Sunday, November 27, 2011

G20 summit: Under the shadow of the Occupy Wall Street movement: Can China save decrepit capitalism in Europe?


"We will fight to defend Europe and the euro," Nicolas Sarkozy, November 4, 2011

With these words of fighting, President Nicholas Sarkozy gave notice to the world that the European leaders from the right will militarize the planet in order to save the European project. After the meeting of the G20 ended in disarray in Cannes, France with no real agreement on how to develop global rules to rein in the ‘vampire squids,’ the debacle of the creeping coup in Greece was overtaken by the reality of the more precipitous and calamitous state of the Italian economy. Newspapers such as the UK’s Guardian declared that the G20 meeting ended in disarray.

There could be no agreement on global rules at the recent G20 summit when the question of the accountability of bankers was off the table. The assembled leaders issued a contradictory communiqué which in one line called for China and other countries ‘with strong public finances to take steps to boost domestic demand,’ while in another line continued the western chorus on undervalued currency with the call, for countries to move ‘more rapidly’ towards greater exchange rate flexibility, without specifically mentioning China. There was the usual bland statement from the summit on ‘the need reinvigorate economic growth’. Other non binding formulations came from the final communiqué:

- To support the IMF and give it more money if necessary
- Welcomes Italy's invitation to the IMF to monitor its economic reforms
- Welcomes the eurozone's plans to restore confidence and financial stability
- Sets up a task force on youth employment

In the week prior to this G20 summit, the political crisis inside Europe over the future form of this EU had been focused on the imposition of harsh measures on the workers of Greece. In that week, there had been another putting off of the day of reckoning with the European leaders leaning heavily on China after their acrimonious meeting in Brussels. The meeting of the leaders of Europe was barely over on Thursday 27 October when Klaus Regling the chief executive of the European Financial Stability Facility (EFSF), jumped on the plane to fly to Beijing to seek over €60 billion investment from the government of the People’s Republic of China. Even before Klaus Regling landed in Beijing, the same Nicolas Sarkozy was on the phone to President Hu Jintao pleading for the government of the PRC to make a clear declaration of support for the decisions of the leaders of Europe to resolve the Eurozone crisis. European leaders such as Angela Merkel and Nicolas Sarkozy wanted the people of China to throw their money at a political crisis when the real question was the contradictions between the goals of the European project of having a monetary union without a political and fiscal union backed up by a single state called the European Union. The loose formation of leaders who were in a notional EU while trying to save old style national capitalism had deluded themselves that they had a plan and presented to the world a three pronged strategy to save the present arrangements that favor bankers and speculators. Greece had taken a front place in the stage of the drama. Thus that communiqué had narrowly focused on Greece with the following declaration:

a) Private banks holding Greek debt would accept a write-off of 50% of their returns
b) The main euro bailout fund – known as the European Financial Stability Facility (EFSF) – was to be boosted from the €440 billion set up earlier this year to €1 trillion, and
c) European banks would be required to raise about €106 billion in new capital by June 2012.

What was implicit in the third component of this bailout package was that the leaders of Europe were planning to pressure ‘emerging’ nations with large foreign reserves to rescue the Euro, because domestically, it will be very difficult for the European banks to recapitalise and find the billions needed to remain solvent. Overall, the EU rescue plan had hoped to maintain the status quo of the European Banks not having to accept losses, by forcing citizens of European nations like Greece, (with demonstrative effects for Ireland, Italy and Portugal) to pay for their losses with IMF like structural adjustment based austerity measures. Even the ‘successful’ bailed out countries like Ireland saw their real economy in ruins and their people suffering. The so-called rescue plan was simply postponing the day of the final crash of the present configuration of capitalism in Europe.

Chauvinism and hierarchy surged as Sarkozy openly declared that Greece should not have been admitted in the Eurozone in the first place. Within the period of over a week between the Brussels summit and the end of the G20 summit the decision of the Greek government to call a referendum on the package brought home the reality that confused strategies and political scuffles in Europe were all part of the political drama of a region in decline. The amount of the debt relief to Greece is only a small fraction of the total debt Greece owes to foreign creditors. Thus the ‘deal’ was insufficient to actually help Greece to get out of its debt crisis. Read more