#44 - Europe and the Euro : what stakes for the working class?

April 1999

A capitalist construction

There is no point in being starry-eyed about Europe. It was never conceived for the purpose of allowing ordinary people to settle freely anywhere they liked from the Shetlands to the Greek islands, the Austrian Alps or the Arctic Circle. Of course the abolition of national borders could allow just that - but only on the basis of a very different social organisation.

On the contrary, when the idea of European integration was first formulated in the aftermath of World War II, it was primarily for the benefit of the largest European companies. But of course, just as Gordon Brown does today, Jean Monnet, the French promoter of European integration argued at the time that it would be "good for Europe" - meaning for European capitalists.

Ever since the development of the world market at the turn of the century, the expansion of these companies had been constrained by the limitations of their national markets in terms of cross-border trade. In every industry each country had its own set of companies, living in the shadow of the particular custom barriers, laws and regulations of their home markets. This resulted in an enormous duplication of resources and efforts across Europe. But in addition, from the 1920s onwards, it put European companies at a disadvantage compared to their US rivals, whose home market was five or ten times larger. Not that cross-border trade within Europe was impossible. But it was costly and difficult, particularly in times of economic crisis. As soon as a world slump affected one particular industry, each European country raised its custom barriers and companies had to shrink their operations for lack of a large enough home market. When eventually business picked up again, they all had to restart if not from scratch, at least from a much lower level than before the slump.

The only way European industrial companies could grow into world-scale companies was by relying heavily on state procurement and handouts, or by being nationalised and directly subsidised by the state, or, in the case of a few countries, by drawing their profits from a large colonial empire. This is why today's largest British companies are either linked to state procurement (the arms, pharmaceutical and heavy engineering industries), to the exploitation of the empire (companies like RTZ, BP or ICI in mining, oil and chemicals) or are formerly state-owned companies (BAe, British Airways, privatised utilities, etc..).

Removing all obstacles to the circulation of goods within Europe was the obvious answer to these age-old constraints. However the obstacles proved enormous in some areas. For instance there were the endless quarrels over agricultural subsidies. Whereas large-scale industry was more or less everywhere at the same level of development, at least in the richest European countries, entire sections of the populations still lived off craft and agricultural activities which only survived thanks to the existence of custom barriers. The small-scale agriculture of western France and southern Germany could hardly compete with the capitalist agriculture of central England, for instance. Hence the need for a system of production quotas and subsidies which would keep agricultural prices high enough for the least productive farmers to survive (or rather to disappear without causing too much trouble) while giving an incentive for the most productive farmers to reduce production - what is known today as the Common Agricultural Policy or CAP.

In any case, it took no less than four decades for the Single Market to be finally completed in 1993, after a long series of intermediary partial agreements and temporary crises.

This does not mean that, even today, everything is sorted out yet in the Single Market, far from it. For instance, there is the thorny issue of state subsidies. The Single Market is supposed to allow "free competition" and therefore to ban "unfair" advantages. Yet state subsidies and handouts remain the most common way for large European companies to boost their profits.

British Airways has a long record of filing suits with the European Commission against its European competitors over such matters. Of course, this does not mean that Bob Ayling, Blair's friend at the helm of British Airways, would ever care to give up (or pay for) the advantages he has been given for free by the British state - such as, for instance, the virtual monopoly on the best flight slots and ground facilities at Heathrow airport, for which BA never paid a penny, since everything was paid for before its privatisation.

But on the other hand, it is becoming difficult to work out what comprises a state subsidy and what does not, and which state is to blame. Thus the activity of Alstom-Rail, which is jointly owned by the British GEC and the French Alstom, is mostly devoted to manufacturing the French high-speed train, the "TGV", and the Eurostar trains. Most of its revenue comes, therefore, from orders made by the French and Belgian state-owned railways (the only rail companies in these countries). Of course they also get orders from the Eurostar consortium, which, as Prescott pointed out, is a private company. But apart from the fact that it also includes the French and Belgian state railways, wasn't this consortium awarded several billion pounds worth of prime land by Prescott himself, plus a state guarantee on an additional multi-billion pound loan, in order to build the rail link between London and the Channel tunnel? And isn't that also a disguised state subsidy?

The fastest growing form of state subsidies these days, however, is even more hypocritical. High-profile handouts like the £180m awarded to BMW for the redevelopment of the Rover Longbridge plant, or similar grants previously awarded to Ford and Vauxhall, are not exceptional but common practice, even though the media remain discreet on such issues. In all European countries, state and regional authorities are involved in a permanent beauty contest in order to attract what they call "inward investment" - that is the setting up of new factories in deprived areas. Generous cash grants are offered to potential investors, together with all kinds of tax breaks.

Officially this is aimed at subsidising the creation of new jobs. One might question the price paid for each job - £40,000 each in the case of the Lucky Goldstar semiconductor factory in Wales for instance - which could have been used more effectively to create much needed public sector jobs. But this money is not lost for everyone. Because most of it goes back straight into the pockets of British construction giants, not to mention the numerous subcontractors which will be involved once production begins.

Such a form of indirect subsidy to national companies is not classified as a state subsidy because the main beneficiary is a foreign company. But when is a foreign company really "foreign"? In 1997, for instance, the Scottish inward investment agency subsidised projects which created a total of 14,500 new jobs while preserving 3,000 existing jobs. But half of the total was paid to English companies which were branded as "European inward investors" and, what is more, it was paid partly with European grants. And they told us that it was the Scottish people who stood to benefit from devolution!

