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Spain: Breaking Up Is Hard To Do

Spain: Breaking Up Is Hard To Do

Dispatches From the EdgeConn Hallinan

Aug. 22, 2017

 

When the Catalans goes to the polls Oct. 1, much more than independence for Spain’s restive province will be at stake. In many ways the vote will be a sounding board for Spain’s future, but it is also a test of whether the European Union—divided between north and south, east and west—can long endure.

 

In some ways, the referendum on Catalan independence is a very Spanish affair, with grievances that run all the way back to Catalonia’s loss of independence in the War of the Spanish Succession (1701-1714). But the Catalans lost more than their political freedom when the combined French and Spanish army took Barcelona, they lost much of their language and culture, particularly during the long and brutal dictatorship of Francisco Franco from 1939 to 1975.

 

The current independence crisis dates back to 2010, when, at the urging of the rightwing Popular Party, the Spanish Constitutional Court overturned an autonomy agreement that had been endorsed by the Spanish and Catalan parliaments. Since then, the Catalans have elected a pro-independence government and narrowly defeated an initiative in 2014 calling for the creation of a free republic. The Oct. 1 vote will re-visit that vote.

 

But the backdrop for the upcoming election has much of Europe looking attentively, in part because there are other restive independence movements in places like Scotland, Belgium and Italy, and in part because many of the economic policies of the EU will be on the line, especially austerity, regressive taxation, and privatization of public resources as a strategy for economic recovery.

 

When the economic meltdown of 2008 struck, there were few countries harder hit than Spain. At the time Spain had a healthy debt burden and a booming economy, but one mainly based on real estate speculation fed by German, Austrian, French, British and U.S. banks. Real estate prices ballooned 500 percent. Such balloons are bound to pop, and this one did in a most spectacular fashion, forcing Spain to swallow a bailout from the EU’s “troika”—the International Monetary Fund, the European Commission, and the European Bank.

 

The price of the bailout—the bulk of which went to pay off the banks whose speculation had fed the bubble in the first place—was a troika-enforced policy of massive austerity, huge tax hikes, and what one commentator called “sado-monetarism.” The results were catastrophic. The economy tanked, unemployment rose to 27 percent—over 50 percent for youth—and some 400,000 people were forced to emigrate.

 

While the austerity bred widespread misery, it also jump-started the Left Podemos Party, now the third largest in the Spanish parliament and currently running neck and neck with the Spanish Socialist party. Podemos-allied mayors control most of Spain’s largest cities, including Madrid, Valencia, and Barcelona.

 

In the 2015 election the ruling Popular Party lost its majority and currently rules as a minority party, allied with the conservative Catalan Ciudadanos Party and the main Basque party.

 

Needless to say, the PP’s control of Spain is fragile.

 

Starting in 2014 the Spanish economy began to grow, unemployment came down, and Spain seemed on its way back to economic health. Or at least that is the story the Popular Party and the EU is peddling.

 

The economy is the fastest growing in the EU, averaging around 3 percent a year. Next year projections are that it will grow 2.5 percent. Unemployment has dropped from 28 percent—50 percent for youth—to just over 17 percent.

 

But youth unemployment is at 37 percent, the second highest in Europe, and wages have still not caught up to where they were before the 2008 crisis. Spain is adding some 60,000 jobs a year, but many of them are temporary and without the same benefits as full time workers.

 

This temp worker strategy is continent-wide. Of the 5.2 million jobs created between 2013 and 2016, some 2.1 million were temporary.

 

The “recovery” is partly due to “labor reforms” that make it easier to layoff workers and replace full-time workers with “temps.” The shift has been from full-time workers protected by labor agreements to insecure temps with few protections. While that might make products cheaper and, thus, more attractive, it impoverishes the work force.

 

The strategy has become so widespread that economists have borrowed a term from physics to describe it: hysteresis.

 

Hysteresis describes a phenomenon where force permanently distorts what it is applied to.

 

“When unemployment is high for a long period of time, the shape of the labour market alters,” says Financial Times economist Claire Jones. “Would-be workers lose their skills, or find that technology or other economic forces make them obsolete. When the recovery comes, they are unable to join in. longer-term, or structural levels of unemployment set in and economy’s potential diminishes.”

 

In short, hysteresis produces an army of under and unemployed workers, whose living standards decline and who are economically marginalized. It also creates a vicious cycle that eventually dampens an economy. If governments are not spending—and under the strictures of the troika that is a given—and if consumers don’t have money, growth will eventually come to a halt, or at least become so anemic that it will be unable to absorb the influx of a younger generation.

 

Those marginalized communities and sectors of the economy are fertile ground for rightists who use xenophobia and racism to whip up anti-immigrant sentiment, as recent elections in Europe and the U.S. have demonstrated.

 

The vote by Britain to withdraw from the EU was put down to racism, but ,while anti-immigrant sentiment did play a role in the Brexit, that argument is a vast oversimplification of what happened. Much of the Brexit vote was not so much xenophobic as a repudiation of the major political parties that abandoned whole sectors of the country.

This particularly included the policies instituted by former Prime Minister Tony Blair and the “New Labour Party” that jettisoned its ties with the trade union movement and bought into the neo-liberal policies of free trade and globalization.

 

However, many of those Brexit voters turned around a few months later and backed the Labour Party and Jeremy Corbin’s left agenda. Given an opportunity to vote for ending the long reign of austerity, and for free university tuition, improved health services, and re-nationalizing transportation, they voted Labour, xenophobia be dammed.

 

Because the Spanish Popular Party claims that the current economic recovery is the direct result of its austerity and labor policies, other EU players are paying attention to the Catalan vote. If the vote goes badly for Catalan independence—and polls are currently showing it will be defeated 42 percent to 48 percent—the PP will claim a victory, not only over Catalan separatism, but also for the Party’s economic recovery strategy.

 

The French are certainly paying attention. Newly elected President Emmanuel Macron is preparing a similar program of cutbacks and labor “reforms” that he intends to ram through by executive decree, bypassing the French parliament.

 

A victory for the PP is also in the interests of the troika as proof that its recovery formula works, even though the track record of austerity as a cure has few success stories, and even those are questionable. For instance, low energy prices and a weak euro have more to do with the Spanish recovery than cutbacks in social services and the evisceration of labor codes.

 

The Popular Party should be riding high these days, but in fact its poll numbers are declining. It is still the largest party in Spain, but that translates into only 31 percent of the voters. Between them, the Spanish Socialist Party and the leftist Podemos Party garner just short of 40 percent.

 

Part of the PP’s woes stem from the fact that many Spaniards recognize there is something sour about the recent “recovery,” but there are also the corruption charges leveled at the PP, charges that have even ensnared Mariano Rajoy. The Prime Minister was recently forced to testify in a bribery and fraud case against some leading members of his Party.

 

While the Socialists have also been tarred with the corruption brush, the current case has riveted the public’s attention because some of it reads like a script from the Sopranos. The key defendant is Francisco Correa, who likes to be called Don Vito, Marlon Brando’s character in The Godfather. Two of his associates are known as The Moustache and The Pearl. Correa and 10 others have already been sentenced to prison for fraud and bribery, but Correa is also on trial for setting up a slush fund. Rajoy testified in that trial, although so far the Prime Minister is not accused of any wrongdoing.

 

A survey by the CIS Institute found that almost 50 percent of Spanish voters are deeply concerned with corruption, and that sentiment is dragging the Popular Party down.

