The internationalist case against the European Union

Issue: 148

Alex Callinicos

For the first time in a generation Britain will vote on its membership of the European Union, probably in the autumn of 2016. How to vote in that referendum is a difficult choice for anyone on the left. Since the 1990s the anti-EU camp has been dominated by the chauvinist and racist right, initially on the Thatcherite wing of the Tory party, but now enjoying separate and increasingly powerful representation in the shape of the UK Independence Party. But anyone who contemplates therefore voting Yes in the referendum is confronted with the reality of the EU as a neoliberal club currently busy nailing the people of Greece to the cross of austerity. Viewing the standoff between the Europhobes and the oligarchs of Brussels and Frankfurt one is reminded of Oscar Wilde’s description of fox hunting as the unspeakable in pursuit of the uneatable. This article seeks to address this dilemma, arguing that there is a powerful internationalist case against the EU.

The left against Europe last time

The underlying assumption of those on the left supporting a Yes vote is that the EU represents, however imperfectly, the transcendence of nationalism and so internationalists and anti-racists should vote for Britain to remain in the EU. John Palmer, who writes in support of a Yes vote elsewhere in this journal, has over the years put an eloquent and sophisticated argument for understanding the EU as fundamentally a progressive response to economic globalisation and the decline of the nation-state.

A similar view was expressed very strongly by one of the most influential contemporary Marxist thinkers, Toni Negri, at the time of the May 2005 referendum in France on the European Constitutional Treaty:

The Constitution is a means of fighting Empire, this new globalised capitalist society. Europe has the chance to be a guardrail against the single thinking [pensée unique] of economic unilateralism: capitalist, conservative and reactionary. Europe can also erect a counter-power against American unilateralism, its crusade against Iraq for petrol. The United States have understood this very well, and since the 1950s fought like madmen against European construction. They see in it a lock against the extension of their power…the real question is who is going to regulate the world market. National resistance is no longer a bulwark. Only the pursuit of European construction can allow global alternatives to be built for what I call the multitudes, the movements of resistance to Empires. Changes that set up a new political space in which this shit of the national state will disappear.1

This kind of thinking has exerted a powerful influence on the radical left—thus Syriza (the Coalition of the Radical Left) in Greece can trace its ultimate origins to the Communist Party of the Interior, which broke away from the strongly nationalist Communist Party of Greece on a Eurocommunist basis. But for a long time this was a minority position on the left, with many of the most powerful forces in the reformist camp opposing the European Economic Community (EEC)2 on a left nationalist basis.3

This was very visible when Britain voted on its membership of the EEC on 5 June 1975. The referendum was called by the Labour government headed by Harold Wilson, for whom it was a device to manage the bitter divisions within his party over Britain’s entry into the EEC at the beginning of 1973. At a time of intense class struggle, with a powerful workers’ movement taking on Ted Heath’s Tory government (which had negotiated British entry), the Labour left were on the offensive within the party, confronting the pro-EEC right wing headed by Roy Jenkins. After taking office in March 1974, Wilson authorised his foreign secretary James Callaghan to renegotiate the terms of British membership. A year later they announced a deal and called a referendum with a recommendation to vote Yes: this was endorsed by the electorate by 67.2 percent to 32.8 percent on a 65 percent turnout.4

All this may sound like a dry run for David Cameron’s strategy in the run-up to next year’s referendum. But the party line-up is very different. Now it is the Tories who are deeply divided over Europe. In 1975 a Labour Party special conference actually backed the No position, though Wilson had the support of a majority of his cabinet. The Tories dominated the slickly run Britain in Europe (BIE) campaign, lavishly funded by big business, and outspending the No camp’s umbrella National Referendum Campaign (NRC) by £1,481,583 to £133,630.5 The Scottish National Party backed a No in 1975, while it is likely to use a vote for Brexit this time as a pretext for holding another independence referendum. The only national daily paper to support the No cause in 1975 was the Communist Party’s Morning Star, while today the Tory press is thick with Eurosceptics.

The key Tory anti-Marketeer in 1975 was the racist demagogue Enoch Powell, who broke with his party over the EEC in the February 1974 general election; he was joined at the end of the referendum campaign by Edward du Cann, a big figure in the City and chairman of the backbench 1922 Committee. But the NRC’s most powerful support came from left wing cabinet ministers—Michael Foot, Tony Benn, Peter Shore and Barbara Castle—and left-led trade unions such as the Transport and General Workers’ Union (TGWU). The campaign nevertheless operated on a cross-party basis. David Butler and Uwe Kitzinger write:

Some of his fellow anti-Marketeers felt a certain embarrassment about sharing a platform with Enoch Powell but by the end of the campaign almost all the leading figures had made some joint appearance with him, either at a press conference or at a public meeting. The one person who ostentatiously avoided such contamination was Tony Benn, who refused to appear in Granada’s final debate because he was not prepared to sit beside Conservatives.6

The basis of this alliance was inevitably nationalist. Benn, Foot and Powell alike portrayed the EEC as a threat to the sovereignty of the British Parliament. After the result, Powell said: “Never again, by the necessity of an axiom, will an Englishman live for his country or die for his country: the country for which people live and die is obsolete, and we have abolished it”.7 A few years later Benn would complain: “Britain is now, in law and in practice, a colony of this embryonic West European federal state”.8

But, for Labour left wingers, this nationalist critique mingled with the concern that restrictions on state sovereignty involved in EEC membership would prevent the pursuit of socialist policies. This mix of reasons is reflected in Benn’s contribution to the debate in the Labour cabinet on 18 March 1975 over whether or not to accept Wilson’s and Callaghan’s deal: “In practice, Britain will be governed by a European coalition ­government that we cannot change, dedicated to a capitalist or market economic theology”.9

Benn and other Labour leftists such as the economist Stuart Holland advocated an “alternative economic strategy” in which the state would extend its control over the economy, in particular to regulate international trade and to direct private investment. Holland argued that the EEC was too weak to be a serious threat to this strategy but warned presciently against European economic and monetary union (EMU), which was already under discussion: “The likely outcome [of EMU] would be an increasing divergence between income and employment levels in the central and peripheral areas of the Community”, leading to “inequalities [that] would surpass anything which post-war Europe has known”.10

Greece has shown that Holland was dead right about EMU. But he underestimated the EEC. The most ambitious attempt to implement a version of the alternative economic strategy came after François Mitterrand, leader of the French Socialist Party, was elected president of the republic in May 1981. His government’s attempts to implement left-Keynesian economic policies (including extensive nationalisations) were (to use a classic phrase of Harold Wilson’s) blown off-course by the downward pressure on the franc within the Exchange Rate Mechanism of the European Monetary System (EMS).

The EMS—under which participating currencies were allowed to fluctuate against each other only within a narrow range—was introduced in 1978 as a step towards EMU, and more immediately to counteract the destabilising effect of a rapidly falling US dollar, which was putting pressure on German exports. But it became the mechanism through which the discipline of the financial market was imposed on the Mitterrand government, eventually forcing it in March 1983 to reverse course and embrace neoliberalism, according to the economic historian Harold James,

The U-turn of the Mitterrand government became the model of a Socialist acceptance of the market and its discipline, not only for France but also for other countries. Finance minister Jacques Delors became the crucial figure in persuading Mitterrand to turn to Europe as a source of political discipline, and the lessons of the 1983 experience provided a foundation for his subsequent campaigns as Commission president in Brussels.11

One of Delors’s most striking achievements as president of the European Commission came when he addressed the British Trade Union Congress in September 1988. The architect of the turn to neoliberalism in France artfully presented Europe as the source of “a new model for society, a model based on a skilful balance between society and the individual…throughout Europe we encounter similar mechanisms of social solidarity, of protection of the weakest and of collective bargaining” that further European integration could defend and modernise.12

The delegates gave Delors a standing ovation. This came against the background of the failure of left reformism—symbolised not merely by Mitterrand’s U-turn but by the defeat of Bennism within the Labour Party in the early 1980s—and also of the terrible reversals suffered by the workers’ movement in Britain and elsewhere. Faced with Margaret Thatcher’s success in crushing the miners, many trade unionists and socialist activists were prepared to see the EEC as a safer guardian of the welfare state and source of progressive policies than national governments. More or less simultaneously as the left shifted in a pro-European direction, the Tories became increasingly divided over their attitude to the EU, leading to Thatcher’s fall in 1990 and the effective paralysis of John Major’s ­government in the mid-1990s.13

The EU—a dysfunctional would-be imperialism

Delors’s intervention summed up one key element of the pro-EU case. But there is a second and deeper justification for European integration, namely that it represents the transcendence of the nation-state and of the antagonisms generated by this political form. The down-market version of this argument is the cliché that the EU has prevented war in Europe since 1945. The up-market version (expressed, for example by Negri) is that European integration represents a progressive political response to economic ­globalisation—the increasing organisation of production, trade and finance across national frontiers.