In other words, despite all the hot air about "free market", "fair competition", etc.., new tricks have been worked out to ensure that state resources go into the right pockets - those of the capitalist class - just as in the pre-Single Market days. And the politicians who sit on the European Commission are only too happy to look the other way, so long as this system remains the milch cow of the various capitalist classes. And of course, it is the working class and the jobless who are meant to carry on footing the bill, just as in the pre-Single Market days.

Europe's economic concentration

The advent of the Single Market triggered a financial explosion across Europe and beyond. Since 1995, more than half of all international loans made each year across the world have gone to the European Union. Why is that? To finance the building of new railway lines for London's suburbs? Or to pay for the redevelopment of deprived housing estates in the North-East of England? None of these. Most of this enormous flow of capital fed the financial expansion of European companies.

In a few cases, this expansion has taken the form of new facilities being created in other countries. The "Cash Converter" chain of revamped pawn shops, which now spreads its tentacles in most of Northern Europe, is a direct product both of the Single Market and the general rise of unemployment. But Barclay's sign can also be seen in French and German high streets. Although German and French banks are not so easy to find on British high streets. In a recent interview a French banker complained about the "incredible amount of red tape required to set up any retail banking business in Britain" - proof that Blair's boast that Britain is a red-tape-free paradise for companies is no longer valid when British companies want to resist competition from abroad.

But most of the expansion of European companies, by far, has been achieved through merging with or taking over competitors, or just indulging in a shopping spree across Europe - each time paying partly with money taken out of the huge pile of profits squeezed out of workers over the previous decade and partly through borrowing money from the banks or on the financial markets.

British asset stripping companies like Grand Metropolitan have been particularly active in the shopping spree department, spending a lot of capital to buy the best they could find in such extremely useful industries as upmarket fashion, perfume and Champagne production. Meanwhile the two French utility giants Vivendi and "Lyonnaise des Eaux" have bought themselves a large share in Britain, in the water industry, private healthcare and train companies. Likewise the British company Stagecoach has bought a large share of Sweden's coach system, among others, but came up against some problems recently when it was faced with a national strike over wages and working hours - something that British bosses believed was "a thing of the past", as Blair's gospel proclaims.

On the merger side, the number of European giants is shrinking almost month by month, producing a constant flow of new companies large enough to compete with their US rivals, including on the American market. The largest intra-European merger so far was that of Zeneca, the former pharmaceutical arm of ICI, with its Swedish rival Astra, thereby forming one of the world's largest pharmaceutical companies. This should soon be followed by the launch of the world's second largest pharmaceutical giant, a company called Aventis, formed by the merger of the German Hoechst and the French Rhone-Poulenc.

But much larger mergers are in the offing, particularly in the weapons industry, where a triangular battle is being played out between the German, French and British companies to decide who will take over whom. Needless to say, governments are not passive observers in such battles and they do not mince their words when it comes to emphasising what the stakes are. In June last year, Defence minister Robertson admonished an assembly of British arms industry representatives: "The idea of a united European Defence industry is not some misty-eyed Europeanism, it is based on hard-headed industrial logic. If we go into the next century with a multitude of competing national companies and industries attempting to find a place in a global market dominated by giant American companies then the result will be industrial suicide (..) Of course you must look to shareholder value and the rate of return on your capital employed, but I ask you for some vision of where these factors will be in an unchanged future." From this statement, it is obvious that even Blair's ministers can feel frustrated at the short-sighted reluctance of British companies to use the chance that Labour offers them to increase their profits in the long term!

That the real objective is the American market is underlined by a long list of takeovers of US companies by European giants - in the oil industry with BP's takeover of the US giant Amoco, in the pharmaceutical industry with the planned merger of Britain's Glaxo-Wellcome and the US Smithkline-Beecham, in the car industry with the takeover of Chrysler by Daimler-Benz, in banking with the takeover of the US Banker's Trust by Deutsche Bank, in utilities with the takeover of US PacificCorp by Scottish Power, etc..

Of course, there is a price to pay for this industrial concentration and the resulting rationalisation. Duplicated facilities are closed down, research and administration are centralised and production is reorganised. And the cost of all this has to be measured in tens, if not hundreds of thousands of jobs which have been or will be cut across Europe. Not that any economic necessity requires these jobs to be cut. But the current balance of forces in society, the fact that unemployment still paralyses the militancy of the European working class and the tameness of the union machineries, which are proving once again incapable of defending the most immediate interests of the working class - all this makes it possible for the bosses to get away with murder, for the time being at least.

A threat to the working class?

It is easy to point to these latter attacks as evidence of the need for the working class to resist European integration. This used to be the line of most union leaders, from Bill Morris to John Edmonds, that is until the Labour Party started to get into gear for its return to power, after 1992. At the time, they argued that "British industry" had to be defended and their conclusion was that Europe was a threat and protectionist measures should be demanded against European competitors.

Today, ironically, the same union leaders are using the same argument (the defence of "British industry") to reach the opposite conclusion. They tell us that Europe is "good" for British industry and that workers should pull up their socks to be more competitive in Europe by agreeing to so-called "partnership agreements", that is by agreeing to cuts in their working conditions, jobs and real wages.