 

The left and center-left parties are split on the Catalan question. Both oppose separatism, but they come at it very differently. Podemos is urging a “no” vote Oct. 1, but it supports the right of the Catalans to have their initiative. That position, along with Podemos’s progressive political program, has made it the number one party in Catalonia.

 

The Socialists have traditionally opposed Catalan separatism, and even the right of the Catalans to vote on the issue. But that position has softened since a major upheaval in the party that began last year when the Socialist’s right wing pulled off a coup and drove the Party’s left wing out of power. But the Socialist right-wingers made a major mistake by voting to allow Rajoy to form a minority government and continue the austerity policies. That move was too much for the Party’s rank and file, who threw out the right this past May and reinstated the Socialist’s left wing.

 

The Socialists’ willingness to consider allowing the initiative is partly a matter of simple math. The Party’s opposition to Catalan independence has resulted in it being virtually annihilated in the province, and no Socialist Party has ever come to power in Spain without winning Catalonia.

 

Whatever happens Oct. 1, Spain is not going to be the same country it has been since the restoration of democracy in 1977. The old two-party domination of the government is over, and there is general recognition that there has to be some shift on the Catalan question. Even Rajoy—who has hinted that he might consider using the military to block the Oct. 1 vote, or ruling the province from Madrid—has offered to give Barcelona the same deal the Basque province have. That would include collecting taxes, something Catalans now don’t have the right to do.

 

There is no little irony in Rajoy’s offer. When the Catalans made that same offer in 2012, Rajoy and the Popular Party wouldn’t even discuss the proposal. It is a measure of how the issue has evolved that Rajoy is now making the same offer as the Catalans did a half decade ago.

 

Polls—weak reeds to lean on these days—show the initiative going down to defeat, but the situation is fluid. Rajoy’s recent proposal and the softening of the Socialist Party’s position might convince the majority of Catalans that some kind of deal can be cut. Young Catalans favor independence, but older Catalans are uncomfortable with what will be a leap into darkness.

 

On the other hand, if Rajoy comes down hard it will likely bolster the “no” vote.

 

The European Union is in a crisis of its own making. By blocking its members from pursuing different strategies for confronting economic trouble and, instead, insisting on one-size-fits-all strictures, the trade group has set loose centrifugal forces that now threaten to tear the organization apart.

 

The eastern members of the EU have charted a course that throttles democracy in the name of stability. The southern members of the bloc are struggling to emerge from austerity regimes that have inflicted widespread, possibly permanent, damage to their economies. Even members with powerful economies, like Germany and France, are trying to keep the lid on the desire of their people for a better standard of living.

 

The Catalan vote reflects many of these crosscurrents, and is likely to be felt far beyond the borders of Iberia.

 

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Europe: The Danger From The Center

Europe: The Danger of the Center

Foreign Policy In Focus

June 13, 2017

 

The good news out of Europe is that Marine Le Pen’s neo-Nazi National Front took a beating in the May 7 French presidential election. The bad news is that the program of the winner, Emmanuel Macron, might put Le Pen back in the running six years from now.

 

Macron pledges to cut 120,000 public jobs, reduce spending by 60 billion Euros, jettison the 35-hour workweek, raise the retirement age, weaken unions’ negotiating strength and cut corporate taxes. It is a program that is unlikely to revive the morbid French economy, but it will certainly worsen the plight of jobless youth and seniors and hand the National Front ammunition for the 2022 election.

 

Europe is enmeshed in an economic crisis brought on by the structure of the European Union (EU), on one hand, and the nature of capitalism, on the other. That convergence has derailed economies throughout the 27-member trade group, impoverished tens of millions, and helped conjure up racist, rightwing movements that are not likely to be deterred by a few election losses.

 

Obscuring the roots of this crisis is the myth that debt is the result of spendthrift behavior, the economic sluggishness a consequence of high taxes, and rigid labor rules that handcuff businesses and inhibit growth. German Chancellor Angela Merkel is fond of saying that countries should behave like a “frugal Swabian house frau.”

 

Is Merkel’s observation bases on a myth or is it allegory? While an allegory is the “figurative treatment of one subject under the guise of another,” a myth is “an unproven or false collective belief that is used to justify a social institution.” The difference may seem pedantic, however, it is anything but, and, because myths are particularly hard to dislodge once they become widespread, it is essential to unpack exactly how the EU got itself in trouble.

 

Part of the problem is capitalism itself, an economic system that generates both enormous productive capacity and economic chaos.

 

Capitalism is afflicted by two kinds of crisis, cyclical and structural. The cyclical ones—recessions—tend to occur pretty much every 10 ten years. The U.S. and Europe went through recessions in the early 1980s, early 1990s, and the first years of 2000. They are painful and unpleasant but generally over in about 18 months.

 

Every 40 or 50 years, however, there is a structural crisis like the 1929 crash and the ensuing Great Depression.

 

When a structural crisis hits, capitalism re-organizes itself. In the 1930s, the solution was to create a re-distributive capitalism that used the power of the state to prime the economic pump and alleviate some of the chaos that accompanies such re-organizations. Unemployment insurance and Social Security took some of the edge off the pain, public works absorbed some of the jobless, and unions got the right to organize and strike.

 

Capitalism went through another structural crisis at the end of the 1970s, and it is the fallout from that one that currently plagues the EU—and the U.S. Using the 1979-81 recession as a screen, taxes on corporations and the wealthy were slashed, business and finance de-regulated, public institutions privatized, and unions assaulted. Capitalism also went global.

 

Globalism did spur enormous growth, but with a deep flaw. With unions weakened—in part by direct attack, in part by the enormous pool of cheap labor now available in the developing world—wages either stagnated or fell in Europe and the U.S., and the gap between rich and poor widened. A 2015 study by Oxfam found that 1 percent of humanity now controls over half the world’s wealth, and the top 20 percent owns 94.5 percent. In short, 80 percent of the world gets by on 5.5 percent of the world’s wealth.

 

This is not just a problem for the developing and under developed world. Germany has the biggest economy in the EU, and the fourth largest in the world. In 2000, Germany’s top 20 percent earned 3.5 percent more than the bottom 20 percent. Today that number has increased five times. For the bottom 10 percent, income has actually fallen. While earnings are up 6 percent, the cost of living has increased 24 percent. If that Swabian house frau was among that 10 percent, it didn’t make a whole lot of difference how frugal she was, she was broke.

 

Globalization generated instability by creating a crisis of accumulation. A few people had lots of money, but far too many had very little, certainly not enough to absorb the output of the global economy. Global capitalism was awash with cash, but where to use it? The answer was financial speculation—especially since many of the restraints and safety measures had been removed through deregulation.

 

For Europe, most of that speculation went into land. Land prices in Spain and Ireland rose 500 percent from 1999 to 2007. In the case of Ireland, it was almost unreal. Irish real estate loans went from 5 billion Euros in 1999 to 96.2 billion Euros in 2007, or more than half the Gross Domestic Product (GDP) of the Republic. Over the same period, European household debt increased on the average by 39 percent.

 

That this was a bubble was obvious and all bubbles pop sooner or later. This one exploded in the U.S. in late 2007 and quickly spread to Europe.

 

What is important to keep in mind is that the EU countries that got in trouble were hardly spendthrifts. Spain, Portugal, and Ireland all had modest debt ratios and budget surpluses at the time of the crisis.

 

The problem was not prodigal governments but a sudden hike in borrowing rates, which made it expensive to finance government operations. That was coupled with a decision to use taxpayer money to bail out banks that had gotten themselves in trouble speculating on real estate. Essentially, Portuguese, Spaniards, Greeks and Irish picked up the debts of banks they had never borrowed anything from.