But both these rationales for the EU are false. In the first place, the EU does not represent the transcendence of nationalism, but rather has provided a framework in which the larger European capitalisms could pursue their interests. Secondly, for the past 30 years the EU has functioned as an engine promoting neoliberalism both within and beyond its borders. EMU and its crisis offer the clearest illustration of both these facts.

In making these claims I am reasserting the position of this journal over many decades. Thus Chris Harman carefully surveyed the obstacles to the emergence of a European federal state in 1971 and concluded:

The dependence of industry in each country upon the national state to protect it from instabilities means that in a period of considerable international financial turmoil, the obstruction to a real capitalist unification of Europe can grow more insistent than ever before. The pressures driving the European capitalist classes to mutual integration are growing, but so too are the centrifugal forces driving them apart… We face a long period of hard bargaining between rival, national capitalisms, in which national ideologies will remain of key importance to the ruling classes and in which political and social struggles will by and large remain nationally based.14

Four years later, at the time of the referendum on British membership, Duncan Hallas expressed essentially the same judgement in characteristically pithy form: “the EEC is a customs union plus a dear-food agricultural protection scheme plus a supra-national bureaucracy with considerable formal regulatory powers but no guns. The aims of creating a supra-national capitalist class, and a West European super-state to go with it, are unrealised and probably unrealisable”.15

Of course, the process of European integration has gone considerably further in the subsequent 40 years. The EEC has become the EU, and has expanded across Europe, notably thanks to the accession of Greece, Portugal and Spain during the 1980s and of ten states, mainly from Central and Eastern Europe in 2004. And it has become institutionally stronger thanks in particular to the Single European Act of 1986, which created the single market, and the Maastricht Treaty of 1991, which led to EMU and the launch of the euro.

Surveying the outcome of this process, Perry Anderson is as sardonic as Hallas: “Larger now than the Roman Empire of two thousand years ago, more opaque than the Byzantine, the European Union continues to baffle observers and participants alike”.16 Anderson quotes Delors’s description of the EU as an “unidentified political object”—neither a conventional state nor a mere cooperative arrangement between sovereign states. The EU embraces supranational institutions such as the Commission, the Parliament, the European Court of Justice, and the European Central Bank—all of which look as if they belong in a federal state. The Court of Justice ruled as early as 1964 that European law overrides national law. But decisive legislative power is vested in the Council of Ministers, which is composed of national governments, and policy is decided at the European Council, the quarterly summit of heads of government.17

The EU today is best understood as a dysfunctional would-be imperialist power. We can see its imperialist character most clearly in its promotion of neoliberalism—through its expansion to incorporate Central and Eastern Europe, in its policies towards neighbouring states in the Mediterranean and Eastern Europe and now, within the EU, through the disciplinary mechanisms enforcing permanent austerity. But the dysfunctional nature of this imperialism is evident both internally (the eurozone) and externally (Ukraine).

Hallas and Harman were right to argue that European integration would be unable to overcome the antagonisms among the national capitalisms making up the EU. It is a fundamental drive of the capitalist mode of production to create a single integrated global economic system in which capital and commodities flow across borders. But this process is accomplished through the tendency of uneven and combined development, which leads to the formation and reformation of specific, geographically concentrated clusters of capitals. These clusters tend to become the economic basis for states that seek to promote the interests of the particular capitals with which they are interwoven. Of course, because of the globalisation of capital, the problems states have to address frequently outrun their capabilities. Specific historical conditions have allowed growing numbers of European states partially to pool their sovereignty, but this process has proven to be subject to structural limits arising from the connections that continue to bind together nation-states and capitals.18

Imperialism is the theme running through the history of the EU: its origins lie in the crisis of European imperialism at the end of the Second World War and the drive by American imperialism to reconstruct European capitalism.19 Far from European integration ending the possibility of further wars, it began in conditions in which it was no longer possible for the major European states to pursue the antagonisms that had led to three Great Power wars between 1870 and 1945—antagonisms that were the consequence, not of nationalism as such, but of the struggle for resources and territories among rival imperialist powers.

Not only was Europe left shattered and exhausted by the third and most terrible of these conflicts, but the Second World War ended with the partition of the continent between two superpowers from Europe’s margins, the United States and the Soviet Union. Even before the outbreak of the Cold War, US policy makers were determined to promote European ­integration—and indeed a federal state modelled on their own polity—both to create a unified market for American firms and to overcome the national antagonisms that they held responsible for the world wars. Contrary to Negri’s claims, European integration was from the start sponsored by US imperialism.

Crucially, the US assumption of responsibility for the security of Western Europe (expressed above in the formation of NATO in 1949) gave France and West Germany the reassurance that they needed in order to cooperate economically. The crucial step came in 1950 with the Schuman Plan, which led to the 1951 Treaty of Paris establishing the European Coal and Steel and Community (ECSC). This essentially placed the Ruhr, ­historically the powerhouse of German industrialism and militarism, under shared control, and guaranteed the supply of coal extracted in France to the German steel industry. The six signatories of the Paris Treaty (France, West Germany, Italy and the Benelux countries) went on to form the EEC six years later.

So the basis for European integration was the alignment together of French and West German capitalism. The EEC provided the framework for this alignment and for the member states to pursue their interests more effectively. For France, the main preoccupation was to pool together the resources of European capitalism in order to counterbalance US power and to strengthen the ability of French imperialism to operate globally after it had been weakened by military disaster in 1940 and the post-war loss of empire.

For the Bonn Republic, European integration offered a way of making the revival of German power more acceptable. This was spelled out most clearly in the “Marbella paper”, a 1976 memorandum by chancellor Helmut Schmidt. West Germany’s “unwanted and dangerous rise to second world power of the West in the consciousness of other governments” could, Schmidt argued, lead to “a revival of memories not only of Auschwitz and Hitler but also of Wilhelm II and Bismarck…perhaps as much in the West as in the East”. It is consequently “necessary for us, so far as at all possible, to operate not nationally and independently, but in the framework of the European Community and the [NATO] Alliance. This attempt to cover [abdecken] our actions multilaterally will only partially succeed, because we will (necessarily and against our own will) become a leadership factor in both systems”.20

What allowed this set-up to work was the virtuous economic circle that was already developing among the Six in the late 1940s: West Germany’s export engine provided a growing market for manufactured goods produced by its neighbours. The formation of the EEC offered a stronger institutional framework for this economic nexus, and thereby allowed national governments more effectively to construct welfare states and a Keynesian economic policy regime, which sought to manage effective demand in pursuit of full employment. Thus, as Alan Milward shows in an outstanding historical study, integration actually strengthened the nation-states that formed the EEC by giving them the legitimacy that came from the secure jobs and rising living standards characteristic of what in France is called the “golden thirty years” after 1945.21

Anderson objects that the supranational character of key European institutions—the Commission, Parliament, and Court of Justice—cannot be explained by Milward’s framework or indeed by any interstate logic. They were the product of “the federalist vision of a supranational Europe developed above all by [Jean] Monnet and his circle, the small group of technocrats who conceived the original ECSC, and drafted much of the detail of the EEC”.22 Monnet was the first president of the high authority of the Coal and Steel Community and founder in 1955 of the Action Committee for the United States of Europe. He saw in a federal Europe the solution to the national conflicts he held responsible for the world wars. But he pursued this goal by a peculiar, incremental method, described by George W Ball, a US official who helped set up the ECSC:

All of us working with Monnet well understood how irrational it was to carve a limited economic sector out of the jurisdiction of national governments and subject that sector to the sovereign control of supranational institutions. Yet, with his usual perspicacity, Monnet recognized that the very irrationality of this scheme might provide the pressure to achieve exactly what he wanted—the triggering of a chain reaction. The awkwardness and complexity resulting from the singling out of coal and steel would drive member governments to accept the idea of pooling other production as well.23

The EEC’s initial success was reflected in the accession of Britain, Denmark, and Southern Ireland in 1973. The British ruling class had been ambivalent about European integration. In the immediate post-war period both Labour and Tory governments encouraged continental Europe to unite, but decided to stay aloof themselves, operating thanks to Britain’s surviving empire as rulers of the “third world power” after the US and the USSR. After the Suez debacle in 1956 shattered these illusions, British governments grudgingly decided to apply for membership of the EEC, but found themselves blocked by the French president, Charles de Gaulle, who saw Britain as Washington’s fifth columnist.