This is what the reasoning of the TUC's leading lights is really worth! It does not go beyond the short-term concerns of the Labour Party leadership. Up to 1992, opposition to Europe was a way of sounding vaguely "radical" while proposing nothing against the attacks directed by the bosses at the working class. Whereas, today, Morris and Edmonds are in the corridors of power, even if they have to be content with third-rate back seats, and they crawl over backwards to earn their petty privileges.

However, while union leaders have moved on, a whole section of the Left is still clinging to the same old eurosceptic line of reasoning. Yet this is as much a non-starter today as it was in the past. Capitalist exploitation, whether under the Union Jack or the European flag, remains capitalist exploitation, and British bosses are hardly known for being more lenient to the working class than their continental competitors. After all, the British working class had the dubious privilege of experiencing the first massive European shockwave of redundancies, in the 1980s. At the time, there was no question of British companies bracing themselves for European competition. Most of the job losses were due either to the trimming down of state-owned industries, which were being prepared for privatisation, or to private capitalists pulling out of the production sphere and switching to financial activities.

At the end of the day, to believe that British bosses and the institutions that serve their interests might be the lesser of two evils for the working class (the other one being an integrated Europe) comes down to a nationalist fantasy which does not fit the facts. For most of this century, Britain has had more stringent protectionist barriers than many other industrialised countries. Yet, this has never prevented the British working class from having to foot the bill for every hiccup and crisis on the world market which affected the profits of British companies. So why would the British working class be in any way protected from the competition of European or other companies if Britain kept its distance from the European Union?

To draw a parallel, from the point of view of the working class there are no more "good" ways of running the capitalist system than there are "good" ways of running a factory for capitalist profits. If your company decides to merge with another company, it is its choice and you can be sure that the aim is to make more profits on your back. Your problem is to pre-empt any attempt at using this merger as a pretext to cut jobs. If there is a duplication of tasks as a result, it must be the company's responsibility to find a job for everyone, including by cutting hours without loss of pay if it comes to it. Is this an unrealistic objective for workers? Not any more than trying to prevent the merger itself. In either case this requires a fight. Opposing the merger does not involve any gains for workers, it is purely defensive and gives no guarantee that the company will not try to enforce redundancies anyway to cut its wage bill. By contrast, forcing the company to replace job cuts with improved conditions is well worth a fight, and on top of that it is a fight in which workers could win the active involvement of their counterparts in the other merged company.

In most respects, this reasoning applies just as well to the issue of European integration. Within or without Europe, the pressure of the world market ensures that the profit drive of British companies will carry on, and actually probably even more drastically if they cannot rely on privileged access to the European market - where British industry sells more than half of its exports. Within or without Europe, the only decisive factor remains the ability of the working class to fight, with the weapons of the class struggle, in order to change the balance of forces in society. In this respect, there is nothing to choose between one and the other.

Except that, today, the European Union and the Single Market are facts of life. Trying to turn the clock back would be an enormous waste of fighting energy for the working class, in Britain and elsewhere. So if the working class is to fight - and it has no other option in the face of the bosses' profit drive - it could just as well concentrate its fire on the root of the problem - the profit drive itself and the resulting degradation of living conditions for workers and the unemployed.

What do the capitalists want the euro for?

The euro was actually the logical step after the setting up of the Single Market and a necessary condition for its full operation. However the fact that it was finally launched only at the beginning of this year, six years after the Single Market, and that it still only involves 11 of the 15 members of the Union, shows the difficulties involved.

The idea of a single European currency goes back a long way. But it was really put on the agenda by the collapse of the postwar monetary system in the early 70s. Up to that point, all currencies had a fixed value against the dollar, which was itself convertible into gold at a fixed value. However, this came to an end when a massive run on gold was caused by US inflation due to its huge expenditure in the Vietnam war. Within a year the various currencies were left to "float" against one another - that is their exchange rates were determined by the market on a day-to-day basis.

This situation created havoc in Europe where the European market was the only export market for most companies. This led in 1972 to the first attempt at putting some order among European currencies - the so-called European "snake". This failed owing to its rigidity. The Bank of England participated for just two months! Subsequently the Italians quit in 1973 and the French the following year. In 1979, another attempt was made with a more flexible version of the "snake", the European Monetary System (EMS). At the same a new financial currency was launched, for accounting purposes, the European currency unit (ECU). Currency rates were backed by a European fund to which member states contributed 20% of their gold and dollar reserves. Not all European countries joined the EMS however. The British government of the time agreed to sit on the board of the European fund, and use its services to defend the pound, but refused to join the EMS. Greece did the same, while Spain and Portugal stayed completely outside the EMS for the time being.

By 1989, on the basis of the EMS experience, steps were taken to turn the ECU into a single currency which was to come into operation in 2002. The project was approved by all EC states in the Maastricht treaty in 1991. This time, the British government was onboard. However, by the Autumn of 1992, the recession in Europe led to a wave of currency speculation. The pound was the first victim, followed by the Italian lira. Both governments chose to drop out of the EMS rather than agreeing to a formal devaluation. This did not stop the ECU project, however. By May 1998, the European Central Bank (ECB) was set up in Frankfurt while the exchange rates of the participating currencies were locked. And on January 1, this year, the euro was launched.

In this final phase, 11 EU countries were on board with Britain, Denmark, Sweden and Greece remaining outside. But at its request the British government was offered a seat on the board of the ECB and the odds are that the pound will eventually go down the same road as the other European currencies - that is into the dustbin of history, where it belongs like all such outdated symbols.