 

Irish taxpayers shelled out 30 billion Euros to bailout the Irish-Anglo bank, a figure equivalent to the Republic’s tax revenues for an entire year. Since none of these countries had that kind of money on hand, they applied for “bailouts” from the International Monetary Fund, the European Central Bank, and the European Commission, the so-called “troika.” Some 89 percent of those bailouts went to banks. The day the Greek bailout was announced, French bank shares rose 24 percent.

 

It was not that EU countries were debt free, but in 2014, the Committee for a Citizen’s Audit on the Public Debt found that between 60 and 70 percent of those debts were due not to overspending, but instead tax cuts for corporations and the wealthy, and increases in interest rates. The latter favors creditors and speculators. The Committee found that most deficits were the result of “political decisions” that shift the wealth from one class to another.

 

In the long run, some of that debt will have to be forgiven because it is simply unpayable. The 1952 London Debt Convention that cut Germany’s post-war debt and ignited an economic revival could serve as a template.

 

Converging with this crisis of capitalism is the way the EU is structured, although the two are hardly independent of one another. Many of EU’s strictures were specifically designed to favor capital and finance and to marginalize the control that the Union’s 500 million members have over economic matters.

 

The first problem is that all economic decisions are made by the “troika,” an unelected body that answers to no one. There is a European Parliament, but it has little power or control over finance. The same is true for EU member governments. When former Greek Finance Minister Yanis Varoufakis told German Finance Minister Wolfgang Wolfgang Schauble that his left-wing Syriza Party was elected to resist the austerity policies of the EU, Schuable replied, “We cannot possibly let an election change anything.”

 

The second problem is that national governments have no control over the value of the Euro. Of the EU’s 27 members, 19 of them use the common currency and make up the Eurozone. Germany’s condition for giving up the Mark and adopting the Euro was that Eurozone members were required to keep budget deficits to no more than 3 percent of national income, and debt levels to no higher than 60 percent of GDP. While that formula works well for Germany’s powerful export model, it doesn’t for of a number of other Eurozone economies.

 

The Euro’s value is set by the European Central Bank, which means that members cannot devalue their currency, a common strategy for dealing with debt, and one near and dear to the U.S. Treasury. As long as it’s smooth sailing, this rule works, but when a financial crisis hits, the common currency and the debt restrictions can mean big trouble for the smaller, less export-centered economies. When the financial bubble popped in 2008, countries like Italy, Spain, Portugal and Ireland—and to a certain extent, France—saw their debts soar, with strategies for dealing with it hamstrung by the Eurozone rules.

 

And that is when the third problem with the Eurozone kicked in. While there is a common currency, there is no sharing of debt through tax receipts. In a single currency system like the U.S., powerful economies in California and New York pay for bills in places like Mississippi and Louisiana.

 

Some 44 percent of Louisiana’s state budget is paid for by the federal government, which collects taxes in wealthy states and doles out some of it to regions whose economies are either too small or inefficient to meet their budget needs. If you get into trouble in the Eurozone, you are on your own.

 

While the EU has been good for banks and countries like Germany and Austria, it hasn’t been so good for many other of its members. Applying austerity as a cure for debt doesn’t cure the problem, it just creates a spiral of more debt and yet more austerity. As Rana Foroohar, business columnist for the Financial Times put it, “No nation can grow when the consumer, the corporate sector, and the public sector stop spending.”

 

Because most the center-left parties bought into the austerity-as-a-cure-for-debt formula, they have been devastated at the polls. The Dutch Labor Party was crushed in the last election, the French Socialists got less than 7 percent of the vote, and the Spanish Socialists are barely keeping ahead of the much more left Podemos Party. The Italian Socialist Party has dropped over 15 points in the polls and is now running behind the rather bizarre Five Star Movement. The Greek Socialists are a footnote.

 

The lesson for the left would seem to be that moving to the center or the right is a prescription for electoral disaster,

 

Macron’s new centrist party, En Marche!, won, but mostly due to the anti-Le Pen vote. His program of austerity, restraints on unions, and corporate tax cuts is not popular with everyone, although En Marche! did well in the first round of voting for the legislature, and poll indicate he may get a majority. If he does not, he plans to push the measures through by decree.

 

It is unlikely that such a centrist program will do anything to reduce France’s unemployment rate—9.6 percent overall and 25 percent among youth age 18 to 29—or lift the economy. Labor “reform” and austerity do not jump start economies, and tax cuts have an equally dreary record. Indeed, as Foroohar points out, there is not a single example in the last 20 years where tax cuts for business or the wealthy stimulated an economy. Indeed, the economic surge in the 1990s happened while tax rates were on the rise.

 

If the economic situation worsens, or even stays the same, the right will be waiting to pounce with their easy answers to economic crisis: nationalism and racism.

 

The clock is ticking. Germany will hold elections in September, and it looks as if Italy will also go to the polls this fall. In Spain, the right-wing minority government is looking increasingly fragile and another election is a strong possibility.

 

Center-left parties are doing well in Portugal, where the Socialists have made common cause with two more leftist parties. In Britain the Labour Party’s sharp break with the Party’s centrism upended the Conservative Party, denied it a majority in Parliament. A recent YouGov poll found that a majority of Britains supported Labour’s left-wing platform over the Conservatives’ austerity program.

 

The Portuguese coalition is demonstrating that there are successful economic models out there to deal with debt and growth that don’t impoverish the many for the benefit of a few. The question is, can the left in Italy, Spain and Germany put together programs that tap into the seething unrest that globalism’s inequality has generated?

 

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The European Union and the Left

The EU & the Left

Dispatches From The edge

Jan. 10, 2017

 

When European Union President Jean-Claude Juncker addressed the European Parliament in Strasbourg this past September, he told them the organization was facing an “existential crisis” and “national governments so weakened by the forces of populism and paralyzed by the risk of defeat in the next election.”

 

Indeed it has been a bad year for the huge trading group:

  • The “Breixit,” or the United Kingdom’s vote to withdraw.
  • Rome’s referendum to amend the country’s constitution was trounced, and several Italian banks are in deep trouble.
  • The austerity policies of the EU have kept most of its members’ economies either anemic or dead in the water. Even those showing growth, like Ireland and Spain, have yet to return to where they were before the 2008 economic melt down. Between 2007 and 2016, purchasing power fell 8 percent in Spain and 11 percent in Italy,

 

It is also true that number of national governments—in particular those in Germany and France—are looking nervously over their shoulders at parties to their right.

 

But the crisis of the EU does not spring from “populism,” a term that many times obscures more than it reveals, lumping together neo-fascist parties, like France’s National Front and Germany’s Alternative for Germany, with left parties, like Spain’s Podemos. Populism, as Juncker uses it, has a vaguely atavistic odor to it: ignorant peasants with torches and pitchforks storming the citadels of civilization.

 

But the barbarians at the EU’s gate did not just appear out of Europe’s dark forests like the Goths and Vandals of old. They were raised up by the profoundly flawed way that the Union was established in the first place, flaws that did not reveal themselves until an economic crisis took center stage.

 

That the crisis is existential, there is little doubt. In fact, the odds are pretty good that the EU will not be here in its current form a decade from now—and possibly considerably sooner. But Juncker’s solutions include a modest spending program aimed at business, closer military ties among the 28—soon to be 27—members of the organization, and the creation of a “European Solidarity Corps” of young volunteers to help out in cases of disasters, like earthquakes. But there was nothing to address the horrendous unemployment rate among young Europeans. In short, rearranging the Titanic’s deck chairs while the ice looms up to starboard.

