failed but left behind the ECU (a logistical unit). Other attempts followed (‘the snake in the channel’, the European Monetary System (EMS) etc.) all of which failed for a number of reasons. The idea of a monetary integration resurfaced in the middle of the ‘80s and was agreed in 1991 with the Maastricht Treaty. The latter had the more ambitious aim: the creation of a common European currency, the euro.

Monetary integration has a number of crucial merits for capitalist accumulation in the European countries. First, it facilitates and develops further the common market aspect. Now this wider market is even more accessible because instabilities and problems due to monetary differences are eliminated.

Second, it imposes even stronger discipline to intra-capitalist and intra-imperialist antagonisms. Previously, the capitals of a less developed country (lower labour productivity) could repulse competition from the more developed ones (higher labour productivity and thus, possibly, lower prices) by resorting to competitive devaluation. By devaluing their currency they could make their products cheaper in international markets and thus compete with the more developed countries, which fall pray to their stronger currencies. With the EMS the range of these competitive devaluations was constrained. With the euro they become non-existent.

Third, all these oblige capitals not solve their profitability problems not by recoursing mainly to intra-capitalist competition (although this remains live and vibrant) but through the increased and more efficient exploitation of workers. It particularly obliges laggard capitals and economies to strive to increase surplus-value extraction from their workers. Thus, particularly regarding less developed capitalist economies it leads them to lean more on the extraction of absolute surplus-value (through the extension of actual working time), since they are less capable to introduce technical change (and thus to extract only relative surplus-value).

The last is the more important feature of the EMU, which makes it preferable even by less developed capitals and economies. It stresses the concerted effort to increase workers’ exploitation and it keeps intra-capitalist struggles constrained. Increased surplus-value extraction is superior to competitive devaluations for several reasons. First, a competitive devaluation usually caused another one as an answer, thus eroding benefits and leading to a dangerous spiral. Particularly, when competitive devaluations were combined with high levels of inflation as a way to steal workers’ incomes, it eroded also the incomes of middle classes creating problems of insufficient demand and generalized social upheavals. Second, whereas inflation and devaluations mean simply the redistribution of surplus-value, the new environment obliges to increase the extraction of surplus-value. Thus, although the EMU fosters primarily the interests of German capital (and the other more developed capitals), it is also in the interest of less developed capitals because ultimately the workers will pay the bill.

On the other hand, common advantage does not imply harmony of interests. The EMU sets the framework within which intra-capitalist competition continues without stop.

Winners and losers from the entrance to the EEC and the EMU

For the Greek working people the entrance to the EEC and the EMU meant the introduction of new and the intensification of old anti-people policies and the implementation of successive austerity programmes.

The increase in unemployment and a worsened income distribution are the immediate results of the economic policies dictated by the integration to the EEC and the EMU. As it can be seen from Table 1, there is a continuous increase of unemployment. This increase continued in 1999 (11.7%) and in 2000 (12.1%). This deterioration took place irrespectively of whether there was an increase or a decrease in the Gross National Product (GNP). The worsened income distribution can be depicted roughly by the GNP per capita: it decreased from 1980 till 1987, with a slow recovery from 1988 till 1997 followed by a significant drop in 1998 and onwards.

Table 1: Unemployment rate, %GNP, GNP per capita

Years Unemployment rate %GNP GNP per capita
1980 2.7 0.7 50.2
1981 4 -1.6 52.3
1982 5.8 -1.1 56.6
1983 7.9 -1.1 52.8
1984 8.1 2 52.9
1985 7.8 2.5 49.9
1986 7.4 0.5 43.2
1987 7.4 -2.3 41
1988 7.7 -1.5 42.5
1989 7.5 3.8 43.4
1990 7 0 43.4
1991 7.7 3.1 45.8
1992 8.7 0.7 46
1993 9.7 -1.6 47.4
1994 9.6 2 47.7
1995 10 2.1 48.4
1996 10.3 2.4 51
1997 10.3 3.2 52.7
1998 10.9 3.7 49.7