Whatever the rhetoric - and there is no shortage of it - devoted by politicians here to their "loyalty to the pound" and their concern for "British interests", the reality is that these two slogans are contradictory. "British interests", meaning in the politicians' language the interests of the British capitalist class as a whole, require that the pound be dumped and Britain becomes fully part of the euro-zone. Those politicians who have half-a-brain know it all too well. Any idea that British companies could carry on operating within the Single Market on an equal footing without joining the euro, is a non-starter. The very existence of the euro will create links between the economies that use it, which will inevitably exclude those that do not. Besides, the irony of this situation will be that, in order to stick to the pound, the British government will effectively make it devoid of any significance outside Britain. Indeed, British companies already have to trade mostly in dollars with their partners outside Europe. But if they want to carry on trading within the Single Market, they will have to trade in euros, not in pounds.

These are the negative reasons over which British capitalists do not have much of a choice. Among the positive reasons are the very same aims that were behind the setting up of the Single Market - that is to end the limitations on trade imposed by national boundaries. Because these limitations are partly due, precisely, to the existence of different currencies and monetary systems. The advantages of a single currency at the scale of a continent are illustrated by the US dollar. Not that this was achieved painlessly. It took the bloodshed of the American Civil War in the last century to weld the USA into its present form. But thereafter the dollar helped create a single, unified market giving US companies the possibility of developing production on a scale that dwarfed anything in Europe. And this is still one of the major factors behind the US economic strength today.

Another positive reason for British capitalists to want to join the euro is the other factor that makes the US economy so strong - the role of the dollar in the world economy. The London Foreign Currency Exchange may be the largest in the world, but it trades relatively few pounds, whereas more than 40% of its turnover is in dollars. Likewise, dollars are used in nearly 50% of international trade transactions. More importantly, dollars make up nearly 60% of the foreign exchange reserves held by the world's central banks. This latter figure implies that whenever the real value of the dollar goes down, due to inflation for instance, the real value of 60% of the world's total stock of money goes down in the same proportion. This is the main mechanism through which the US capitalist class can export US inflation to the rest of the world and carry on living off the enormous debt of the US state - an unattainable dream for the European capitalist classes so far, but one that they hope will come true at some point, when the euro replaces a significant amount of dollars in foreign exchange reserves.

Why the resistance to the euro in Britain?

If there are such incentives for British companies to join the euro-zone, why then have Tory and Labour governments kept out of it so far? In any case certainly not because of the anti-euro campaigns mounted by sections of the media - the Sun in particular. On the other hand these campaigns have been a useful camouflage during the last period, by helping to mask the differences, ambivalence and tactical moves within the British capitalist class.

One thing is for sure, whatever their differences - whether pro- or anti- Europe - British capitalists want to have their cake and eat it. The only difference between the attitudes of the europhiles and the eurosceptics is over the timetable and extent of the concessions that should be demanded from the other EU members. Whether Britain will eventually join is taken for granted, the question is on what terms. And it is this need to represent all points of view as much as he is able that explains Blair's contortions and zigzags as much as it did Major's before him.

Some sections of the British bourgeoisie do have preoccupations which are different from those of their counterparts in other EU states.

For instance, of all the European bourgeoisies, the British is probably the most internationalised. On the whole, British companies make a greater proportion of their profits outside the home country than European rivals. To some extent this is due to the legacy of empire as well as the more derelict state of British industry. A conglomerate like Lonrho, with extensive mining interests in Africa, grew rich in the decades preceding independence and was in a strong position to bargain with the newly independent states. Even today it depends on the weight Britain exerts in countries like Zimbabwe, Zambia and Mozambique. Likewise for Rio Tinto Zinc (RTZ) which extracts in Australia, Papua New Guinea, Namibia and South Africa. ICI, another British giant which developed on the back of the empire, still gets 90% of its revenue from outside Britain.

Three of the big four British banks (with a combined market value of over £130bn) all have extensive overseas interests - Barclays in Africa in particular, Lloyds in South America. But those who have noted that the Midlands Bank has recently disappeared from the high street to be replaced by HSBC, may not know that this is the former Hongkong and Shanghai Bank, which remains a dominant player in the Far East with more than 70% of its assets outside Britain, as is also the case with Standard Chartered, another of the Big Four.

It may seem in the boardrooms of such and other companies, that due to their interests being mostly located outside Europe, they will need special guarantees to ensure that the euro-zone does not constrain their business.

Others may fear that Britain's so-called special relationship with the USA could be jeopardised by its closer integration with Europe. Many asset managing and investment firms do most of their business thanks to the regular flow of capital backward and forward between the USA and Britain. Others, such as the asset-stripping conglomerate Hanson, has been an important channel for British industrial investment to the USA - which may explain why Lord Hanson was behind one the big advertising campaigns against the euro in the British papers. Likewise Rupert Murdoch's US citizenship may be one of the reasons behind the Sun's obsession against the euro - the others being his financial assets in the US and his crude hard-selling demagogy in Britain.