 

But what is to be done is not obvious, nor is how one goes about reforming or dismantling an organization that currently produces a third of the world’s wealth. The complexity of the task has entangled Europe’s left in a sharp debate, the outcome of which will go a long way toward determining whether the EU—now a house divided between wealthy countries and debt-ridden ones—can survive.

 

It is not that the European left is strong, but it is the only player with a possible strategy to break the cycle of debt and low growth. The politics of racism, hatred of immigrants, and reactionary nationalism espoused by the National Front, the Alternative For Germany, Greece’s Golden Dawn, Denmark’s People’s Party, and Austria’s Freedom Party, will not generate economic growth, any more than Donald Trump will bring back jobs for U.S. steelworkers and coal miners and “make America great again.”

 

Indeed, if the anti-immigrant Alternative for Germany Party gets its way, that country will be in deep trouble. German deaths currently outnumber births by 200,000 a year, a figure that is accelerating. According to the Berlin Institute for Population and Development, to have a sufficient working-age population that can support a stable pension system, the country will require an influx of 500,000 immigrants a year for the next 35 years.

 

Many other European countries are in the same boat.

 

There are several currents among the European left, ranging from those who call for a full withdrawal, or “Lexit,” to reforms that would democratize the organization.

 

There is certainly a democracy deficit in the EU. The European Parliament has little power, with most key decisions made by the unelected “troika”—the International Monetary Fund (IMF), the European Central Bank, and the European Commission. The troika’s rigid debt policies mean members have lost the ability to manage their own economies or challenge the mantra that debt requires austerity, even though that formula has clearly been a failure.

 

As economists Markus Brunnermeier, Harold James, and Jean-Pierre Landau point out in their book “The Euro and the Battle of Ideas,” growth is impossible when consumers, corporations, and governments all stop spending. The only outcome for that formula is misery and more debt. Even the IMF has begun to question austerity.

 

But would a little more democracy really resolve this problem?

 

Nobel Laureate Joseph Stiglitz, a long-time critic of austerity, argues that while the EU does indeed need to be democratized, a major problem is the common currency. The euro is used by 19 of the EU’s 28 members that constitute the Eurozone.

 

Stiglitz argues that the Euro locked everyone into the German economic model of modest wages coupled with a high power export economy. But one size does not fit all, and when the economic crisis hit in 2008, that became painfully obvious. Those EU members that used a common currency were unable to devalue their currency—a standard economic strategy to deal with debt.

 

There is also no way to transfer wealth within the EU, unlike in the U.S. Powerful economies like California and New York have long paid the bills for states like Louisiana and Mississippi. As Stiglitz points out, “a lack of shared fiscal policy” in the EU made it “impossible to transfer wealth (via tax receipts) from richer states to poorer ones, ensuring growing inequality between the core and the periphery of Europe.”

 

Stiglitz proposes a series of reforms, including economic stimulus, creating a “flexible” euro, and removing the rigid requirement that no country can carry a deficit of more than 3 percent of GDP.

 

Former Greek Finance Minister Yanis Varoufakis, however, argues that the Union “is not suffering from a democratic deficit that can be fixed with a ‘little more democracy’ and a few reforms here and there.” The EU, he says, “was constructed intentionally as a democracy-free zone” to keep people out of decision-making process and to put business and finance in charge.

 

Is the machine so flawed that it ought to be dismantled? That is the opinion of British Pakistani writer and journalist Tariq Ali and King’s College Reader in politics, Stathis Kouvelakis, both whom supported the Brexit and are urging a campaign to hold similar referenda in other EU member countries.

 

But since that that position is already occupied by the xenophobic right, how does the left argue for Lexit without entangling itself with racist neo-Nazis? Varoufakis, a leading member of the left formation, DiEM25, asks whether “such a campaign is consistent with the Left’s fundamental principles” of internationalism?

 

He also argues that a Lexit would destroy the EU’s common environmental policy and the free movement of members, both of which find strong support among young people.

 

Is re-establishing borders and fences really what the left stands for, and wouldn’t re-nationalizing the fossil fuel industry simply turn environmental policies over to the multi-national energy giants? “Under the Lexit banner, in my estimation,” says Varoufakis, “the Left is heading for monumental defeats on both fronts.”

 

DiEM25 proposes a third way to challenge the disastrous policies of the EU, while avoiding a return to borders and “every country for itself” environmental policies. What is needed, according to Varoufakis, is “a pan-European movement of civil and governmental disobedience” to create a “democratic opposition to the way European elites do business at the local, national and EU levels.”

 

The idea is to avoid the kind of trap that Greece’s left party, Syriza, has found itself in: running against austerity only to find itself instituting the very policies it ran against.

 

What DiEM25 is proposing is simply to refuse to institute EU austerity rules, a strategy that will only work if the resistance is EU-wide. When Greece tried to resist the troika, the European Central Bank threatened to destroy the country’s economy, and Syriza folded. But if resistance is widespread enough, that will not be so easy to do. In any case, he says, “the debt-deflationary spiral that drives masses of Europeans into hopelessness and places them under the spell of bigotry” is not acceptable.

 

DiEM25 also calls for a universal basic income, a proposal that is supported by 64 percent of the EU’s members.

 

Portugal’s left has had the most success with trying to roll back the austerity measures that caused widespread misery throughout the country. The center-left Socialist Party formed a coalition with the Left Bloc, and the Communist/Green Alliance put aside their differences, and restored public sector wages and state pensions to pre-crisis levels. The economy only grew 1.2 percent in 2016 (slightly less than the EU as a whole), but it was enough to drop unemployment from 12.6 percent to 10 percent. The deficit has also declined.

 

Spain’s Podemos and Jeremy Corbyn of the British Labour Party have hailed the Portuguese left coalition as a model for an anti-austerity alliance across the continent.

 

Debt is the 800-pound gorilla in the living room. Most of the debt for countries like Spain, Portugal and Ireland was not the result of spendthrift ways. All three countries had positive balances until the real estate bubble pumped up by private speculators and banks burst in 2008, and taxpayers picked up the pieces. The “bailouts” from the troika came with onerous austerity measures attached, and most of the money went straight to the banks that had set off the crisis in the first place.

 

For small or underdeveloped countries, it will be impossible to pay off those debts. When Germany found itself in a similar position after World War II, other countries agreed to cut its debt in half, lower interest rates and spread out payments. The 1952 London Debt Conference led to an industrial boom that turned Germany into the biggest economy in Europe. There is no little irony in the fact that the current Berlin government is insisting on applying economic policies to debt-ridden countries that would have strangled that German post-war recovery had they not been modified.

 

It is possible that the EU cannot be reformed, but it seems early in the process to conclude that. In any case, DiEM25’s proposal to practice union-wide civil disobedience has not really been tried, and it certainly has potential as an organizing tool. It is already being implemented in several “rebel” cities like Barcelona, Naples, Berlin, Bristol, Krakow, Warsaw and Porto, where local mayors and city councils are digging in their heels and fighting back.

 

For that to be successful throughout the EU, however, the left will have to sideline some of the disputes that divide it and reach out to new constituencies. If it does not, the right has a dangerous narrative waiting in the wings.

 

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The Big Boom: Nukes and NATO

The Big Boom: Nukes And NATO

Dispatches From The Edge

July 18, 2016

 

“Today, the danger of some sort of a nuclear catastrophe is greater than it was during the Cold War and most people are blissfully unaware of this danger.”