It was only after his resignation in 1969 that a new application by Heath was accepted. But de Gaulle’s suspicions were entirely justified: successive British governments were careful to preserve a close security partnership with the US, and the euro’s launch consolidated Britain’s semi-detached position. Under the Maastricht Treaty Britain won a special exemption from EMU, but—adding insult to injury—the City of London rapidly became the eurozone’s offshore financial centre.

Nevertheless, the Thatcher government played a pivotal role in the EEC’s first big step towards institutionalising neoliberalism—and also towards greater integration. The early phase of the Community’s development coincided with the height of the post-war economic boom in the late 1950s and the 1960s. The return of large-scale crises during the 1970s undermined the Keynesian economic policy regime. Thatcher’s election in May 1979 marked the first clear break in the direction of neoliberalism. It was followed, as we have seen, by Mitterrand’s U-turn in France.

The EEC was already “a formidable power in trade”, as Sophie Meunier and Kalypso Nicolaïdis put it:

In the field of trade, the Treaty of Rome was a revolutionary document. Not only did it contain unusually broad injunctions for achieving free trade internally, it also granted the new supranational entity an external personality with the authority to elaborate, negotiate, and enforce all aspects of trade relations with the rest of the world.24

The Single European Act (SEA) of 1986 took this further. Lord Cockfield, Thatcher’s appointee as Commission vice president, worked closely with Delors to win acceptance of detailed treaty changes aimed at achieving a Single European Market by 1992. In the process, member states’ veto power was substantially reduced as the Council of Ministers was permitted to make decisions on many issues by a weighted majority (so-called qualified majority voting). The European Parliament was given a significant role in legislation.

The Single Market was supposed to boost the competitiveness of the EEC, which was widely seen as suffering “Eurosclerosis” in comparison with the US and Japan, both enjoying booms driven by financial bubbles in the second half of the 1980s. Despite Delors’s promises of a “Social Europe”, the SEA, driven by the Commission and the Court of Justice, helped to transform the EU into, in Wolfgang Streeck’s words, “a machine for the liberalisation of European capitalism”.25

EMU and empire building

Delors’s other major initiative—the introduction of EMU, which he argued was necessary to make the Single Market work—went in the same direction. He presided over a committee that in May 1989 set out a step by step path to monetary union.26 EMU had played a decisive role in Monnet’s federalist project. He wrote in 1958: “the current communities should be completed by a Finance Common Market which would lead us to European economic unity. Only then would…the mutual commitments make it fairly easy to produce the political union which is the goal”.27

But these federalist ambitions didn’t play a large part in the decision to launch the euro. The relative decline in US economic competiveness visible by the early 1960s ushered in a period of major currency instability that was exacerbated by president Richard Nixon’s decision to break the link between the dollar and gold in August 1971. The willingness of the US Treasury aggressively to devalue the dollar in order to boost the competitiveness of American firms posed particular problems for West German capitalism.28

The Bonn Republic, reinforced by the EEC, provided the framework in which German companies increasingly dominated European markets through their exports of complex manufactured goods. Benefiting from the close relations with banks first analysed by Rudolph Hilferding in Finance Capital, the big industrial firms could undertake long-term high-tech investments; the high productivity of their workers meant they could cope with a generally strong Deutschmark (DM), which kept import costs and therefore inflation low. Indeed, as Joseph Halevi puts it, “a firm stance against inflation by the Bundesbank [the German central bank] constitutes a guarantee of the stability of Germany’s financial-industrial complex”.29

West Germany’s cumulative technological dominance was expressed in huge balance of payments surpluses financing an outflow of capital to the rest of Europe. But German capitalism therefore needed stable exchange rates, which were disrupted not only by the fluctuations of the dollar, but also by the tendency of the weaker European economies to boost their competitiveness through devaluation. The EMS helped to remedy this situation by pegging European currencies against each other and thereby making devaluation much harder. After Mitterrand’s U-turn in 1983, the EMS became, as Bernard Connolly put it, “an undeclared DM-zone”.30 Other European currencies fluctuated against the Deutschmark, and when the Bundesbank changed its policies, the rest of the EEC had to adjust. Because of German capitalism’s bias in favour of a strong currency and low inflation, this tended to export deflation to the rest of Europe.

This was shown most dramatically after the Maastricht Treaty was agreed on in December 1991: the Bundesbank wasn’t happy about the threat to its power represented by the agreement to implement the Delors report and reacted by sharply raising interest rates to slow down a German economy that was booming thanks to the absorption of the East after the 1989 ­revolution. Other member states were forced to follow suit, suffocating their economies. This led to the debacle of Black Wednesday, 16 September 1992, when Britain and Italy were forced out of the Exchange Rate Mechanism, the former permanently.

For Mitterrand and his ally, the Italian prime minister Giulio Andreotti, creating a single currency would transfer control over European monetary policy from the Bundesbank to a European Central Bank (ECB), over which France and Italy could hope to have more influence. EMU would thus serve to counter the economic power of a newly reunified Germany. As Mitterrand told Thatcher in September 1989, “without a common currency, we are all of us—you and we—already subordinate to the Germans’ will. If they increase their interest rates, we are obliged to follow suit… So the only way of having the right to speak is to establish a European Central Bank, where one will take decisions jointly”.31

But, in order to secure German acceptance, the new currency union had to reproduce the main features of the German monetary regime. Thus, as Harold James puts it, “the future ECB came to look more and more like an internationalised version of the Bundesbank”, unaccountable to elected politicians and with the sole responsibility of maintaining price stability.32 The Bundesbank itself would survive and continue to exert influence along with the other national central banks as members of the European System of Central Banks managed by the ECB.

The Maastricht Treaty fixed 1 January 1999 as the date European currencies participating in EMU would be irrevocably fixed against one another. Member states would have to meet tough convergence criteria to qualify, notably reducing the budget deficit to 3 percent of national income and keeping government debt no higher than 60 percent of GDP. These provisions of the Maastricht Treaty thus ensured that it was creating a neoliberal monetary union.

James suggests that the ideas of Friedrich von Hayek had an important influence over the conception of the ECB:

As Otmar Issing, the first chief economist of the European Central Bank, put it, “many strands in Hayek’s thinking…may have influenced the course of events leading to Monetary Union in subtle ways. What has happened with the introduction of the euro has indeed achieved the denationalisation of money, as advocated by Hayek”.33

The neoliberal character of the ECB was reinforced by a structural design flaw in EMU. Participating member states were giving up the ability to respond to recession by allowing their currency to devalue, thereby making exports cheaper and boosting growth. Normally monetary unions coincide with states. Within a state there are mechanisms that tend to compensate for the effects of a recession in a specific region. The unemployed can move to other regions in search of jobs. Moreover, the fiscal and welfare system of a modern capitalist state automatically shifts resources to depressed regions—as growth falls companies and workers pay less taxes, and more welfare benefits will flow in to support the unemployed. But the EU is precisely not a state, and so lacks these mechanisms. Moreover, the Maastricht Treaty prohibits either the EU or member states assuming the liabilities of individual member states, though the German interpretation that this forbids bailouts is controversial.34

The Keynesian economist Wynne Godley highlighted the problem soon after Maastricht in words that have proved all too prophetic:

What happens if a whole country—a potential “region” in a fully integrated community—suffers a structural setback? So long as it is a sovereign state, it can devalue its currency. It can then trade successfully at full employment provided its people accept the necessary cut in their real incomes. With an economic and monetary union, this recourse is obviously barred, and its prospect is grave indeed unless federal budgeting arrangements are made which fulfil a redistributive role… If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.35

The problem is sometimes put by saying that monetary union requires fiscal and indeed political union. It was for this reason that federalists such as Monnet and Delors hoped EMU would force the pace of European ­integration, leading to political union. But in fact the trend has been in the opposite direction: the Commission has become weaker, with key decisions taken through bargaining among the heads of government in the European Council and ministerial groups such as Ecofin (the Economic and Financial Affairs Council, composed of ministers of finance and economy) and the Eurogroup (the eurozone ministers of finance).