Among the issues on which British financial companies would certainly want to have guarantees before Blair makes any commitment to joining the euro is that of taxes. The suggestion made by European Commissioners of a 20% tax on financial profits earned by foreign investors sent shivers down the spines of City top-brass. Indeed, since the 1970s, the City's affluence is largely due to the fact that there is no tax on such profits - which makes the City a tax haven for scores of American and Japanese finance companies in particular. Following a complaint made by some British banks that foreign investors were moving funds to Switzerland, Brown made a counter-proposal in April - that this tax should only apply to blocks of bonds worth less than £25,000. In other words, very rich speculators would get away tax-free and the City would retain its most profitable customers. But whether the other European governments will agree to this, particularly that of Germany, which has clearly the ambition of turning Frankfurt into a future contender to the City's position as Europe's largest financial centre, is another question.

Likewise, the proposal to harmonise corporation taxes across Europe has received a cool response in London - which has one of the lowest. On the other hand British capitalists know very well that some degree of tax harmonisation is necessary across Europe, otherwise a maze of different tax systems will slow down the flow of capital and perpetuate the same kind of obstacles that the Single Market and the euro are intended to remove. So ultimately, the real issue is one of bargaining over how to join the euro rather than opposing it.

Is the euro "a threat to democracy"?

To ask the question is to imply that under capitalism there can be such a thing as a "democratic currency". In the sense that it ties the fate of millions of people to the ups and downs of speculative capital, yes, the euro is a threat. And in the sense that these ups and downs are in no way controllable by the population. But it is certainly no more of a threat than the pound, with its recurrent hiccups, chronic overvaluation and sudden fall and rise.

On the other hand there are people who take a different view. Self-made millionaire and eurosceptic, Paul Sykes - founder of the so-called "Democracy Movement" - claims that the introduction of the euro marks "the largest economic risk" for Europe that has ever arisen and that once in there "the peoples of these nations will no longer be able to vote out of office those who are in charge of their economies, i.e. the bankers in Frankfurt". And, strangely enough, this view is shared by most of the British Left which singles out the European Central Bank (i.e. the "bankers in Frankfurt") as the most "undemocratic" feature of the euro.

But is the European Central Bank (ECB) any less accountable than the Bank of England or, for that matter, the Banque de France or the Bundesbank? Let alone Barclay's and HSBC, which are nevertheless powerful enough to decide the job prospects of millions of waged workers? Leaving aside the private banks, how can a central bank be deemed "democratic", whether it is independent of the government (as the bank of England is since June 1997) or not? Until it was nationalised in 1946, the Bank of England operated as a private bank i.e. trading at a profit. Since then it has had a governor and representatives on the board drawn from top banking circles who balance out the leading interests in the City. Together with the Treasury this narrow clique has tried - often unsuccessfully and sometimes disastrously - to regulate the country's economy. But in whose interest? Inevitably in the interests of Britain's biggest businesses.

The point about the euro is that it can only operate as a single currency if there is a single policy on interest rates, public debt and inflation across the whole of the euro-zone. But, say the europhobes, the British government will no longer be able to regulate its own budget? It will no longer be able to play with interest rates in order to "control inflation"? What they forget to say, of course, is that whenever British governments move to "bring inflation under control", it is always aimed at making the working class foot the bill for the hiccups of the system, so that the capitalist class does not lose a penny.

The anti-euro Left accuses the ECB of wanting to impose low budget deficit, low inflation and low interest rates "undemocratically", through the convergence criteria adopted at the Amsterdam conference. This is true, but isn't this the very same policy which has been implemented in Britain for many years, by what these comrades consider apparently as the more "democratic" British institutions?

Besides, it would be pure nonsense to claim that there is anything wrong with aiming at low inflation and low interest rates. After all those who always foot the bill for inflation are working people and the jobless whose wages and benefits lag far behind. As to interest rates, the lower they are, the smaller the share of the social income which goes straight into the banks' pockets. Why should there be anything wrong with that?

What generates monetary instability and hence inflation is the fact that the money printed by the state is not counter-balanced by an equivalent amount wealth generated in the productive sphere. Therefore budget deficits are a threat to monetary stability. This is an unquestionable fact.

But what is questionable is how governments resolve such problems. They claim that the only way to reduce their budget deficits is by reducing the standard of living of the working class, cutting jobs and services in the public sector, etc.. To add insult to injury, what is saved through these attacks against the working class is used to increase handouts to the capitalist class, by means of tax cuts and larger subsidies. Meanwhile the public deficit stays as large as ever. And this is the policy that governments everywhere have been carrying out for two decades or more.

As in the past, eurosceptics and much of the Left got into the habit of blaming everything on the European Community, today it is the euro. In reality it is the economic crisis itself and the fact that governments choose to hand out ever more subsidies to make up for the profits potentially lost as a result, which makes the situation intolerable for workers.

Of course with the crisis set to continue, politicians can be expected to use the euro or anything else as a pretext for continuing their attacks against the working class. Just as, for instance, when Labour devalued the pound in 1967, it was the "gnomes of Zurich" who were accused by Prime Minister Wilson. Or in 1992 when it was the Bundesbank which, according to Major and Lamont, caused the pound to crash out of the EMS, etc.. In that respect the euro and the creation of the European Central Bank may provide governments with a convenient excuse to cover their backs! But why should we help them to dodge their responsibility by turning the ECB into some sort of bogey man?

In fact what is undemocratic about the euro is what is undemocratic about capitalism in general. Although workers create all the wealth in society they and the population in general do not have the slightest control over how this wealth is spent and how the economy is organised. This falls to a tiny number of capitalists who make their decisions behind closed doors and are accountable to no-one. This rich men's club is much more powerful than any elected government and bends every government to its will. Is their domination over the British economy and their control over the lives of millions of British workers more "democratic" than the euro and the ECB?