-William J. Perry

U.S. Sec. Of Defense (1994-97)

 

Perry has been an inside player in the business of nuclear weapons for over 60 years and his book, “My Journey at the Nuclear Brink,” is a sober read. It is also a powerful counterpoint to the North Atlantic Treaty Organization’s (NATO) current European strategy that envisions nuclear weapons as a deterrent to war: “Their [nuclear weapons] role is to prevent major war, not to wage wars,” argues the Alliance’s magazine, NATO Review.

 

But, as Perry points out, it is only by chance that the world has avoided a nuclear war—sometimes by nothing more than dumb luck—and, rather than enhancing our security, nukes “now endanger it.”

 

The 1962 Cuban missile crisis is generally represented as a dangerous standoff resolved by sober diplomacy. In fact, it was a single man—Russian submarine commander Vasili Arkhipov—who countermanded orders to launch a nuclear torpedo at an American destroyer that could have set off a full-scale nuclear exchange between the USSR and the U.S.

 

There were numerous other incidents that brought the world to the brink. On a quiet morning in November 1979, a NORAD computer reported a full-scale Russian sneak attack with land and sea-based missiles, which led to scrambling U.S. bombers and alerting U.S. missile silos to prepare to launch. There was no attack, just an errant test tape.

 

Lest anyone think the Nov. 9 incident was an anomaly, a little more than six months later NORAD computers announced that Soviet submarines had launched 220 missiles at the U.S.—this time the cause was a defective chip that cost 49 cents—again resulting in scrambling interceptors and putting the silos on alert.

 

But don’t these examples prove that accidental nuclear war is unlikely? That conclusion is a dangerous illusion, argues Perry, because the price of being mistaken is so high and because the world is a more dangerous place than it was in 1980.

 

It is 71 years since atomic bombs destroyed Hiroshima and Nagasaki, and humanity’s memory of those events has dimmed. But even were the entire world to read John Hersey’s Hiroshima, it would have little idea of what we face today.

 

The bombs that obliterated those cities were tiny by today’s standards, and comparing “Fat Man” and “Little Boy”—the incongruous names of the weapons that leveled both cities—to modern weapons stretches any analogy beyond the breaking point. If the Hiroshima bomb represented approximately 27 freight cars filled with TNT, a one-megaton warhead would require a train 300 miles long.

 

Each Russian RS-20V Voevoda intercontinental ballistic missile (ICBM) packs 10 megatons.

 

What has made today’s world more dangerous, however, is not just advances in the destructive power of nuclear weapons, but a series of actions by the last three U.S. administrations.

 

First was the decision by President Bill Clinton to abrogate a 1990 agreement with the Soviet Union not to push NATO further east after the reunification of Germany or to recruit former members of the defunct Warsaw Pact.

 

NATO has also reneged on a 1997 pledge not to install “permanent” and “significant” military forces in former Warsaw Pact countries. This month NATO decided to deploy four battalions on, or near, the Russian border, arguing that since the units will be rotated they are not “permanent” and are not large enough to be “significant.” It is a linguistic slight of hand that does not amuse Moscow.

 

Second was the 1999 U.S.-NATO intervention in the Yugoslav civil war and the forcible dismemberment of Serbia. It is somewhat ironic that Russia is currently accused of using force to “redraw borders in Europe” by annexing the Crimea, which is exactly what NATO did to create Kosovo. The U.S. subsequently built Camp Bond Steel, Washington’s largest base in the Balkans.

 

Third was President George W, Bush’s unilateral withdrawal from the Anti-Ballistic Missile Treaty and the decision by the Obama administration to deploy anti-missile systems in Romania and Poland, as well as Japan and South Korea.

 

Last is the decision by the White House to spend upwards of $1 trillion upgrading its nuclear weapons arsenal, which includes building bombs with smaller yields, a move that many critics argue blurs the line between conventional and nuclear weapons.

 

The Yugoslav War and NATO’s move east convinced Moscow that the Alliance was surrounding Russia with potential adversaries, and the deployment of anti-missile systems (ABM)—supposedly aimed at Iran’s non-existent nuclear weapons—was seen as a threat to the Russian’s nuclear missile force.

 

One immediate effect of ABMs was to chill the possibility of further cuts in the number of nuclear weapons. When Obama proposed another round of warhead reductions, the Russians turned it down cold, citing the anti-missile systems as the reason. “How can we take seriously this idea about cuts in strategic nuclear potential while the United States is developing its capabilities to intercept Russian missiles?” asked Deputy Prime Minister Dmitry Rogozin.

 

When the U.S. helped engineer the 2014 coup against the pro-Russian government in Ukraine, it ignited the current crisis that has led to several dangerous incidents between Russian and NATO forces—at last count, according to the European Leadership Network, more than 60. Several large war games were also held on Moscow’s borders. Former Soviet president Mikhail Gorbachev went so far as to accuse NATO of “preparations for switching from a cold war to a hot war.”

 

In response, the Russians have also held war games involving up to 80,000 troops.

 

It is unlikely that NATO intends to attack Russia, but the power differential between the U.S. and Russia is so great—a “colossal asymmetry,” Dmitri Trenin, head of the Carnegie Moscow Center, told the Financial Times—that the Russians have abandoned their “no first use” of nuclear weapons pledge.

 

It the lack of clear lines that make the current situation so fraught with danger. While the Russians have said they would consider using small, tactical nukes if “the very existence of the state” was threatened by an attack, NATO is being deliberately opaque about its possible tripwires. According to NATO Review, nuclear “exercises should involve not only nuclear weapons states…but other non-nuclear allies,” and “to put the burden of the doubt on potential adversaries, exercises should not point at any specific nuclear thresholds.”

 

In short, keep the Russians guessing. The immediate problem with such a strategy is: what if Moscow guesses wrong?

 

That won’t be hard to do. The U.S. is developing a long-range cruise missile—as are the Russians—that can be armed with conventional or nuclear warheads. But how will an adversary know which is which? And given the old rule in nuclear warfare—use ‘em, or lose ‘em—uncertainty is the last thing one wants to engender in a nuclear-armed foe.

 

Indeed, the idea of no “specific nuclear thresholds” is one of the most extraordinarily dangerous and destabilizing concepts to come along since the invention of nuclear weapons.

 

There is no evidence that Russia contemplates an attack on the Baltic states or countries like Poland, and, given the enormous power of the U.S., such an undertaking would court national suicide.

 

Moscow’s “aggression” against Georgia and Ukraine was provoked. Georgia attacked Russia, not vice versa, and the Ukraine coup torpedoed a peace deal negotiated by the European Union, the U.S., and Russia. Imagine Washington’s view of a Moscow-supported coup in Mexico, followed by an influx of Russian weapons and trainers.

 

In a memorandum to the recent NATO meetings in Warsaw, the Veteran Intelligence Professionals for Sanity argued “There is not one scintilla of evidence of any Russian plan to annex Crimea before the coup in Kiev and coup leaders began talking about joining NATO. If senior NATO leaders continue to be unable or unwilling to distinguish between cause and effect, increasing tension is inevitable with potentially disastrous results.”

 

The organization of former intelligence analysts also sharply condemned the NATO war games. “We shake our heads in disbelief when we see Western leaders seemingly oblivious to what it means to the Russians to witness exercises on a scale not seen since Hitler’s army launched ‘Unternehumen Barbarossa’ 75 years ago, leaving 25 million Soviet citizens dead.”

