The specter of catastrophe returns

[Hannah Bell]

In the late evening of Friday, May 7, 2010, an extraordinary scene unfolded in Brussels at a meeting of the leaders of the 16 eurozone member countries. A deadlock had developed between France and Germany over the feasibility and terms of a financial bailout of Greece...

Suddenly, sometime between 11:30 p.m. and midnight, the meeting exploded. President Sarkozy, according to observers, began “shouting and bawling,” banged his fists on the table, and demanded that Germany withdraw its opposition. If Merkel refused, Sarkozy warned, France would abandon the euro...


First, the austerity policies demanded by the European Central Bank in return for financial support will force a slashing of consumption in the targeted countries and drive them into recession. This, in turn, will lead to an erosion of important markets for EU-based manufacturers, particularly in Germany.

Second, the battle over the €750 billion safety net has shattered confidence in the viability of the single-currency project... rumors are sweeping financial markets, according to a report in the British Guardian, “that Merkel is printing Deutschmarks in preparation for a split” within the eurozone.

The break-up of the euro does not mean merely the end of a currency. It threatens a devastating and potentially bloody breakdown of political relations between European states. The Süddeutsche Zeitung offered this scenario in its May 15 edition: “The European Union collapses, as its most important political clamp, the common currency, disintegrates. Twenty-seven nation states fight again for markets. Germany, as the largest country with a healthy industrial structure, acquires enemies, and is possibly boycotted: the specter of the ‘Hegemonic Power’ is revived.”

This is the context within which ECB President Trichet warned that the current world political and economic situation is the “most difficult” since 1939-1945, and, perhaps, even since 1914-1918...

http://www.wsws.org/articles/2010/may2010/pers-m17.shtml

[Hannah Bell]

1. k