Ultimately the only guarantee of democratic control, whether within Britain or within the euro-zone, is for the working class to take its interests into its own hands and bring those in power to account - the bankers as well as the politicians.

"Undemocratic" institutions?

Like the ECB, the EU's institutions are blamed by eurosceptics for being undemocratic. But what are these institutions, which are supposed to threaten "British independence" according to them?

The 20 members of the Brussels-based European Commission (two of whom are in any case British) preside over a budget for 15 member states which is only about three-quarters of the amount spent by Britain's Department of Social Security. Britain's entire contribution is only £9bn, most of which is "given back" in one form or other. Its net contribution in 1997 was only £1.49bn - more, it is true, than France which benefits proportionally more from the Common Agricultural Policy, but less than little Holland and much less than Germany (£7.14bn).

Of course much ridicule has been heaped on Brussels for stipulating the size and shape of fruit like apples or bananas. Decisions at the European Court of Justice in the Hague which have reversed English law on several points (for instance, banning or limiting the use of corporal punishment against children both in schools and at home) have been condemned as an "insult" to English "justice". But the accusers conveniently forgot to mention that British officials or an English judge are always involved in such decisions.

In any case, the real decisions at Brussels are taken not in the European parliament - which is the only European elected body but has no power - but at the Council of Ministers. This is where the EU's foreign and finance ministers decide the agendas which will be implemented by the EU commissioners and the European parliament. And ultimately the real decisions are up to the half-yearly "summits" of the prime ministers of all 15 member states.

However, the EU could not have existed for so long without evolving mechanisms designed to overcome the rivalries between the different member states. Up to 1986, the rule was that a unanimous vote was required for a decision to be made. This paralysed decision-making but was the only procedure on which everyone agreed. Then new rules were developed. They introduced more qualified majority voting but at the same time accepted "variable geometry". While previously the law of the EC had to be applied uniformly to all member states, new legislation can be applied differently and at different times in different member states.

Thus British customs and immigration officers continue to inspect the passports or ID's of EU members, because for the time being Britain has opted out of the agreement abolishing internal borders; Britain and Denmark have their own opt-outs enabling them to stay outside the euro for as long as they wish; and there are so many exemptions and partial opt-outs concerning VAT across Europe, that it amounts to no legislation at all.

Far from individual countries being forced into the Brussels straitjacket, it is rather the other way round. Those who make the actual decisions on a European-wide scale, are not unaccountable because they are unknown EU functionaries operating from behind the scene - they are unaccountable because they belong to the various governments of member states, which are themselves unaccountable in their own countries.

That corruption should exist in the European institutions, as the media revealed earlier this year, should not come as a surprise. After all it permeates British institutions, so why not those of the EU? But has anyone heard of a British government resigning as a block over a corruption scandal (and Blair has had a few over the past two years) as the EU Commission did recently? And why didn't the British media demand the EU Commission's resignation when it was revealed a few years ago that it had concealed facts about the BSE catastrophe? Did it have anything to do with the fact that the British government had itself an even greater responsibility in the BSE scandal and should not only have been forced to resign but submitted to criminal investigation?

Democratic rights in Europe

In the draft document which preceded the signing of the Single European Act it was stated that the EC should be an area "in which persons, goods and capital shall move freely under conditions identical to those obtaining in a Member State." In essence the aim of the single market should be a "Europe without borders". From the point of view of big business this has more or less been achieved. But what about from the peoples' point of view?

For a citizen of an EU member state the freedom to travel and settle wherever he pleases is unrestricted, provided he is self-financing. But if he is not self-financing - and unemployment is probably the major reason why people might want to seek work abroad - there are the added difficulties of a foreign language and different rules. In the poorest countries, there is only a limited welfare system, if any at all, and in the richest, EU citizens who happen to come from Southern Europe are often confronted with the racism of welfare officials.

As for immigrants from outside the EU, and particularly if their skins are not white, gaining even temporary residency status in an EU country is usually a nightmare. For these immigrants, entry into the EU is regulated by the Schengen treaty, signed in 1985. Its principle is that non-EU citizens have to get an entry or residence visa for "only" one of the countries where the Schengen treaty applies, and with this visa they can travel anywhere in the Schengen zone and enjoy the same status.

This sounds very simple and liberal. But in fact the implementation of the treaty went together with a drastic tightening of the unwritten rules followed by immigration officers to grant entry and residence visas. So that, while the same treaty ended border checks within the Schengen zone itself, it created around it a much tighter barrier, backed up by a sophisticated computerised database used by all the police forces involved.

Despite this, Thatcher was not prepared to go along with the Schengen treaty and insisted on Britain opting out ostensibly - to use her own words, as "a matter of common sense ... to protect our citizens from crime and stop the movement of drugs, of terrorists, of illegal immigrants". Subsequently Blair renewed the British opt-out.

In fact there is nothing to choose between Britain and the rest of the EU in terms of the treatment meted out to non-EU citizens, particularly refugees from the Third World. Whether in the Campsfield prison camp, near Oxford, or in the "illegal immigrant regroupment centre" at Paris-Charles-De-Gaulle airport, there is the same revolting contempt for the misery of refugees whose plight is often caused by dictatorial regimes which are armed by European countries. "Fortress Europe" is a relatively free land for a better-off minority of the planet's population, but it is a no-go area for the vast majority - for those who come from impoverished countries which European companies have plundered freely for decades if not centuries.