 

While the NATO meetings in Warsaw agreed to continue economic sanctions aimed at Russia for another six months and to station four battalions of troops in Poland and the Baltic states— separate U.S. forces will be deployed in Bulgaria and Poland —there was an undercurrent of dissent. Greek Prime Minister Alexis Tsipras called for deescalating the tensions with Russia and for considering Russian President Vladimir Putin a partner not an enemy.

 

Greece was not alone. German Foreign Minister Frank-Walter Steinmeler called NATO maneuvers on the Russian border “warmongering” and “saber rattling.” French President Francois Hollande said Putin should be considered a “partner,” not a “threat,” and France tried to reduce the number of troops being deployed in the Baltic and Poland. Italy has been increasingly critical of the sanctions.

 

Rather than recognizing the growing discomfort of a number of NATO allies and that beefing up forces on Russia’s borders might be destabilizing, U.S. Sec. of State John Kerry recently inked defense agreements with Georgia and Ukraine.

 

After disappearing from the radar for several decades, nukes are back, and the decision to modernize the U.S. arsenal will almost certainly kick off a nuclear arms race with Russia and China. Russia is already replacing its current ICBM force with the more powerful and long range “Sarmat” ICBM, and China is loading its ICBM with multiple warheads.

 

Add to this volatile mixture military maneuvers and a deliberately opaque policy in regards to the use of nuclear weapons, and it is no wonder that Perry thinks that the chances of some catastrophe is a growing possibility.

 

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Brexit and Spain: Europe On The Edge

The Brexit & Spain: Europe On The Edge?

Dispatches From The Edge

July 5, 2016

 

On the surface, the June 23 Brexit and the June 26 Spanish elections don’t look comparable. After a nasty campaign filled with racism and Islamophobia, the British—or rather, the English and the Welsh—took a leap into darkness and voted to leave the European Union (EU). Spanish voters, on the other hand, rejected change and backed a rightwing party that embodies the policies of the Brussels-based trade organization.

 

But deep down the fault lines in both countries converge.

 

For the first time since Margaret Thatcher and Ronald Reagan rolled out a variety of free market capitalism and globalization that captured much of the world in the 1980s, that model is under siege. The economic strategy of regressive taxes, widespread privatization and deregulation has generated enormous wealth for the few, but growing impoverishment for the many. The top 1 percent now owns more than 50 percent of the world’s wealth.

 

The British election may have focused on immigration and the fear of “the other”—Turks, Syrians, Greeks, Poles, etc—but this xenophobia stems from the anger and despair of people who have been marginalized or left behind by the globalization of the labor force that has systematically hollowed out small communities and destroyed decent paying jobs and benefits.

 

“Great Britain’s citizens haven’t been losing control of their fate to the EU,” wrote Richard Eskow of the Campaign for America’s Future, “They’ve have been losing it because their own country’s leaders—as well as those of most Western democracies—are increasingly in thrall to corporate and financial interests.”

 

While most of the mainstream media reported the Spanish election as a “victory” for acting Prime Minister Mariano Rajoy’s Popular Party (PP) and defeat for the left, it was more a reshuffle than a major turn to the right, and, if Rajoy manages to cobble together a government, it is likely to be fragile and short lived.

 

It was a dark night for pollsters in both countries. British polls predicted a narrow defeat for the Brexit, and Spanish polls projected a major breakthrough for Spain’s left, in particular Unidos Podemos (UP), a new alliance between Podemos and the Communist/Green party, Izquierda Unida.

 

Instead, the Brexit passed easily and the UP lost 1 million votes from the last election, ending up with the same number of seats they had in the old parliament. In contrast, the Popular Party added 14 seats, although it fell well short of a majority.

 

A major reason for the Spanish outcome was the Brexit, which roiled markets all over the world, but had a particularly dramatic effect on Spain. The Ibex share index plunged more than 12 percent and blue-chip stocks took a pounding, losing about $70 billion dollars. It was, according to Spain’s largest business newspaper, “The worst session ever.” Rajoy—as well as the Socialist Party (SP)—flooded the media with scare talk about stability, and it partly worked.

 

The Popular Party poached eight of its 14 new seats from the center-right Ciudadanos Party and probably convinced some UP voters to shift to the mainstream SP.

 

But Rajoy’s claim that “We won the election. We demand the right to govern” is a reach. The PP has 137 seats, and it needs 176 seats to reach a majority in the 350-seat parliament. The Prime Minister says he plans to join with Ciudadanos, but because the latter lost seats in the election such an alliance would put the PP seven votes short. An offer for a “grand alliance” with the SP doesn’t seem to be going anywhere. “We are not going to support Rajoy’s investiture or abstain,” said Socialist Party spokesman Antonio Hernando. An abstention would allow the PP to form a government.

 

Which doesn’t mean Rajoy can’t form a government. There are some independent deputies from the Basque country and the Canary Islands who might put Rajoy over the top, but it would be the first coalition government in Spain and a fragile one at that.

 

Part of that fragility is a scandal over an email between Rajoy and Jean-Claude Juncker, head of the European Commission, that was leaked to the media. The Commission is part of the “troika” with the International Monetary Fund and the European Central Bank that largely decides economic policy in the EU.

 

During the election Rajoy promised to cut taxes and moderate the troika-imposed austerity measures that have driven Spain’s national unemployment rate to 22 percent, and a catastrophic 45 percent among young people. But in a confidential email to Juncker, the Prime Minister pledged that, “In the second half of 2016, once there is a new government, we will be ready to take further measures to meet deficit goals.”

 

In short, Rajoy lied to the voters. If the PP had won an absolute majority that might not be a problem, but a coalition government is another matter. Would Ciudadanos and the independents be willing to associate themselves with such deceit and take the risk that the electorate would not punish them, given that such a government is not likely to last four years?

 

Unidos Podemos supporters were deeply disappointed in the outcome, although the UP took the bulk of the youth vote and triumphed in Catalonia, Spain’s wealthiest province, and the Basque country. What impact UP’s poor showing will have on divisions within the alliance is not clear, but predictions of the organization’s demise are premature. “We represent the future,” party leader Pablo Iglesia said after the vote.

 

There is a possible path to power for the left, although it leads through the Socialist Party. The SP dropped from 90 seats to 85 for its worst showing in history, but if it joins with the UP it would control 156 seats. If such a coalition includes the Catalans that would bring it to 173 seats, and the alliance could probably pick up some independents to make a majority. This is exactly what the left, agreeing to shelve their differences for the time being, did in Portugal after the last election.

 

The problem is that the SP refuses to break bread with the Catalans because separatists dominate the province’s delegation and the Socialist Party opposes letting Catalonia hold a referendum on independence. Podemos also opposes Catalan separatism, but it supports the right of the Catalans to vote on the issue.

 

Rajoy may construct a government, but it will be one that supports the dead-end austerity policies that have encumbered most of the EU’s members with low or flat growth rates, high unemployment and widening economic inequality. Support for the EU is at an all time low, even in the organization’s core members, France and Germany.

 

The crisis generated by the free market model is hardly restricted to Europe. Much of Donald Trump’s support comes from the same disaffected cohort that drove the Brexit, and, while “The Donald” is down in the polls, so were the Brexit and the Spanish Popular Party.

 

The next few years will be filled with opportunity, as well as danger. Anti-austerity forces in Spain, Italy, Greece, Portugal and Ireland are organizing and beginning to coordinate resistance to the “troika”. But so, too, are parties on the right: France’s National Front, Hungary’s Jobbik, Greece’s Golden Dawn, Britain’s United Kingdom Independence Party, Austria’s Freedom Party, Denmark’s People’s Party and Sweden’s Democratic Party.

