Democracy and Popular Sovereignty instead of Neoliberal Integration and a failed Euro-System!  

This document was commonly developed by people from the Lexit Network. It was written and agreed before the Brexit referendum and was not intended to influence the popular vote one way or another.

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With the implementation of the European single market and the Maastricht Treaty, European integration was established as a neoliberal project for the long run. The Stability- and Growth Pact, the fundamental freedoms of the single market and the European monetary union, among other elements, constituted a framework that has fueled austerity policies, the dismantling of workers’ rights and the welfare state and imposed privatization throughout the EU member states.

Contrary to the theory of the EU as a neutral level playing field, the events after the Great Recession (2007/2009) have shown that the current European integration project is defined by the regressive nature of its treaties and by an unprecedented radicalization of its neoliberal character. Uneven and hierarchical power relations (core – periphery) have long been a feature of European integration, finally culminating in Germany’s dominance of the EU’s economic policy orientations after the Great Recession. The regulatory developments that accompanied the establishment of the Eurozone and the measures taken in response to the Euro crisis through the imposition of ever stricter and ever less legitimated rules and governance structures (EuroPlus-Pact, Firscal Compact, etc.) deepened the authoritarian, neoliberal nature of EU-integration. Thus, the current integration project became a threat to democracy and popular sovereignty.

The Euro – A Currency of Crises

The Euro crisis is a product of the misconceived concept and architecture of the European Monetary Union (EMU) from its start, focused on austerity and disinflation as its main targets. Instead of leading to a process of economic and social convergence of Eurozone member states, real economic development (in terms of wages, productivity etc.) drifted ever more apart. EMU was finally creating huge macroeconomic imbalances (e.g. increasing current account deficits not only in the southern EU-periphery, but also in France and Italy; huge current account surpluses in Germany and some others) and, in the first stage, led to capital flows from the EU-core to periphery. This flood of cheap money propelled speculative bubbles based on real estate, finance, and the like, and also heavily increased private and public debt.

An important factor behind the imbalances was Germany’s drive to reduce unit labour costs via re-organizing the chains of value creation for Germany’s export industries with cheaper labour from Eastern Europe, wage dumping, tax dumping and social cuts.

A consequence was a huge pressure on weaker economies to increase the international competitiveness of their industries and services. Since in the framework of EMU they could not do so with monetary policy anymore, they proceeded with internal devaluation. In practical terms, this meant dismantling of the welfare state, extensive privatization of public services and structures, wage and social dumping, tax competition, attacks on collective bargaining, attempts to disorganize unions and demonization or extensive lay-off of public workers.

The Euro – A Tool for the Benefit of Finance Capital

It is important to remark that none of this happens because of some unforeseeable construction faults in the Eurozone: The Euro works well in the sense of its neoliberal designers. It works not towards some kind of economic balance among member states, economic growth and full employment. It works towards the destruction of labor rights, social security systems, public sectors and profit taxation and towards the imposition of publicly financed bank-bailouts.

This is how the Euro works in political terms: It pushes its members into ever more downward competition in which the economic position of each member state can only be improved by policies against the majority of the population and for the benefit of international capital. It creates a downwards spiral which brings wages, pensions, social benefits, public employment, public investment, etc. to the bottom.

As the events in Greece in summer 2015 have shown quite clearly, the Eurozone governance structure is not open for policies that follow the democratically expressed view of the majority of people if they run counter to the neoliberal agenda. When the Syriza-led government tried to implement its program – strengthened by the Oxi-referendum – the ECB used its financial weapons to force the government to capitulate and sign another memorandum.

The Euro – A Bad Idea That Cannot Be Turned into a Good One

As has been proven conclusively by countless authors, the Eurozone does not meet the requirements for a functioning monetary area, nor is it to be expected that it will meet such requirements in the future. Among other measures, a functioning monetary area with very different levels of productivity and economic structures, as it is the case in the Eurozone, would require massive financial transfers in order to revert economic imbalances. Reliable analysis show that this would entail the redistribution of some 10% of Eurozone’s GDP from stronger to weaker economies, a step which is not only unfeasible in political terms, but also undesirable: As all precedents in the Eurozone have shown, the governments of donor countries would use this position to influence national policies in recipient countries, trampling on democracy. The last years showed how fast such a system undermines popular sovereignty, divides the peoples of Europe and creates room for xenophobia.

Ultimately, the option of a democratic, federal European state that does not reflect the uneven relations of power among the current member states would require a European civil society that is not given, nor can it be pushed into existence from above.

Lexit – The Way to Effectively Fight Neoliberalism and Uphold Democracy