Successive French administrations pressed for the ECB to be accompanied by and accountable to a ministerial “economic government”, but Germany blocked this. Maastricht did, however, promote the trend to greater surveillance of member states from Brussels, with the 1997 Stability and Growth Pact (SGP), which sought to police national governments’ implementation of the convergence criteria. Embarrassingly, the first offenders after the euro’s launch proved to be France and Germany, who forced a loosening of the SGP in 2005, underlining another trend—the growing asymmetry between strong and weak member states.

Nevertheless, despite the drama of the EMS crisis of 1992-3, the introduction of the euro took place without incident at the start of 1999, followed three years later by the replacement of national banknotes with those issued by the ECB. After an initially bumpy start for the euro on currency markets, euphoria grew over the apparent success of EMU and the accession of ten new member states in 2004.

Interestingly, even pro-EU scholars have described expansion into Eastern and Central Europe as an exercise in empire-building. Jan Zielonka, for example, celebrates the EU as a “postmodern” empire more akin to mediaeval polities with their overlapping jurisdictions, institutional ­complexity and fuzzy borders than to a modern state:

When Communism fell, the EU was obviously one of the most powerful actors in this region, and it is clear that it could not but try to fill the power vacuum emerging on its borders. Enlargement emerged in due time as the Union’s prime instrument of gradually acquiring control over the former Communist space.36

Zielonka emphasises the importance of “conditionality”: the EU made access to the benefits of membership dependent on meeting detailed conditions and supervised implementation:

The EU not only told Eastern European applicants what they should do—in terms of, say, new legislation or administrative reforms—but sent representatives to specific ministries there to make sure that the changes were being made as prescribed through its “twinning” programme. The whole process of readjustment was being carefully monitored. At every stage, the champions and laggards among the applicant countries were identified at regular review sessions… The EU discourse was very much inflexible and hierarchical, leaving little space for negotiations.37

Seen in the light of the Troika’s detailed surveillance of Greece, Ireland and Portugal this process seems a lot less “benign” than Zielonka claims. He admits: “the Union has been using chequebooks rather than swords as leverage. Nevertheless, the substance of its policies has been similar to many previous imperial exercises: export of laws, economic transactions, administrative systems, and social habits”.38 This process of assimilation undoubtedly reshaped the political elites of Eastern and Central Europe, socialising them into the particular version of neoliberal capitalism represented by the EU, and thereby making them all too ready to impose austerity on their own peoples and those of other member states after the crisis broke in 2007-8.

Zielonka is typical of the conformist scholarship on EU integration in viewing it solipsistically, as if other states don’t exist. Only in passing does he mention that “the United States has been an enthusiastic supporter of the EU enlargement process”.39 You can say that again—indeed, Bill Clinton’s administration (1993-2001) was arguably the main author of this process as part of a package deal that extended both the EU and NATO to draw Eastern and Central Europe into a liberal capitalist world firmly under US hegemony. The strategy was articulated by Zbigniew Brzezinski, the Democratic Party’s leading geopolitical thinker, for whom the EU was “the Eurasian bridgehead for American power and the potential springboard for the democratic global system’s expansion into Eurasia”.40

Anderson stresses the priority given to NATO expansion over EU enlargement:

Expansion to the East was piloted by Washington: in every case, the former Soviet satellites were incorporated into NATO, under US command, before they were admitted to the EU. Poland, Hungary and the Czech Republic had joined NATO already in 1999, five years before entry into the Union; Bulgaria and Romania in 2004, three years before entry; even Slovakia, Slovenia and the Baltics, a gratuitous month—just to rub in the symbolic point?—before entry (planning for the Baltics started in 1998). Croatia, Macedonia and Albania are next in line for the same sequence.41

Enlargement thus underlined the importance of the European integration process to US imperialism. In line with this, Washington is a strong proponent of continued British membership of the EU, which ensures the presence in Brussels of a powerful European state closely aligned geopolitically to the US and highly integrated in the financial markets of the Anglosphere. Barack Obama intervened in the British referendum debate in July 2015: “Having the UK in the European Union gives us much greater confidence about the strength of the transatlantic union,” he told the BBC.42

The enlargement process certainly underlined the imperialist nature of the EU, but also its dysfunctional character. Imperial power depends on swords as well as chequebooks. This has become very evident in the Ukraine crisis, where Brussels—far from keeping the European peace—helped to precipitate a war by pressuring president Viktor Yanukovych into signing an Association Agreement with the EU under its Eastern Partnership policy. When Vladimir Putin reacted with fury at what he interpreted as an attempt to extend the EU/NATO zone to Russia’s borders and forced Yanukovych to renege on the deal, the profound fracture dividing western and south east Ukraine exploded, with devastating results. As Richard Sakwa comments:

the EU was launched on the path of geopolitical competition, something for which it was neither institutionally nor intellectually ready. Not only was the Association Agreement incompatible with Ukraine’s existing free-trade agreements with Russia, but there was also the Lisbon requirement for Ukraine to align its defence and security policy with the EU. This was an extraordinary inversion: instead of overcoming the logic of conflict, the EU became an instrument for its reproduction in new forms… Not surprisingly, as soon as the Ukraine crisis escalated, the burden of geopolitical leadership shifted to the US, which was far more organisationally and temperamentally suited for this kind of conflict.43

The Ukraine crisis confirmed the EU as a dysfunctional imperialist power in two respects. First, it lacks the military capabilities or political will to police its own borders. Though the Baltic states reacted by increasing defence spending, most of the big EU players—most notably Germany—are
ignoring Washington’s demands that they meet the NATO target of two percent of GDP spent on defence. It is the US that is, for example, positioning heavy weapons close to the EU’s eastern frontier. The dependence of Eastern and Central European states on a US security guarantee gives Washington additional influence over the EU.

Secondly, the continuing power of the member states and their conflicting interests mean the EU can easily be split. Vladimir Putin has sought to deflect and soften the effect of the sanctions demanded by the US through the support of sympathetic EU member states such as Italy, Bulgaria and Greece. He had succeeded (thanks to the intervention of France, Germany and Italy) in blocking sanctions altogether after Russia’s 2008 war with Georgia. He was following in American footsteps: the administration of George W Bush countered France’s and Germany’s opposition to the invasion of Iraq in 2003 by mobilising what his defence secretary Donald Rumsfeld called “New Europe”—the accession states of Eastern and Central Europe.

Catastrophe in the eurozone

Competition, bubble and bust

But the fracturing of the EU by national antagonisms has been most evident in the crisis that has gripped the eurozone since 2010. This has had three dimensions: the global economic crisis; the reorganisation of production and trade within the EU since the mid-1990s; and the structural flaws inherent in EMU.

The architects of EMU hoped that the euro’s launch would facilitate greater competition among participating states. In line with neoclassical orthodoxy, they assumed this would produce greater economic convergence within the eurozone. The Marxist critique of political economy understands competition very differently, as a process that both reflects and reinforces the uneven and combined development of capitalism. So competition doesn’t equalise—it continually reforges economic hierarchy.44

And indeed EMU increased the divergences within the eurozone. Between 1995 and 2008 German nominal labour costs remained almost static, while those in the euro area as a whole rose—in the so-called ­“peripheral” economies (Ireland, Greece, Italy, Portugal and Spain) substantially. This reflected the success of German capital, in particular thanks to the 2004 Hartz IV cuts in unemployment benefit, in forcing workers to accept worse wages and conditions—an extreme form of the squeeze suffered generally by workers in the eurozone thanks to the Maastricht-imposed controls on fiscal and monetary policy. Costas Lapavitsas and his collaborators explain:

In peripheral countries real compensation has increased in some countries, though productivity has increased even faster. Nonetheless, productivity did not rise fast enough to ensure catching up with the more advanced economies of the core.