 

Instead of reconsidering the policies that have spread so much misery through the continent, European elites were quick to blame “stupid” and “racist” voters for the Brexit. “We are witnessing the implosion of the postwar cultural and economic order that has dominated the Euro-American zone for more than six decades,” writes Andrew O’Helir of Salon. “Closing our eyes and hoping that it will go away is not likely to be successful.”

 

A majority of Britain said “enough,” and while the Spanish right scared voters into backing away from a major course change, those voters will soon discover that what is in store for them is yet more austerity.

 

“We need to end austerity to end this disaffection and this existential crisis of the European project,” said a UP statement following the election. “We need to democratize decision making, guarantee social rights and respect human rights.”

 

The European Union is now officially a house divided. It is not clear how long it can endure.”

 

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The Brexit: A Very British Affair

Brexit Vote: A Very British Affair

Dispatches From The edge

June 24, 2016

 

In the end, the Brexit—the vote on whether the United Kingdom should remain in the European Union (EU) or be the first in the 29-member trade group to bail out—was a close fought matter, but for all the sturm und drang about a pivotal moment for the EU, the June 23 referendum that saw the Brexit pass was a very British affair.

 

While the European Union is clearly in a crisis—countries weighed down with unpayable debt, economies virtually dead in the water, double digit unemployment, and a rising chorus of opposition to the austerity policies of the EU authorities in Brussels—those were not the issues that brought the British people to the polls.

 

Indeed, the whole affair started as an entirely homegrown matter, an internal split in the ruling Conservative Party. Back in 2013, Conservative Prime Minister David Cameron cut a deal with the euro skeptic part of his party that if they would close ranks until after the 2015 general election, he would hold a referendum on the EU.

 

At the time, Cameron was also looking over his shoulder at the rise of the extreme right wing, racist United Kingdom Independence Party (UKIP), which had begun using anti-immigrant issues to poach Conservatives. It is likely that Cameron never really intended to follow through on the 2013 pledge, but once he let slip the dogs of war he had little control over the havoc that followed.

 

When the Conservatives defeated the Labour Party last year, the “out” faction demanded their due, and what emerged was a deeply disturbing campaign that focused on race, religion and “sovereignty,” the latter a code-word for a particularly nasty brand of nationalism that is on the rise all over Europe.

 

Brexiters conjured up hordes of Turks pouring into Britain, even though Turkey is not a EU member—or likely to become one. In any case, the UK is not part of the Schengen countries, those members of the EU that allow visa less travel.

 

“Vote Leave” ran posters depicting crowds of Syrians and endless ads on Turkish birthrates. “None of this needs decoding,” wrote Philip Stephens of the Financial Times, “The dog whistle has made way for the Klaxon. EU membership talks with Turkey, we are to understand, will soon see Britain overrun by millions of (Muslim) Turks—most of them thugs or welfare scroungers.”

 

Last year Britain did process some 330,000 immigrants, but the overwhelming majority of them hailed from Spain, Poland, the Baltic countries, and Greece. The UK has accepted very few Syrian refugees and Turks, certainly not enough to “overrun” the place.

 

The openly racist and xenophobic character of the “Leave” campaign put the UK left in a difficult spot. While the left, including the Labour Party, has profound differences with current policies and structures of the EU, these are not over immigration and religion. How to express those critiques without bedding down with the likes of UKIP or the euro skeptic Conservatives was a tricky business.

 

Labour Party head Jeremy Corbyn chose to endorse the “remain” campaign, but also to point out that the EU is an undemocratic organization whose financial policies have spread poverty and unemployment throughout the continent. However, because the trade groups have a progressive stance on climate change, equal pay, work hours, vacations, and maternity leave, Corbyn argued—if somewhat tepidly—that all in all, it was best to stay in and try to reform the organization.

 

Part of the “leave” vote sprang from one of Britain’s most pernicious ideologies—nostalgia. Run through a few verses of “Rule Britannia” and a considerable portion of older Britains go misty eyed with the mythology of Trafalgar, Waterloo, and Omdurman. Polls indicate that support for the EU among people over 60 was just 33 percent. It was only 10 percent more among Conservative Party members of all ages.

 

In contrast, young Britains, Labour Party members, the Scots and Northern Irish supported remaining, though in the end they were not enough. The fallout? There will almost certainly be another referendum for Scottish independence. Will Northern Ireland do the same?

 

Is this the beginning of end for the EU? It is hard to imagine how the organization can continue as it is since the second largest economy in the trade group has debarked. But the European Union’s troubles have only just begun, and a far more important measure of the future of the organization will come when Spanish voters go to the polls June 26.

 

In that election the austerity policies of the “troika”—the European Central Bank, the International Monetary Fund, and the European Commission—will be directly confronted by a spanking new left formation, Unidos Podemos (United We Can). UP comes out of an alliance of Izquierda Unida (United Left) and Podemos. It is currently running number #2 in the polls and nipping at the heels of the ruling rightwing Popular Party.

 

The UP calls for rolling back the austerity policies of the troika, a public works program to create 300,000 jobs, and economic stimulation to tackle Spain’s horrendous unemployment problem. Joblessness is over 22 percent nationwide and 48.5 percent among young Spaniards.

 

A recent manifesto by more than 200 leading Spanish economists charges that the austerity policies of the EU have created an “economic crisis” that “has had devastating consequences for our country, as well as the euro zone as a whole” and “unnecessarily prolonged the recession across the continent and generated deep social fractures by increasing economic and social inequalities.”

 

The euro zone is the 19 members of the EU that use the common currency, the euro.

 

UP plans to link up with similar minded forces in Greece, Portugal, Italy and Ireland to demand that Brussels adopt fiscal stimulation as a strategy against the economic malaise plaguing most of the EU.

 

United Left leader and Communist Alberto Garzon, probably the most popular politician in the country, says “Brussels has to understand that if they continue to apply austerity politics in Spain our social emergency will get worse, which only helps the rise of fascism—as we have already seen in Austria and other EU countries.”

 

The Brexit vote was a British affair (and promises to be a messy one). The Spanish election is a continental affair that will have reverberations worldwide.

 

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Spanish Elections: EU Watershed?

The Spanish Challenge

Dispatches From The Edge

June 8, 2016

 

For the past quarter of a century there have been few watershed moments in Spanish political history. Like a well-choreographed pas de deux, the center-left Socialist Workers Party (PSOE) and right-wing Popular Party (PP) have taken turns governing the country.

 

But the 2015 election changed all that. Upstart parties on the right and left crashed the ball, punished the two major parties, and forced another round of voting on June 26 that could be a turning point in a growing campaign to roll back austerity policies that have spread poverty and unemployment throughout the continent.

 

Last December’s vote saw the ruling PP drop 63 seats and lose its majority. But voters chastised the Socialists as well, with the party losing 20 seats. Many of the seats that formerly went to the two major parties shifted to the left-wing Podemos Party and, to a lesser degree, the rightist Ciudadanos Party. In the current parliament, the PP controls 123 seats, the Socialists 90, Podemos 69, and Ciudadanos 40. Regional parties of Basques, Catalans and Canary Island independents hold 28 seats. The parliament has 350 seats and a ruling majority is 176.