Source: Ministry of National Economy

An even more accurate picture of the deterioration of workers’ incomes can be depicted from Table 2 and 3. Table 2 shows that, for the period 1991-8, the rate of increase of the basic daily wage lagged behind the consumer price index (thus wages were eroded by inflation) and the net industrial profits (denoting an increasing exploitation of labour). The same picture can be drawn from Table 3, where it can be seen that the average real wage lagged behind the consumer price index for several periods. Average real wage is lagging significantly behind inflation. This lag was dictated by government policies in accordance with the programmes of entrance to the EEC and the EMU. Wage increases also lagged behind productivity increases. The EU general directive was for a 1% lag but the actual one was greater. But the data of Ministry of National Economy almost without shame obscure this fact.

Table 2: Rates of change of Profits, wages, inflation for the period 1991-98

Net industrial profits 3.260
Basic daily wage 85
Consumer price index 135.9

Sources: Institute of Labour/General Confederation of Workers of Greece

Association of Greek Industries, ‘Greek Industry in 1999’

Table 3: Consumer Price Index and Average Real Wage

Periods Consumer Price Index Average Real Wage
1980-81 24.7 -3.1
1981-85 20.7 2.7
1986-89 16.6 0.4
1989-93 16.8 0.1
1990-93 17.5 -2.2
1994-98 7.6 3
1996-98 6.1 3.3

Source: Ministry of National Economy

Thus, according to a Eurostat survey conducted in September 1998, Greece is second only to Portugal regarding economic inequality: the poorer 10% of the Greek population possesses only the 2,2% of the GNP, whereas the wealthier 10% possesses the 26,3%. Later studies revealed an even bleaker picture.

Regarding the GNP Greece has usually more robust rates of increase it compared to those of most EU countries. This is a typical feature of less developed economies. However, this feature is neither permanent nor without significant setbacks. Thus, while Greece’s GNP in 1981 (when it achieved full membership to the EEC) was 58% of the average GNP of the EEC, today it has dropped to 48-49% of the EU average.

On top of all that there is a marked increase of the time that an average labourer works. Figure 1 represents an econometric evaluation of trends in actual working time (the time actually worked as opposed to that defined by laws and statutory agreements) in Greece. It reveals a marked increase in actual working time in Greece from the mid-1980s and onward. This increase was caused, to a great extent, by the policies of integration and particularly by their pressure over less developed economies to increase the extraction of absolute surplus-value (that is to actually extend the work time).

On the other hand, Greek capitalism had also to pay certain costs, despite its overall strategic gains. For example the balance of trade between Greece and the EU from positive (at the beginning of the integration process) became negative: we now have a 24 trillion drachmas deficit and the gap continues to worsen. The deterioration of the trade balance with the EU can be seen in Tables 4 and 5. Table 4 shows rate changes in the trade balance with the EU. It is interesting that from 1995 and onwards there is a marked upsurge in the rate of deterioration of the deficit. Table 5 draws the same picture but this time as a percentage to GNP. It can be seen that while exports to EU are more or less stagnant at the same level, imports from the EU show an almost continuous increasing share.

Table 4: Trade balance with the EU (customs statistics)

Year Exports yearly rate of change Imports’ yearly rate of change Deficit’s yearly rate of change
1981 -2.2 37.4 93.3
1982 28.8 24.7 21.7
1983 55.3 32.2 14.7
1984 37.7 25.2 12.4
1985 18.3 29.4 43.4
1986 49.6 40.2 30.6
1987 25.1 18.2 10.0
1988 -20.5 -0.8 25.8
1989 60.8 48.9 38.8
1990 0.6 24.0 47.0
1991 24.3 17.2 12.4
1992 22.6 19.1 16.5
1993 -12.0 8.1 23.9
1994 13.6 10.9 9.4
1995 44.0 39.3 36.6
1996 26.9 34.0 38.0
1997 2.4 15.6 23.4
1998 5.9 24.9 35.0
1980-1998 1470.1 3018.2 5206.8

Source: The Greek economy in numbers 2000

Table 5: Exports and Imports with EU and with non-EU countries

(current prices, percentage of the GNP)