In Germany, on the other hand, productivity, real compensation, and nominal unit labour costs have increased very slowly. It cannot be overstressed that gains in German competitiveness have nothing to do with investment, technology, and efficiency. The competitive advantage of German exporters has derived from the high exchange rates at which peripheral countries entered the eurozone and, more significantly, from the harsh squeeze on German workers. Hence Germany has been able to dominate trade and capital flows within the eurozone.45

The competitive struggle, moreover, was not simply an ­intra-eurozone affair. The competitiveness of European capitalisms has been severely affected by the emergence of new rivals in the Global South, above all China. Lucia Pradella points out that:

since 2000, the EU-15 [ie the pre-enlargement EU] has lost market shares to the BRICS, China in particular, which has become the largest exporter of goods and is moving up the value chain… The EU is facing increasing pressure both in low-tech and in high-tech production… Widening the range of countries considered as competitors results in a higher estimate of the scale of deterioration of EU competitiveness in manufacturing. Between 2000 and 2007, this is nearly 50 percent if Brazil, India and China are included, compared with just over 40 percent if they are excluded… Declining competitiveness affects all EU-15 countries, Southern member states in particular, which are stuck at a middle level of technology and increasingly compete with emerging countries.46

David Marsh notes that:

Germany improved its overall competitiveness against all countries by 9 percent between 1998 and 2010, based on labour costs per unit of output in industry. At the same time, Italy’s competiveness position worsened by an astonishing 20 percent. Germany’s focus on high-value capital goods, often in niche sectors where small to medium-sized family-run businesses rank as world leaders, gave the country a powerful edge in trade with fast-growing emerging economies in Asia, Latin America and the Middle East.

German competitiveness based on price within EMU was thus complemented by competitiveness based on quality outside EMU. Without EMU, Germany’s corporations would have been be much less competitive both within and outside Europe. So monetary union led directly to a sizeable increase in the German trade surplus.47

Behind the figures lies a restructuring of production and trade within the EU that means export and import flows no longer represent the virtuous circle that launched European integration back in the late 1940s. The squeeze on workers’ wages within Germany was accompanied by a relocation of production to Central and Eastern Europe, where there are large pools of skilled but low paid industrial workers. This allowed German capital to increase its competitiveness and enlarge its markets, especially in China. Within the EU trade flows shifted, as the new member states of Central and Eastern Europe became more important markets and suppliers for Germany; meanwhile the weaker southern European economies (facing tougher competition from producers in the Global South while wage repression weakened German consumer demand) found it harder to export to Germany, but still imported heavily from it.48

Initially EMU papered over these differences by facilitating the flow of capital from northern to southern Europe. Interest rates within the eurozone converged at German levels, reflecting the markets’ mistaken assumption that if anything went wrong, Berlin would bail the others out. The spread between the yields on Greek and German government bonds fell to a low of 0.1 percent in 2005-6.49

The fall in interest rates encouraged the eurozone’s version of the great financial bubble of the mid-2000s. As in the US, inflated asset prices fed by borrowing temporarily compensated for the underlying weakness of profitability. In Spain, for example, capital inflows and cheap credit fuelled a spectacular property boom, in which economic growth was driven by speculative construction and by spending by private households encouraged by the rising nominal value of their homes.50

In Greece there had been a long history of governments using borrowing to patch up social conflicts and mask economic weakness. But the post-Keynesian economist Frances Coppola points out that in the late 1990s it was the Greek private sector that went into deficit:

Since during that time the government deficit did not grow, the private sector deficit was funded by external capital inflows. In other words, the private sector borrowed from foreigners to fund domestic investment spending, resulting in a worsening external balance…the private sector’s debt-financed investment boom came to an abrupt end in 2008-9 when the capital inflows reversed. The external deficit reduced, the private sector deficit disappeared completely, the government deficit ballooned and real GDP fell off a cliff.

So the story of the Greek crisis is not really one of fiscal profligacy resulting in a “sudden stop”. It is one of private sector profligacy fuelled by rising external debt, itself resulting from (or caused by) falling competitiveness. As happened to so many countries in 2008, the banking crisis forced private sector debts on to the public sector balance sheet.51

If the eurozone crisis wasn’t simply a matter of “peripheral” governments borrowing and spending too much, the economist Michael Pettis stresses that the conflict also wasn’t primarily a national one:

It was not the German people who lent money to the Spanish people. The policies implemented by Berlin that resulted in the huge swing in Germany’s current account from deficit in the 1990s to surplus in the 2000s were imposed at a cost to German workers, and have been at least partly responsible for Germany’s extremely low productivity growth… With German, Spanish, and other banks offering nearly unlimited amounts of extremely cheap credit to all takers in Spain, the fact that some of these borrowers were terribly irresponsible was not a Spanish “choice”. I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who benefitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other. This is a conflict among economic groups, in other words, and not a national conflict, although it is increasingly hard to prevent it from becoming a national conflict.52

The underlying tensions became visible with the financial crash in 2008. Europe did not, as EU leaders claimed, suffer a crisis imported from the Anglosphere. Rather the global processes underlying first the bubble and then the crisis were mediated by the dysfunctional structures of the eurozone. The public debts of the weaker member states ballooned as they had to rescue their banks and as recession reduced their revenues and increased welfare spending.

The eurozone responded with bailouts—first of Greece (now facing its third bailout), then of Ireland, Portugal and Spain—conditional on cuts in public expenditure, privatisation and labour market and pension “reform” supervised in the first three cases by the Troika of the Commission, the ECB and the International Monetary Fund. The logic of these programmes is, as Pettis argues, to displace the costs of the crisis onto working people (employed, unemployed and retired), especially (but not exclusively) in the weaker member states. The impact on the “rescued” economies has been devastating, producing in Greece a prolonged depression more severe than its counterpart in the 1930s.53

But there was another motive as well, pointed out by ex-Bundesbank president Karl Otto Pöhl when he criticised the first Greek bailout for failing to impose a haircut on Greece’s creditors: “It was about protecting German banks, but especially the French banks, from debt write-offs. On the day that the rescue package was agreed on, shares of French banks rose by up to
24 percent. Looking at that, you can see what this was really about—namely, rescuing the banks and the rich Greeks”.54

The German private sector held €25 billion of Greek debt, and French banks almost as much. Moreover, the economic historian Barry Eichengreen points out that “the ECB itself had bought more than €25 billion of Greek government banks put up for sale by French and other commercial banks by the time the [first] Greek programme was announced [in May 2010], making [ECB president Jean-Claude] Trichet a steadfast ­opponent of any debt write-down”.55

A recent analysis by the Guardian confirms this assessment, giving the lie to North European politicians who claim that Greeks have been living off money supplied by their voters. Of the €240 billion supposedly lent to Greece in the 2010 and 2012 bailouts, €140 billion went in debt repayments and interest to the creditors (mainly north European banks), €34 billion in sweeteners to private bondholders who were forced to accept a haircut in 2012, and €48.2 billion to the Greek bankers. “Less than 10 percent of the bailout money was left to be used by the government for reforming its economy and safeguarding weaker members of society”.56

Towards greater integration?

But the class dimension of the eurozone crisis shouldn’t be allowed to obscure the continuing dominance of national interests. The response to the 2008 crash was orchestrated by national governments, which organised their own rescues of their banking systems while the Commission looked on ineffectually.57 Similarly, the management of the eurozone crisis has been dominated by the German political elite’s refusal to allow the currency area to become a “transfer union”, in which the richer member states subsidise the poorer. They were defending Germany’s high-export, low-inflation economic model.

