[E-rundbrief] Info 897 - Euro not for Europes Poor

Matthias Reichl info at begegnungszentrum.at
Sa Feb 20 17:04:21 CET 2010


E-Rundbrief - Info 897 - David Cronin (IPS): Euro not for Europe's Poor.

Bad Ischl, 20.2.2010

Begegnungszentrum für aktive Gewaltlosigkeit

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Euro not for Europe's Poor

Analysis by David Cronin

BRUSSELS, Feb 20  (IPS)  - For 329 million, people shopping with the
euro is a part of everyday life. Since its notes and coins were
introduced on New Year's Day 2002, this single currency has made it
possible to travel across a 16-country zone stretching from Cyprus to
Ireland without having to change the money in one's pocket or handbag.

Yet while it may sound like a dream for holiday-makers, the economic
crisis in Greece has illustrated that there is a flipside to Europe's
experiment in monetary union. In order to guarantee the 'stability' of
the currency, participating governments have signed up to rules
stipulating that their budget deficits should be no more than 3 percent
of their gross domestic product.

After Greece admitted its deficit stood at 12.7 percent, it has
undertaken to slash it to 2.8 percent by 2012; the measures envisaged to
achieve this drastic reduction include cutbacks in public sector pay and
spending on education and an increase in the retirement age.

The irony of how these measures will hurt Greeks on low-income far
more than the politicians and business elite widely blamed for
causing the crisis has not been lost on some commentators. Costas
Douzinas, a law professor at Birkbeck College in London, says that
the euro-zone's economic affairs are being run ”according to a kind
of witchdoctor theory.”

”It is not Greece that is suffering but the Greek working people, the
people who are always at the bottom of the pile,” he told IPS. ”If
you want to have a reduction of the deficit, the first thing to do
should not be to hit the most vulnerable parts of society, the low-
paid civil servants and the working class. You should hit big
capital, the people who profited out of the extreme neo- liberal
organisation of the markets.”

The idea of building a single currency was originally hatched by just
five companies involved in selling cars (Fiat), oil (Total), chemicals
(Solvay), electronic goods (Philips) and pharmaceuticals (Rhône-
Poulenc). In 1987 they formed the Association for the Monetary Union of
Europe (AMUE), which argued that the patchwork of different currencies
then in use in Europe prevented it from competing with Japan or the U.S.

Upon its inception, the grouping decided to exclude trade unions and
other public interest advocates from its membership. Etienne Davignon,
the AMUE president, argued that the single currency could ”only be
effective if it was proposed by the people who were in favour without
the necessity to compromise between themselves.”

David Boyle from the New Economics Institute, a Massachusetts-based body
that challenges conventional thinking on financial management, said that
while there is a need for ”big reference currencies”, it is wrong to
believe that the euro and its common interest rates can bring equal
benefits to all areas where it is used. ”Interest rates don't suit every
country in the EU at the same time,” he said. ”How can they? In times of
hardship, a single currency will benefit those at the heart of Europe -
maybe Paris and Frankfurt - but it will damage the outlying areas.
Single currencies are blunt instruments and will tend to increase
poverty around the edges.”

Unlike the dollar or the yen, the euro has been introduced in a
situation where its participating countries apply considerably different
policies on other key economic questions. Efforts by France, for
example, to introduce common rules on taxation have been resisted by
other euro-zone members such as Ireland, which has been fearful that
higher corporate taxes would act as a disincentive to foreign
investment.

Roland Kulke, a researcher with the Rosa Luxemburg Foundation, a left-
wing German think-tank, said the economic crisis in Greece has
highlighted the intrinsic design flaws in the euro. ”You can't have a
common currency without at least a certain kind of coordination on
budgetary and financial policies.”

The euro, coupled with the absence of any increase in real wage levels
over a two-decade period, has enabled Germany to become a top exporter,
Kulke added. More peripheral countries such as Greece, on the other
hand, have been unable to devalue their currencies to sell goods abroad
at a competitive price.

One of the murkier aspects of the Greek crisis is that opaque
transactions by Wall Street firms appear to have contributed
significantly to it. Goldman Sachs and other top investment banks are
known to have sent high-level delegations to Athens in the recent past,
fuelling allegations that they were betting against the euro and helping
to falsify the real economic picture in the country by using complex
financial instruments to conceal the true nature of the Greek debt.

Susan George, a leading member in the French anti-poverty group ATTAC,
called on the European Central Bank (ECB) and other euro-zone
institutions to consider a tax on transactions of a high-risk nature.
”An international currency tax would help stop speculation against the
euro,” she said. ”But unfortunately I don't think the ECB is going to
move on this.” (END/IPS/EU/IF/FM/UE/DC/SS/10)

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