 

The new election was forced when none of the parties could form a working majority. The PP and Ciudadanos are on the same page politically, but together fall short of a majority. The Socialists, Podemos and the regional parties—most of which are leftist to one extent or another—could have formed a government, but the Socialist Party refuses to have anything to do with Catalan separatists.

 

While polls indicate that Spaniards are likely to vote pretty much the same way they did in December, a new kid on the block has altered the electoral terrain and raised the pressure on the center-left Socialists to make a choice: follow the lead of Portugal, where the Socialist Party formed a united front with the Left Bloc and the Communist/Green alliance, or imitate the Social Democrats in Germany and join a “grand coalition” and make common cause with the right?

 

The “new kid” is “Unidos Podemos” (“United We Can”), a coalition of Podemos and the United Left (UL). No one expects the new alliance to win a majority, but most analysts predict, that under Spain’s quirky election system the coalition could increase its representation by 25 percent, or somewhere between 15 to 20 seats. That would vault the new formation past the PSOE, making United Podemos (UP) the second largest bloc in the parliament. The PP is still number one and on track to slightly increase the 29 percent they received in the last election.

 

Spain’s election geography is heavily weighted toward rural areas, where the PP and Socialist Party are strong. While it takes 128,000 votes to elect someone in Madrid, it only takes 38,000 in some areas of the countryside. The rules also favor regional depth over broad support. In December, the UL won almost a million votes but only got two representatives. Other parties averaged one seat for every 60,000 votes.

 

United Podemos has internal tensions, but both parties have put these aside for the moment. For instance, Podemos supports continued membership in NATO, while United Left opposes the military alliance. The UL is also opposed to the current structure of the European Union and calls for a “refounding” of the organization.

 

What both agree on is ending Spain’s punishing austerity regime and confronting the country’s staggering unemployment. The national jobless rate is 21 percent, with a catastrophic 45.5 percent for youth 25 and under. The education system is in a state of collapse, and there is a national housing crisis. In the face of those conditions, the UP has decided to shelve disagreements over NATO and the EU and make common cause.

 

This is almost exactly what the left did in Portugal, where disagreements on NATO and the EU were sidelined in favor of freezing privatizations, rolling back tax increases, increasing the minimum wage and augmenting funding for education and medical care. There is no question that differences will eventually surface, but the Portuguese left has decided that when the house is burning down saving the inhabitants takes precedent. Whether the Spanish Socialist Party will take that step is an open question.

 

In some ways the divisions of the left in Spain are narrower than they are in the Portuguese alliance: part of the UP—specifically Podemos—backs NATO membership and the EU. But the PSOE’s opposition to Catalan independence is a major roadblock to an alliance with the UP. Podemos also believes Catalonia should remain part of Spain, but it supports the right of the Catalans to hold a referendum on the issue.

 

The Socialist Party’s hostility to Catalan independence allies it with the PP and Ciudadanos. The latter was formed to oppose Catalan independence, and the PP has led a mean-spirited campaign against Barcelona. When Catalans banned bull fighting, Madrid made bull fighting a “national cultural heritage” to thwart the ban. When Catalans flew their nationalist “Estelada” flag at the Copa Del Rey soccer match finals in Madrid, the government tried to block it. A court stopped the authorities from banning the flag, and Barcelona defeated Madrid in the match.

 

PP leader and acting Prime Minister, Mariano Rajoy, is pressing the Socialists to join a grand coalition that, so far, the latter has resisted. But the PSOE is deeply split. Some in the Party would rather bed down with the right than break bread with Podemos United. Others are afraid that, if the Socialist Party enters a grand alliance with the Popular Party, the Socialists will end up suffering the consequences. Center-left parties that join with center-right parties tend to do badly come election time.

 

The Greek Socialist Party was decimated by the left-wing Syriza Party after the former went into a grand coalition with the right. The Liberal Party’s alliance with the Conservative Party in England turned out to be a disaster. The Liberal Party barely exists today. And the German Social Democrat’s grand coalition with Chancellor Angela Merkel’s Christian Democratic Union has seen the once mighty Socialists slip below 20 percent in the polls. In Spain the mantel of “the left” would clearly shift to the UP alliance, something that many in the Socialist Party deeply fear.

 

There are profound differences among the European left, making unity difficult. The Socialist parties in Portugal and Spain, for instance, support paying off their countries debts to European banks and the International Monetary Fund (IMF). The Portuguese Socialist Party’s alliance partners, as well as the Spanish United Left, think the debt is unpayable and, in any case, unfair because most of the debt is the result of the 2008 economic crisis brought on by the irresponsible speculation of private banks. Speculators may have lost the money, but the taxpayers are picking up the tab.

 

There is a potential path out of the current situation, but it will have to overcome powerful interests and a deeply flawed economic system.

 

Those “interests” are the debt holders, ranging from governments to the European Central bank and the IMF.

 

The flaw is built into the eurozone, which is made up of the 19 countries in the 28-member European Union that use the common currency, the euro. As economist Thomas Piketty puts it, the eurozone has “a single currency with 19 different public debts, 19 interests rates upon which the financial markets are completely free to speculate, 19 corporate tax rates in unbridled competition with one another, without a common social safety net or shared educational standard—this cannot possibly work, and never will.”

 

Piketty argues the eurozone’s rigidity on debt and its strategy for solving it—austerity and yet more austerity—has “throttled” a recovery, particularly in Greece, Spain, Portugal, and Ireland. Even where countries economies are finally growing—Spain and Ireland—their debts are actually higher than when they instituted austerity regimes. And the “growth” is not due to the EU’s economic strategy, but rather to cheap oil and the declining value of the euro.

 

Piketty proposes a conference on debt, similar to the one that saved postwar Germany. Syriza has long called for such a gathering. Such a conference could cut debt burdens, lower interest rates and spread out repayments.

 

However, the eurozone would also have to be democratized. The current European parliament includes non-eurozone members and is largely powerless. Decisions are largely made by the unelected Troika—the IMF, the European Central Bank, and the European Commission. One thing that could be done immediately would be to institute a common corporate tax rate, which could be used to finance infrastructure improvements and education.

 

Germany is unlikely to support such an approach, but Germany only represents 25 percent of the EU’s population and GDP, while France, Italy and Spain combined account for 50 percent. Add in Ireland, Portugal and Greece, and Germany and its allies are a distinct minority.

 

Italy is openly advocating debt reductions and loosening of the eurozone’s rules, and France has already raised the issue of a more democratic and transparent EU political structure along the lines of what Piketty is proposing.

 

Can it be done? It won’t be easy, but Germany is increasingly isolated, and countries in the southern tier of the eurozone are desperate for relief from the endless rounds of austerity. They are also no longer convinced that such a strategy will lower their debt burdens and stimulate their economies. In fact, most the debt is unpayable no matter how much austerity is applied.

 

There are some wild cards in the upcoming election. Both the PP and PSOE have been tarred with the corruption bush, and two former Socialist governors of Andalusia have just been charged with illegal payments to supporters. Turnout will likely be lower than in the December election, but the left’s effective grassroots organizations may offset that.

 

The Spanish elections arrive at a critical time for the European Union, and a Madrid government that resists the increasingly discredited economic strategy of the troika could shift the balance in the direction imagined by Piketty.

 

That, however, will depend on whether the Socialist Party decides to join with the left or go into a grand coalition with the right.

 

A failure by the left to unite will open the door for Europe’s resurgent far right, whose xenophobia and racism have gained ground all over the continent.The only way to effectively counter the far right is to democratize the European Union and pursue economic policies that will provide jobs and raise living standards. Only the left can deliver such a program.

 

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