But one can argue that the national antagonisms represent only one side of the picture. Writing in this journal in 2010, Christakis Georgiou argues that the EU integration process reflects the contradiction between the trend for the Europeanisation of capital and the continued assertion of national capitalist interests. He goes on to suggest that, on the basis of the experience of past crises—those of the 1970s and early 1980s, which led to the creation of the Single Market, and those of the early 1990s, which formed the backdrop to EMU—one can see “a pattern where each crisis acts as a catalyst which eliminates opposition to further integration by ­demonstrating in practice why the dominant fractions of European capital can no longer solely rely on a single national state and why individual national states would be much weaker if left on their own”.58

In one sense Georgiou is right: the eurozone crisis has led to greater integration. The most important example of this is the Fiscal Compact, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, signed by 25 member states in March 2012 (despite Cameron’s unsuccessful attempt to block it at the European Council the preceding December). This effectively generalises austerity by entrenching the deficit and debt targets in the SGP. Signatories must amend their constitutions to include the requirement of balanced budget and set up an “independent” fiscal coordination council to monitor compliance. Infractions are policed by the Commission and the Court of Justice.

Angela Merkel justified the Fiscal Compact as a response to the imperatives of global competition. In a December 2012 interview she said:

If Europe today accounts for just over 7 percent of the world’s population, produces around 25 percent of global GDP and has to finance 50 percent of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life. All of us have to stop spending more than we earn every year.59

This regime of fiscal surveillance certainly represents a greater centralisation of decision making in the EU. But it doesn’t offer anything resembling a political union, which could only take a genuinely democratic form if a European popular sovereign were created. Policing member states’ taxation and expenditure is a substitute for the “transfer union” shifting resources from rich to poor areas that a real federal state would necessarily involve. Yanis Varoufakis, Syriza’s first finance minister, offers a fascinating insight into this project as it is conceived by his German counterpart, Wolfgang Schäuble, who tried to persuade Greece to leave the eurozone:

Wolfgang Schäuble has a plan… And the way he described it to me is very simple. He believes that the Eurozone is not sustainable as it is. He believes that there has to be some fiscal transfers, some degree of political union. He believes that, for that political union to work without federation, without the legitimacy that the properly elected federal parliament can render can bestow upon an executive, it will have to be done in a very disciplinarian way. And he said explicitly to me that the Grexit, a Greek exit, is going to equip him with sufficient bargaining power, with sufficient terrorising power, in order to impose upon the French that which Paris is resisting. And what is that? It is a degree of transfer of budget-making powers from Paris to Brussels.60

The Fiscal Pact underlines that the response to the crisis by the dominant forces inside the EU is to entrench and radicalise neoliberalism. Thus the Transatlantic Trade and Investment Partnership (TTIP), strongly pushed by the Commission, promises to take this process a step further by creating a single market uniting the EU and the US and giving corporations the right to sue governments for policies that they claim reduce their profits.

This trend—neoliberalism enforced by unelected and unaccountable institutions—is summed up by the ECB. Supposedly a “neutral” expert body, the ECB is in fact highly politicised. It has vacillated between mimicking the Bundesbank’s obsession with keeping inflation low (for example, raising interest rates during the crisis, in July 2008 and again in the spring and summer of 2011) and following the example of the US Federal Reserve Board and playing a more active economic role (through, for example, buying indebted governments’ bonds in 2011 and launching quantitative easing in March 2015). “Making Things as Difficult as Possible” is Eichengreen’s damning judgement on the ECB’s crisis management.61

The ECB’s more adventurous policies provoked intense resistance from the Bundesbank, but Merkel backed Mario Draghi when, after taking over as ECB president, he announced in July 2012 that “the ECB will do whatever it takes to save the euro”, temporarily stabilising the eurozone. But his decision to start quantitative easing was fiercely opposed by Merkel because it might undermine the Europe-wide austerity regime. Draghi fell back into line with Berlin in the confrontation with the Syriza government. The ECB played the decisive role in bullying Syriza into submission, refusing to play the classic role of a central bank in acting as a lender of last resort and cutting off liquidity to the Greek banks, in effect forcing a bank run.

More generally, Susan Watkins argues, the eurozone crisis has led within the EU to “a landmark extension of autocratic control by the Commission and, behind and above this, an unprecedented centralisation of extra-legal power in the office of the German Chancellor”. The formal strengthening of the European Parliament under successive treaties doesn’t alter the dominant picture. Watkins describes how it is managed by a partnership of the centre-right People’s Party and centre-left Socialists and Democrats:

Accountability here only operates upwards—the need to achieve a consensus with the Commission and the Council, if any amendment is to have effect—never
downwards. The political-group leaders never have to answer to party memberships at annual conferences; they are non-recallable, their seats effectively guaranteed. The model is that of 19th century Parties of Notables, rather than 20th century mass parties. The Parliament’s role during the Eurozone crisis was exemplary in this regard: the Große Koalition [Grand Coalition] leaders, Joseph Daul and Martin Schulz, orchestrated Parliament’s assent to every extension of autocratic power, fast-tracking some of the most egregious measures.62

The EU is a thoroughly anti-democratic set of institutions. The fury with which its leaders greeted the Greek referendum of July 2015 is typical—and understandable. Most times an EU treaty has been put to a popular vote it has been rejected.63

A German hegemony?

Germany stands at the pinnacle of the new power set-up in the EU. According to the historian Brendan Simms, “the European project as now constructed, and especially the currency union, originally designed to contain German power, has increased it, just as the British Eurosceptics warned it would”.64 Germany is indeed now frequently described as the hegemonic power in Europe. It is undoubtedly the most powerful state in the EU, with Merkel’s personal role supplanting the traditional partnership of the French and German leaders as chief political managers of Europe. But does Germany meet the conditions required for a hegemonic state? In mainstream International Relations theory, the hegemonic state has ­sufficient hard power—military and economic capabilities—to ­dominate the state system or at least a region.65

Germany certainly is the economic powerhouse of the EU, but, as we have seen, it lacks both serious military capabilities and the inclination to develop them. But there is a more subtle point. The US has exercised its hegemony over the global system certainly to pursue the interests of American capitalism but also to secure the stability of the system as a whole. As Giovanni Arrighi and Beverly Silver put it, hegemony obtains when “a dominant state leads the system of states in a desired direction, and, in so doing, is widely perceived as pursuing a general interest”.66

But this is exactly what the German political leadership is reluctant to do. In the eurozone crisis it has, as we have seen, concentrated on defending its own economic model. This has led to a chronic divergence between Berlin and Washington over how to resolve the crisis. Tim Geithner, Obama’s original Treasury secretary, has described his first meeting with Schäuble, at a G7 finance ministers’ meeting in February 2007:

I said at that dinner, that meeting, you know, because the Europeans came into that meeting basically saying: “We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them,” was their basic attitude, all of them…

But the main thing is I remember saying to these guys: “You can put your foot on the neck of those guys if that’s what you want to do. But you’ve got to make sure that you send a countervailing signal of reassurance to Europe and the world that you’re going to hold the thing together and not let it go. [You’re] going to protect the rest of the place”.67

In May 2010 Obama rang Merkel to warn her that a Greek default might be a Lehman Brothers-type event precipitating another financial crash. During the G20 summit at Cannes in November 2011 his pressure on her to overrule Bundesbank opposition to plans to mobilise the credit needed to prevent the crisis spreading to Italy reduced Merkel to tears. “I’m not going to commit suicide,” she angrily told Obama and French ­president Nicolas Sarkozy.68

After Syriza’s election victory in January 2015 Obama publicly backed the calls by the new Greek prime minister, Alexis Tsipras, for an end to austerity: “You cannot keep on squeezing countries that are in the midst of a depression”, he told CNN.69 Geithner’s successor Jack Lew put constant pressure on Merkel and Schäuble to offer Greece debt relief. A main US concern in the confrontation between the eurozone and the Syriza government has been the destabilising geopolitical consequence of a Greek collapse, since Athens is an important NATO military power in the eastern Mediterranean, an increasingly dangerous neighbourhood.

In fact, conflicts between Germany, preoccupied with keeping inflation low and suspicious of speculative financial markets, and the US, much more willing to use Keynesian techniques and dollar devaluation to maintain economic growth, have been going on since the 1960s. What has changed is less a shift in the relative power of the two states than Germany’s pre-eminence in the EU.

