Focus: The euro crisis

The euro crisis broke out in the wake of the global economic and financial crisis of 2008. It is neither a classic monetary crisis nor a sovereign debt crisis. The euro continued to strengthen against the dollar, and before the crisis Irish and Spanish government debt was actually some of the lowest in Europe in relation to the strength of their economies. The problem was more the high levels of personal debt (also abroad). The euro bail-out did nothing to help Greek pensioners or Irish nurses. Instead it rescued the banks and asset managers that were owed money by the crisis-hit countries – particularly German and French banks.

The real causes of the euro crisis

The real causes of the euro crisis lie elsewhere: Over the course of many years, the industrialised nations have seen wages decline as a proportion of the economy as a whole. In Germany this trend peaked with the labour market reforms introduced by the SPD/Green coalition and the Agenda 2010 reforms (to welfare and temporary work, etc.). Countries such as Germany dealt with their lack of domestic demand by looking to other countries, combining good products with low labour costs and exporting them. The crisis-ridden countries could no longer defend themselves by devaluing their currencies, because they had all switched to the euro. This meant that southern European countries were basically buying on tick. This house of cards collapsed with the advent of the economic and financial crisis.

Bailing out zombie banks and the economic collapse led to an increase in government debt. However, unlike the USA and Japan, the European Central Bank did not guarantee the debts, so the crisis-hit countries had no access to fresh euros. Investors feared bankruptcy and would only lend them money at extremely high interest rates. Absurdly, the banks that we bailed out borrowed cheap money from "our" bank – the ECB – and lent it at high interest rates to the debt-ridden countries.

Led by Germany, the troika of the European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF) orchestrated an economic and social disaster. Cuts to wages, pensions and public investment simply caused the Eurozone to sink deeper into depression. Unemployment soared and levels of debt went up rather than down. The supposed euro saviours used the euro crisis to bail out their ailing banks at the expense of the taxpayer, destroying the welfare state and putting pressure on wages. This is also bad news for economic growth and the majority of people in Germany.

Time to call a halt to failed euro policies

DIE LINKE are calling for an end to these failed euro policies. Instead, Germany needs higher wages, pensions and public investment in order to build its domestic economy. This is a way of minimising chronic export surpluses, leading to a balance of payments in the Eurozone. In order to restart the economy, DIE LINKE also call for an EU-wide programme of public investment amounting to €500 billion per annum. It would be better if the ECB were to finance public investment directly rather than pumping money into banks, which then fail to lend this money to the real economy.

Those who caused the crisis and those who profited from it should be held to account by imposing an EU-wide capital levy on millionaires. We also call for a smaller, better regulated financial sector. The reputable deposit and loan business should be separated from investment banking. And finally, there would be more scope for productive investments if heavily indebted countries were given a haircut.