The political establishment—in Britain and across Europe—is filled with dread at the prospect of the single European currency project falling apart.
They are desperate for a deal to stop Greece from leaving the euro—or to isolate Greece enough to keep the remaining 16 eurozone countries together.
It’s not immediately obvious why the ruling class should go to such lengths to preserve the euro.
A single currency might be convenient, but surely it isn’t worth the grinding austerity now being inflicted on the people of Greece?
But the single currency is hugely important to Europe’s ruling class. Along with the European Union (EU), the euro has helped European bosses to punch their weight in the global capitalist system.
The euro was set up in 1999 when the global economy was booming. It created a ready market for German exports—and fuelled massive profits for German, French and British banks.
The single currency was touted as the logical result of a longer process of economic integration across Europe (see top right, opposite page).
But sharing a currency had other consequences for weaker economies such as those of Greece and Portugal.
It locked them into the same high exchange rates and low interest rates as the powerhouse economy of Germany.
This made it harder for them to export goods. It also meant they were flooded with cheap credit pushed by financial institutions based in the richer northern European states.
This imbalance between “core” and “peripheral” eurozone countries was hardwired into the euro from day one.
That lies behind the debt crisis in countries such as Greece and Spain—not the “laziness” and “greed” of workers, as our hypocritical rulers claim.
The euro’s initial “success” was a product of the boom. But like all bubbles, it had to burst.
In late 2007 a financial crisis broke out in the US housing markets. This soon spread across the global financial system as banks around the world discovered they were sitting on worthless “toxic” assets.
Now governments around the world are hell bent on imposing vicious cuts to recoup the money they have spent bailing out the banks.
And the German ruling class in particular is determined to enforce the eurozone debts that built up during a decade of expansion for German industry.
So the euro has now been transformed from a mechanism for lending credit to a mechanism for enforcing austerity.
As long as they remain in the euro, the most heavily indebted countries will stay shackled to their spiralling debts.
They are held to ransom by the EU, European Central Bank and International Monetary Fund.
This “troika” of institutions promises to pay off some of the debt by sending money straight to the bankers. But it demands cuts that will wreak utter devastation in return.
The heroic resistance of workers in Greece has challenged this blackmail.
Health workers have refused to charge fees for hospital visits. Power workers have refused to cut off electricity to the poor. There have been so many general strikes unions can now organise them at 48 hours notice.
The backlash against austerity is now spreading across Europe. The markets wanted Nicolas Sarkozy re-elected as president of France—but the French electorate rejected him.
The Dutch government has recently collapsed because it could not agree on cuts.
And a new EU austerity treaty is likely to be thrown out by voters in Ireland in a referendum later this month.
The ruling class has responded to all this with panic. They warn of huge costs if Greece leaves the euro.
Some say a Greek exit could cost more than £632 billion and spark a new recession across Europe. And that’s before counting the astronomical sums needed to stop Spain and Italy from crashing out of the euro.
But it may already be too late for the euro. More than £560 million was pulled out of Greek banks last week, along with £800 million from the ailing Spanish bank Bankia.
The break-up of the euro could bring banks crashing down as more than £1.6 trillion of government debt is devalued.
So the consequences of the euro failing will be felt by ordinary people in Europe.
But that does not mean we should give in to austerity blackmail in order to hold the eurozone together. That course of action won’t make any of the underlying problems go away.
In or out of the euro, capitalism is mired in deep crisis. The ruling class’s only way out is to make workers pay. And our only solution is to fight back.
That means rejecting the euro—a currency that was set up by the bosses, for the bosses, and is now being maintained at our expense.
Joseph Choonara’s short book Unravelling Capitalism is an accessible Marxist introduction to economics. It is available from Bookmarks, the socialist bookshop—phone 020 7637 1848 or go to bookmarksbookshop.co.uk