Social rights for EU citizens do not match the stated intentions either. Instead of the EU establishing a benchmark, based on the most advanced EU country in a particular area, and then providing a framework and a timescale for improvements, each country does its own thing. Thus whatever the field of social policy, there are huge discrepancies between the best and the worst instances.

The situation of women is always an accurate measure of social development. The gap between men's and women's earnings is smallest in Sweden, larger in France and much larger in Britain, which fares worse than some Third World countries. The abysmal position of women in Britain is, partly at least, a reflection of the lack of child provision which forces many women into menial, part-time jobs. Despite all the hot air about Equal Opportunities, the condition of women in Britain mirrors the very large class divide, probably among the largest in Europe.

The right to abortion, on the other hand, does not exist in Ireland. It is severely limited to a few cases in Spain and Portugal. It is tolerated in practice, but still formally illegal in Germany and Belgium. And, of course, in every country, it is conditional on the state of healthcare provision (the biggest obstacle in the case of Britain) and the willingness of the medical profession (which is often a problem in Italy, for instance).

A united Europe?

The most conspicuous shortcoming of the EU is that it does not cover the whole of Europe, not even most of it in fact. Switzerland has cautiously remained out of the EU, thereby leaving a gaping hole at its very heart. In the North, Iceland and Norway are still outside with no indication that they intend to join. None of the countries which made up the former Yugoslavia are part of it either - neither Serbia, of course, which is being bombed into ashes by American, French and British bombs, but not even Slovenia, Croatia or Macedonia. And although Turkey and most of the former Eastern European countries have applied for membership, none of them has been included so far. As to Albania, its government is trying to trade the free use of its land by NATO troops against a promise to be allowed into the EU.

As the EU stands already, there is a huge 5 to 1 gap between the wealth of its richest member (Luxemburg) and its poorest (Greece). And even this figure misleading, because it conceals the much wider gap between the poorest and the richest regions. But once the EU is finally extended - if it is ever - to all the countries which have applied for membership, the gap between the richest and the poorest will be 30 to 1, without even taking Albania into account.

Most of the poorest regions of the future European Union are rural. But they will not benefit from the same relatively advantageous agricultural subsidies that were available to the present EU members. In its discussion document, Agenda 2000, the EU calculated that to extend the existing level of provision offered by the Common Agricultural Policy to include Eastern European countries would require a doubling of the present budget. This has been rejected in favour of maintaining current budget levels. So the new aspiring member states can expect to gain very little in direct financial terms from joining the EU. On the other hand, as has been the case in every other EU country, the CAP - which benefits mostly the larger and best equipped farms - will accelerate the destruction of the poor peasantry while lining the pockets of the agro-business.

Will time eventually reduce the gap between the richest and the poorest EU member states? If the capitalist crisis carries on (and there is no indication that it won't) and even more so if it gets worse, the odds are that this gap will actually increase. In the same way as the poverty divide between the South-East of England and the North- East has increased over the past decade, at least for the working class and the unemployed. On a European scale, the capitalist classes of the poorest countries will probably benefit from their integration into the European Union, as it will allow them to act as the local trustees of rich European companies. But the poor populations themselves will only gain, at the very most, the "privilege" of being over-exploited by these companies instead of barely surviving by toiling their fields.

In that respect, joining the European Union will accelerate the complete integration of these countries' lives into the world market - a process which would have taken place anyway. And by the same token, it will increase their exploitation by the imperialist bourgeoisies.

As to the respect of the rights of peoples by the European Union, it is also formally part of its charter. But the dramatic break-up of the former Yugoslavia has shown how little this meant for the EU leaders.

Thus the EU gave its blessing to the declaration of independence first by Slovenia and then Croatia - the German government in particular, played a prominent part in this, obviously seeing it as a way to extend its own sphere of influence. Croatia's leaders, being confident of a future in Europe's backyard, then took steps which led to the civil war with Serbia and its overspilling into the Bosnian catastrophe.

The result is well-known - 350,000 ethnic Serbs were "cleansed" from areas which are now part of the non-Serbian republics, and many of them are still living in refugee camps alongside the Danube, surrounded by the hostility of the local Serbs who consider them as unwelcome immigrants. Meanwhile, the EU provided its backing to the two regional strongmen who were responsible for this disaster - the Croatian president Tudjman and his Serbian counterpart Milosevic. That is, until finally it was considered that Milosevic had overstepped the mark by creating the risk of another explosion, this time in Kosovo. Then, the EU leaders joined in with the US government to bomb Serbia, Kosovo and Montenegro. However, this brief reminder of their past record in the Balkans makes their claim to be upholding the rights of the Kosovan Albanians a corrupt and hypocritical farce.

The EU and the working class

Under the previous Major government, British officials negotiated an opt-out to the EU's proposed Social Chapter which was supposed to improve the position of workers. This was seen by a section of workers here as yet another denial of their rights by the Tories. And when the Labour government opted back in, there were some expectations as to what this could deliver for the working class. All the more so as the union machineries had been actively promoting the implementation in Britain of the Social Chapter as a way out of the Thatcher years.

Of course, there are areas in which EU regulations could provide some improvements - on environmental issues, in the labelling of food, etc.. But these are secondary changes which cost little and benefit the rich more than the poor. More importantly, they do not result in a significant drain on profits.