France has slipped back, and Britain is increasingly marginal, partly by choice, partly because the increasing integration of the eurozone excludes it from the most important decisions. (Ironically given France’s traditional advocacy of EU integration as a counterweight to American power, during the eurozone crisis Paris became Washington’s main European ally.) On defence and security policy the US can rely on the East and Central European states, but in the eurozone crisis, they, along with the more prosperous North European member states, have lined up alongside Germany (not surprisingly, given their role in the new European division of labour). So the US hasn’t been able to play divide and rule against Germany.

Watkins describes Germany’s as “a strangely crimped hegemony”.70 Maybe it’s better to think in terms of a divided hegemony in Europe, with the US retaining politico-military primacy and Germany assuming economic leadership within the EU. The narrow and defensive way in which Berlin has operated is probably best understood against the background of the reorganisation of German capitalism over the past 20 years. With global capitalism caught in what Michael Roberts calls the “long depression” and international competition intensifying, Germany’s economic position can be maintained only at the price of transforming—and destabilising—the configuration of power within the EU.71

Thus the settlement brutally imposed on the Syriza government in July 2015 found Merkel caught between Schäuble orchestrating German and broader North European support for pushing Greece out of the eurozone and François Hollande of France and Matteo Renzi of Italy partially supporting Tsipras. Indeed, in forcing Greece to surrender, Germany had France and Italy in its sights as well. Defeating Syriza was a way of ­maintaining the pressure for neoliberal “reforms” throughout the EU. Before Tsipras’s first cave-in in February 2015, one of Schäuble’s officials told the Financial Times: “If we go deeper into the [debt] discount debate, there will be no more reforms in Europe. There will be joyful celebrations in the Elysée [the French presidential place] and probably in Rome, too, if we go down this path”.72

Wolfgang Münchau, one of the most persistent mainstream critics of German economic management, has underlined the enormity of Schäuble’s advocacy of Grexit (notionally temporary—a “timeout”) from a monetary union that was supposed to be irrevocable. He accused “Greece’s creditors” of having:

destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union… They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order.73

More broadly, the entire Greek crisis underlined how EMU, far from overcoming national antagonisms, has increased them—not merely between Greece and Germany, but between Northern and Southern member states, and among three of the founders of the EEC, the biggest economies in the eurozone—France, Germany and Italy. Fierce national antagonisms among member states that led to invocations of the world wars and the Balkan wars of the 1990s were also a marked feature of the refugee crisis in summer and autumn 2015. None of this means the EU is about to disintegrate. But the crisis has left its member states caught in the same trap that has confined them since the 1950s—too weak to stand up to the forces of global competition on their own, but with too strongly diverging ­interests to be willing to surrender their sovereignty definitively to a genuine economic and political union.

Another Europe is possible

Greece, moreover, has tested to destruction what Stathis Kouvelakis has called “left Europeanism”—the idea that, as we have seen, has become dominant on the left in Europe since the 1980s, that the EU provides the best framework for pursuing reforms. Kouvelakis sums up how this mentality crippled Syriza in government:

for these people the choice is between two things: either being “European” and accepting the existing framework, which somehow objectively represents a step forward compared to the old reality of nation-states, or being “anti-European” which is equated with a falling back into nationalism, a reactionary, regressive move.74

It is essential that the radical left throughout Europe rejects this false dilemma. Antarsya—the Front of the Anticapitalist Left—in Greece is right to advocate not just exit from the eurozone but from the EU. Similarly, when the British referendum is held, the radical left should campaign for a No vote. This doesn’t mean that we should simply dismiss the widespread fears that opposing the EU represents a retreat into nationalism. They are understandable—partly because of the obnoxious politics of the Tory right and UKIP, but also because of the growth of what one might call “Europeanness”, encouraged by, for example, easy travel within Europe and the Erasmus visiting student scheme.

These developments are certainly valuable, but they are often not dependent on EU membership. Erasmus, for example, involves a number of non-EU member states such as Iceland, Norway and Turkey. One of the favourite targets of the Tory right, the European Convention on Human Rights, is entirely independent of the EU. It was issued by the Council of Europe, which was established by ten European states in 1949, and now embraces 47 states, which is way larger that the EU with its 28 member states. So leaving the EU doesn’t mean isolation from the rest of Europe.

Strategically the problem is that since the 1980s, but more especially as a result of the eurozone crisis, a Europe-wide neoliberal regime is being constructed. Breaking that is most likely to happen at national level. To make successful resistance dependent on a coordinated movement at the EU level is to postpone that resistance indefinitely. The process of uneven and combined development implies that struggles are most likely to succeed at national level but can then be generalised.

Dialectically, then, for internationalism to advance there have to be breakthroughs at the national level. As I wrote at an early stage of the eurozone crisis:

The logic of resisting austerity leads ineluctably to stopping paying the debt and withdrawing from the euro. The idea that this involves an abandonment of internationalism implies a view of history in which there is a linear movement from the national to the European and then to the global levels. But history develops dialectically, with sudden twists and turns, and not in a straight line. A break with the euro in Greece or elsewhere that led to a successful defence of jobs, services and living standards could act as a beacon for a new, fighting internationalism that could start to create a very different Europe.75

But this internationalism has to be expressed in the content of struggles in different countries. Disastrously, a section of the radical left in Britain links opposition to the EU to rejection of one of its core principles, the free movement of labour. Thus Peter Taaffe of the Socialist Party writes: “The alleged benefits of the ‘free movement of labour’ are in reality a device for the bosses to exploit a vast pool of cheap labour, which can then be used to cut overall wage levels and living standards.” He goes on, absurdly, to argue that, if Polish workers “were forced to stay” at home, presumably by immigration controls, there would be “a massive rebellion of Polish workers, which is coming in any case”.76

Of course European capitalists want to exploit cheap migrant labour. But this is one facet of a much larger picture. Global capitalism has been built through a succession of giant waves of immigration—from Ireland to Britain in the 19th century, from Europe and China to the US and from South Asia to other parts of the British Empire in the late 19th and early 20th centuries, from the ex-colonies to Western Europe after the Second World War, from Latin America to the US, from Eastern and Central Europe westwards, and from Africa, South Asia and the Middle East to both Northern and Southern Europe in the past few decades.

These waves are driven by the demands of capital accumulation, but also by the desires of migrants fleeing poverty and war. The forces at work are so elemental that no state can stop them, and they would operate whether or not Britain were in the EU. Controls on migration serve partially to regulate the flows. They also help to ensure that migrant workers are vulnerable to racists and sweatshop bosses. Elsewhere in this journal Fran Cetti shows how the EU’s Fortress Europe policy has since the 1990s developed a particularly cruel version of these mechanisms, extending far beyond the borders of the Union into Eastern Europe and sub-Saharan Africa. This policy doesn’t simply oppress migrants and refugees—it hurts “native” European workers through the divisions it fosters that undermine effective labour organisation and resistance.

For the left to support immigration controls or demand “British jobs for British workers” would be a disastrous capitulation to the chauvinism and racism of UKIP and the Tory right. Our objection to the free movement of labour is that it doesn’t go far enough: the borders should be open, unconditionally, not just to EU citizens, but to everyone. We want to see Fortress Europe dismantled.

In the debates about the referendum that have developed inside the Socialist Workers Party, the critique of the EU put here hasn’t been directly challenged. Some comrades nevertheless argue that the British debate on the EU will be so dominated by racist anti-immigrant arguments that we should vote Yes to express solidarity with migrants. This doesn’t address the fact that the “reforms” with which Cameron will seek to justify campaigning for a Yes are likely to include restricting EU migrants’ access to welfare benefits. Restrictive and selective immigration policies have been a defining feature of neoliberalism, and will operate whether or not Britain is in the EU. This is illustrated by Germany’s abrupt decision in mid-September to suspend the Schengen agreement and close its borders to refugees.

