The alternatives are not restricted to neoliberalism in or out of the European Union. It is possible to fight for a radical left transformation of European institutions, argues Orlando Hill

As we digest the results of the European elections, we might ask ourselves whatever happened to the European dream. The consensus in Europe was once that all citizens were entitled to certain universal basic rights such as education, health care, housing, employment and care for children and the elderly. The market economy was heavily regulated to avoid and counteract economic downturn and crisis. It was successful. Not just in Europe, but throughout the West from the 1940s to the 1970s real wages and economic conditions steadily improved.

Thomas Fazi argues in The Battle for Europe published by Pluto Press that the wealthy elite of Europe took advantage of the financial crisis of 2008 to pursue an austerity programme ‘to do away with last remnants of the welfare state and complete the neoliberal project’ (p.xiii). After describing how the crisis that originated in the US spread across Europe, Fazi gives a step by step guide on how the elite hijacked a continent.

The first step was to rewrite history. The crisis was not caused by the recklessness of an overly leveraged financial sector or the increasing inequalities in European societies. That was merely a trigger. The real cause was excessive government spending. Governments were living beyond their means. However, the data seems to contradict this version of history. ‘Prior to the crisis, both the fiscal deficit and the public debt-to-GDP (of the Eurozone) were in line with, or very close to, the parameters of the Maastricht Treaty’ (p.61). According to the analysis of a number of economists, the increased debt levels were mostly caused by the large bail-out packages provided to the financial sector. The large government deficits are the consequence, not the cause of the crisis.

Once this version, that governments living beyond their means is the explanation for the crisis, has been spread widely in society by the media, the next step was to force the subversion of democracy. Any government that dared to confront the troika (IMF, the European Commission and the European Central Bank) was simply replaced. George Papandreou’s (prime minister of Greece) announcement of a referendum on the EU-IMF rescue plan was met with indignation by markets. He resigned and was replaced by Lucas Papademos, a former governor of the Bank of Greece and former vice-president of the ECB. In Italy, ‘a technocrat replaced an elected politician, for the specific purpose of doing as the financial markets wanted’ (p.51). The rewriting of history and the attack on the welfare state is not limited to countries in the Eurozone. As we know the Coalition government in the UK has also committed itself to fiscal consolidation.

Most on the left would agree with Fazi’s analysis of the crisis and how the wealthy elite saw the crisis as an opportunity to ‘re-engineer European societies and economies according to a radically neoliberal framework’ (p.155). Fazi becomes controversial in his belief that it is possible to radically reform the EU and the Euro. He argues that to give up on the vision of an alternative European Union would represent ‘a renunciation of the left’s historical goal of seizing power to change the political and economic structures from below, above and within’ (p.164).

A left-wing nationalist solution with a breakup of the EU presents serious problems. The breakup of the Euro would take countries back to unfettered competition with a race to the bottom, as they devalued their national currencies. This would be damaging to the living standards of working people. A way of avoiding this would be to replace the Euro with a system of managed exchange rates as defended by Costas Lapavitsas. Fazi argues that this return to a European Monetary System would not be able to defend countries from currency speculators. A fixed-but-adjustable system would allow speculators to anticipate when a currency would be devalued. This is what caused the departure of the British Sterling from the EMS and the collapse of the system in 1993. The threats would be greater today than they were in the 90s with the even greater power of the financial markets.

On the other hand, Fazi also fears that an exit from the euro and the EU would lead to nationalistic, conservative regimes ‘aimed at protecting the existing balance of social forces and characterised by authoritarian rule, continuous devaluations, poor growth, increased inequality and social disintegration’. The alternative is a version of the progressive Euroscepticism as defended by Lapavitsas. In his opinion ‘a single European state, whether federal or unitary, is neither feasible nor desirable’. The nation state can still offer a defence against the encroachment of big business. Fazi offers his proposal of ‘a set of radical reforms to deeply transform the European Union in a democratic and progressive-federalist sense’ (p.167).

I do not think that the set of reforms defended by Fazi differ widely from Lapavitsas’. These include an overhaul of the financial sector limiting the size of banks and their ability to create private money; a new macroeconomic policy which reasserts the primacy of democracy and the state over markets, and economic convergence among member states. The difference between the two is that Fazi does not believe that a single state is able to ‘tame the overwhelming (and intrinsically borderless) power of global capital’ (p.195).

At the same time, however, Fazi does not think that a breakup of the EU is unrealistic. It might even be necessary if the demands for a readjustment are not met. Nonetheless, in his opinion ‘a progressive integrationist solution to the crisis would be a better option, and we should do all that is in our power to accomplish it’ (p.195). Fazi reminds us that although the strategic goal should be to achieve change at a European level, ‘this will only be attained through progressive change at the national level. However we look at it, the struggle starts from the bottom up’ (p.198).