Years Exports to EU Exports to non-EU Imports from EU Imports from non-EU
1980 5.3 5.3 9.7 12
1981 4.3 5.2 10.6 9
1982 4.5 4.7 10.9 10.5
1983 5.7 4.7 11.6 10.7
1984 6.7 5.1 12.1 11.3
1985 6.4 4.9 12.8 12.3
1986 7.8 4 14.5 9
1987 8.1 3.4 14.8 8.2
1988 5.4 2.6 12.2 6.3
1989 7.5 3.5 15.9 8
1990 6.6 3.1 16.1 7.6
1991 6.5 3.2 15.4 8.7
1992 6.9 3.1 15.8 8
1993 5.6 3.9 15.5 9.2
1994 5.4 4.1 14.8 7
1995 5.8 3.8 15.8 6.8
1996 5.7 3.3 16.1 6.7

Source: European Economy 1998

The deterioration of the trade balance has created recently significant problems to the Current Account Balance. Thus so-called ‘creative logistics’ (i.e. the manipulation of statistics) was systematically used – as in other EU countries as well – in order Greece to catch the Maastricht criteria and to enter the EMU.

In the field of economic and social policies the participation in the EU led to successive laws that worsen the position of working people. First, flexible labour relations are being promoted, which limit workers’ protection and enhance bosses’ control and exploitation. Second, the Social Welfare System (pensions etc.) is being transformed: people’s needs are being worse covered and additional payments are introduced. This process is particularly grave in Health Care. Third, there is an ongoing attempt to change the taxation system and to make it even more rich-friendly; that is to increase the haemorrhage of people’s incomes and to boost further those of the rich.

The EMU has also an extremely dangerous characteristic. Almost every tool of economic policy is ceded to Brussels. Thus Greek government has a very limited and inefficient toolbox in order to face specific problems of the Greek economy. It cannot use neither monetary nor fiscal policy in order to face contingencies. For example the implementation of a uniform monetary policy for economies with such great differences (e.g. Germany and Greece) is extremely problematic. Thus, not even monetary stability can guaranteed completely. For this reason the current example of Argentina – although the EMU provides a mechanism of support for member-countries in danger, but this mechanism can have political limits – send shivers in the spine of many official circles.

The necessity of an anti-capitalist anti-imperialist revolutionary movement

The participation to the European integration has worsened the economic, social and political clout of the Greek people whereas it has enhanced those of the ruling class. This has started being recognized by proliferating sections of the Greek popular masses. The ruling class is truly alarmed by this process. Furthermore, it has recognized that the entrance to the EMU debunked one of its major ideological weapons and, moreover, it does not have a ready substitute for it.

On the other hand, parts of the reformist Left – and particularly SYNASPISMOS (the even more conservatively transformed party of the old euro-communists) – attempt to offer again their help to the bourgeoisie. Those that supported almost uncritically the European integration try today to ask for changes that would create a social Europe. They argue that the EU is more socially sensitive and democratic than the US and, therefore, the people and the Left should support it. On top of that they ask for more social consideration and less unpopular measures by the EU. All these are a pure fraud. The EU is less aggressive than the US simply because it is still weaker and has to follow the American directives. Furthermore, it has been constructed as a capitalist and imperialist union and that cannot change. This has been proven in every significant economic, social, political and international issue.

The New Left Current (NAR) and the Radical Left Front (the front organization in which NAR participates) maintain that the only road for the working people is to fight to Greece’s disentanglement from the EU. This cannot be done in alliance with the so-called anti-monopolist patriotic sections of the bourgeoisie because such sections are even more reactionary than the now dominant ones and of course they want to impose their dominance and their own interests on the working class and to use the latter as their instrument. The Left and the workers’ movement have to strive for a process of disentanglement form the EU combined with the process of social revolution and the overturn of capitalism. This necessarily implies the necessity of a renewed and deeper international solidarity and co-operation between the people and the working masses of all the countries and particularly those of the Eastern Mediterranean region.



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