The left Yes argument is sometimes supported by a rhetorical appeal: how can we justify voting No to migrants here in Britain? This seems rather patronising since it treats migrants as victims and not conscious political subjects. SWP members encounter migrants as part of our general political activity. They know us as principled anti-racists and anti-fascists who systematically targeted UKIP in the last general election. If they come from Eastern Europe, where there are strong Eurosceptic parties, they are well aware that the EU is a controversial political issue. If they come from outside the EU, they will know better than anyone the brutality and the racism with which the EU treats migrants. Even if they disagree with us about Europe, they are likely to respect our views. And they know we will be the first to defend them. This was shown once again by our recent role in campaigning for Britain to open its borders and building the “Solidarity with Refugees” rallies on 12 September.

In any case, the referendum is about the EU as a whole, not just immigration. Socialists in Britain will have to take a stand on the entire project of European integration. The comrades in Antarsya are rejecting the EU, not out of narrow nationalist reasons but on a principled anti-capitalist basis. The preceding analysis supports them, showing that the EU was a capitalist project from the start, strongly backed by US imperialism and developing its own problematic version of neoliberal imperialism. The obvious conclusion is to reject the EU. Yes supporters must either refute this analysis or abandon their position.

Getting our internationalist and anti-capitalist message heard during a referendum campaign where the right is making the running won’t be easy. But the brutal treatment of Greece under Syriza is concentrating many minds. Owen Jones, one of the most eloquent voices on the reformist left, has recently come out in favour of “Lexit”, as he calls “left support for withdrawal”.77 Another Guardian columnist, George Monbiot, also says he may vote No because of the EU’s pro-business environmental policy (as well as Greece and TTIP).78

More remarkably still, Perry Anderson, long a sophisticated Marxist defender of the EU, who only a few years ago wrote that “my admiration for its original architects remains undiminished”, declared after the breaking of Syriza that the “EU is now widely seen for what it has become: an oligarchic structure, riddled with corruption, built on a denial of any sort of popular sovereignty, enforcing a bitter economic regime of privilege for the few and duress for the many”.79

We should take up the slogan of the social forums: Another Europe is possible. But this Europe will be achieved through breaking the autocratic, neoliberal structures of the EU, not by pursuing the utopia that they can be reformed. We can glimpse the other Europe in the struggles against austerity, in the movements against racism and in defence of migrants that have sprung up most vigorously in some of the worst affected states. The space is beginning to open up for a socialist campaign against the EU. We shouldn’t be afraid to help fill it.


1: Negri, 2005. The idea of Empire is expounded in Hardt and Negri, 2000, and criticised in Callinicos, 2001.

2: The European Economy Community (EEC), often called the Common Market, was established by the Treaty of Rome in 1957. The Treaty of Maastricht of 1992 renamed it the European Community (EC, which had already become common usage) but also established the European Union (EU) for certain purposes. Under the 2007 Treaty of Lisbon the EU absorbed the EC. I’ll refer to the EEC when dealing with developments before Maastricht, and to the EU for those afterwards.

3: Nairn, 1972, is a rare expression of a pro-EEC position on the British left during the 1970s. See the discussion in Callinicos, 2013.

4: Butler and Kitzinger, 1976, p263.

5: Butler and Kitzinger, 1976, p86. Among the biggest donors to BIE were GKN, ICI, Marks & Spencer, Shell, Vickers, Ford, IBN, Rank, Reed International, Cavenham Foods, Legal & General, Reckitt & Colman, Royal Insurance, Sun Alliance, and Unilever—Butler and Kitzinger, 1976, p85.

6: Butler and Kitzinger, 1976, p179. TGWU general secretary Jack Jones spoke on the same platform as Powell in 1974—Butler and Kitzinger, 1976, p98.

7: Butler and Kitzinger, 1976, p274.

8: Benn, 1982, p15.

9: Benn, 1990, p346.

10: Holland, 1976, pp358, 336. For a critique of Holland and the alternative economic strategy, see Sparks, 1977.

11: James, 2012, p199. For background see chapters 5 and 6.

13: For background on the Tory divisions, see Callinicos, 1997.

14: Harman, 1971.

15: Hallas, 1975.

16: Anderson, 2009, p79.

17: Understanding the EU isn’t helped by the deeply conformist nature of academic scholarship on European integration: see Anderson, 2009, chapter 3, Ryner, 2012, Klinke, 2015, and Cafruny, 2015.

18: Harman, 1991, Callinicos, 2007, and Callinicos, 2009, chapter 2.

19: See the overview in Callinicos, 2009, pp170-174, drawing heavily on Milward, 1984, and 1994.

20: Quoted in Ash, 1994, p87.

21: Milward, 1994.

22: Anderson, 2009, p12.

23: George W Ball, Foreword to Duchêne, 1994, pp10-11. See also Duchêne, 1994, pp373-378.
Monnet’s crabwise approach to federalism was rapidly turned into a full-blown academic theory, “neofunctionalism”—see Haas, 1958.

24: Meunier and Nicolaïdis, 2005, pp265, 249.

25: Streeck, 2014, p105.

26: James, 2012, chapter 8. For a Marxist analysis of EMU, see Bonefeld, 2001.

27: Quoted in Duchêne, 1994, p312.

28: See Parboni, 1981, on the early phases of this instability, and Marsh, 2011.

29: Halevi, 1995, p266. For another analysis of European monetary integration focusing on the needs of German capitalism, see Carchedi, 2001.

30: Connolly, 1995, p33; see chapters 7 and 12 for the EMS crisis of 1992-3.

31: Quoted in Marsh, 2011, p135.

32: James, 2012, p267. See chapter 8, “Designing a Central Bank”.

33: James, 2012, p6.

34: Münchau, 2015b.

35: Godley, 1992.

36: Zielonka, 2007, p54. See also Münkler, 2007, pp162-167.

37: Zielonka, 2007, p56.

38: Zielonka, 2007, p59.

39: Zielonka, 2007, p63.

40: Brzezinski, 1998, p74.

41: Anderson, 2009, p69.

43: Sakwa, 2015, pp40-41. Sakwa’s overall interpretation of the Ukrainian tragedy is too willing to make apologies for Russian imperialism, but his assessment of the EU role seems bang on the nail. For a more balanced analysis, see Ferguson, 2014.

44: See Callinicos, 2009, pp89-90, and Carchedi, 1991, chapter 7. The assumptions behind EMU are criticised in Simonazzi, Ginzburg, and Nocella, 2013, pp255-258.

45: Lapavitsas and others, 2012, p28.

46: Pradella, 2015, p605.

47: Marsh, 2011, Kindle locs 5585-5592.

48: Simonazzi, Ginzburg, and Nocella, 2013.

49: Marsh, 2011, Kindle loc. 6582.

50: López and Rodríguez, 2011. See the analysis of this process on a global scale in Callinicos, 2010a, pp50-83.

51: Coppola, 2015. See Fouskas and Dimoulas, 2013, for an interesting account of the origins of the Greek crisis that stresses finance and geopolitics but somewhat underplays the autonomy of Greek capital.

52: Pettis, 2015.

53: Chouliarakis and Lazaretou, 2014.

54: Pöhl, 2010.

55: Eichengreen, 2015, p349.

56: Inman, 2015.

57: Callinicos, 2010a, pp97-101.

58: Georgiou, 2010, drawing on the earlier Marxist analyses of the EEC in Mandel, 1970, and Harman, 1971.

59: Peel, 2012.

61: Eichengreen, 2015, chapter 24.

62: Watkins, 2014, pp13, 19-20.

63: The ideological rationale for the EU’s hostility to democracy is often sought in the post-war German school of “ordoliberalism”—see, for example, Bonefeld, 2012, and Ryner, 2015.

64: Simms, 2015.

65: For example, Gilpin, 1981.

66: Arrighi, Silver, and others, 1999, p27. See the outstanding study of US hegemony in Panitch and Gindin, 2012, and the discussions in Callinicos, 2009, chapters 4 and 5.

67: Go to See also Watkins, 2014, pp13-14.

68: Spiegel, 2014.

69: Spiegel and Donnan, 2015.

70: Watkins, 2014, p15.

71: For example, Roberts, 2015.

72: Barker, Hope, and Wagstyl, 2015.

73: Münchau, 2015a.

74: Kouvelakis, 2015.

75: Callinicos, 2010b.

76: Taaffe, 2015.

77: Jones, 2015.

78: Monbiot, 2015.

79: Anderson, 2009, pxv; Anderson, 2015.


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