In the case of the Social Chapter, which could potentially affect company profits, one can be sure that the European institutions will not make more concessions to the working class than the different governments are prepared to make. This is why there has been so much watering down in the initial content of the Social Chapter, in response to the pressures of the various European governments (and not just the Tories in fact) that it has become fairly meaningless.

Predictably, therefore, Blair's recent opting-in has not resulted in an improvement for workers. In fact, it has produced another devious attack on their conditions. This is not altogether new. In the past, a European ruling against sex discrimination for retirement age - which should have allowed men to retire at 60 like women did - was translated by Tory ministers into a new retirement age of 64 for everyone. A similar trick was played by Blair's Labour ministers when, on October 1st last year, the European working time directive was implemented in British law.

The resulting bill contained several positive aspects, such as compulsory paid holidays for all workers, including temporary and part-time workers. However, since there was nothing in this law which prevented employers from paying themselves back on workers' wages by reducing their hourly rates, it seems that quite a few small and medium companies resorted to that sort of dirty trick to recoup the cost - with no possible redress for the workers concerned.

The main thrust of the bill was that it made it illegal to require anyone to work more than 48 hours in a week. At the same time, there were also a number of regulations concerning breaks. But on the one hand there was such a long list of partial or total exemptions from its provisions, that it was not applicable to the main industries in which long hours are most prevalent - all transport workers, workers engaged in sea fishing or other work at sea and doctors in training were totally excluded. On the other hand, even in those industries where the 48-hour limit was applicable, it introduced through the backdoor a number of nasty devices. For instance, for the first time in British law, it introduced the concept of annualised hours - the 48-hour maximum was to be calculated not every week, but in average over a period of 17 weeks which could be extended to a year through collective bargaining (something that the GMB leader John Edmonds promptly proposed to several companies, which of course felt much obliged). In other words, according to this law, there was nothing wrong with asking workers to work 60 hours for 6 weeks, 42 hours for 2 weeks and 26 hours for 5 weeks. This was just introducing surreptitiously the kind of flexible working practices that British companies have been trying to force down the throats of workers for some time, without too much success so far.

Moreover, the bill went out of its way to show employers how they could bypass it. They only had to get their employees to sign once and for all a waiver which allows them to ignore the 48-hour limit. Of course, this was quickly spotted by companies, and contractors in the building trade went round their workforces giving them the choice between signing the waiver or looking for a job elsewhere. It was even reported that some employers are now including a waiver in the employment contract of their new recruits.

There is nothing illegal in all of this, since the bill does not say otherwise. Nor does this bill formally contradict the European working time directive - which is deliberately very vague - at least not until a court case is brought in front of the European Court of Justice, and won, which could take many years. In the meantime, British employers can carry on imposing long hours on their workforces and flexibility into the bargain!

But in any case, the fact is that, with or without the Social Chapter, there is a striking convergence between the policies of the European capitalists as regards the working class. In that respect, they do not need European directives to coordinate their actions. Greed and the search for profit do it just as effectively. Over the past decade, in all European countries the share of wages as part of the national income has been reduced, while the share of profits increased by the same amount. This is partly due to the direct impact of unemployment and the resulting shrinkage of the overall wage bill. But it is also the result of the impact of unemployment on the ability of the working class to defend itself - resulting in lower wages and more precarious jobs. In this context there is very little risk that the bosses would meet significant resistance - or so they think. Thus, with Blair's help of course, British bosses feel they can use a law such as the 48-hour law to impose flexibility and long hours on workers, just as in France, the recent 35-hour law introduced by the Socialist Party-led government is being used to introduce flexibility and end overtime premiums.

The working class, in Britain as well as in the whole of Europe, should see the EU, its Social Chapter, the euro and all the related institutions, as mere instruments to serve the interests of the capitalist classes. In that sense they can only be instruments against the working class. But no more and no less than the various national political and economic institutions of the capitalist class.

This capitalist Europe has certainly nothing to do with the Socialist United States of Europe that a proletarian revolution could aim to build. A proletarian revolution would bring down borders, not to allow more freedom for the capitalists to make profits, but to allow the rational utilisation of all resources across Europe through economic planning and the sharing out of social wealth among all its constituent parts under the democratic control of the population. It would aim to build a Europe based on the free association of peoples, respecting their cultural rights and their right to self-determination if it comes to that, instead of a machine aimed at dominating peoples despite and against their will. And of course, it would aim to use these Socialist United States of Europe as a stepping stone towards establishing a communist society on the entire planet, instead of using it as a weapon in the economic war against the USA or Japan on the world market.

But in the meantime, the EU, as it is, may present some advantages for the working class. It should facilitate the mixing of populations and allow the European working classes to develop links with each other: not the kind of bureaucratic links that trade union officials love so much when they demand the setting up of Europe-wide committees in companies, but living links through hundred of thousands of workers who will have lived among their class brothers in other countries, discovered their traditions and learnt their language.

But it is only the battles of the working class which can be decisive for its future, whether they take place in Britain alone, or on a larger scale - not the developments or misadventures of the EU. It is the present unfavourable relationship of forces which paralyses our class. This needs to be reversed. And if it started to be reversed here, in Britain, if the working class began to show its collective strength again by challenging the right of the capitalist class to draw its profits from the increasing poverty of society, then the bosses' European construction might indeed backfire, by uniting the European working classes against their common exploiters.