Monetary Union and the Transatlantic and Social Dimensions of Europe’s Crisis

This paper really shows the contradictions of European monetary policy and its social fiscal policy. On the former side, we see a belief in capitulating American capital dominance via EMU competition in capital markets, while in the latter, we see what the authors call welfare state retrenchment as pensions and benefits are cut to meet elements of SGP targets where seen as economically necessary. What’s particularly enlightening about this paper is that is shows the futility of the EMU becoming a capital market dominator. It shows that modern capital and financial markets are really creatures of the US state, created via dollar hegemony and the encouragement of export-led growth and financial preeminence. Cohen’s work on the Euro shows this to be the case, as even European firms and investors rely more on dollars than on Euros. Thus by the EU pursuing this neoliberal strategy of creating Euro-based financial markets, they are relying on an economic fallacy which is subsequently damaging internal business and economic growth and destroying the European sociality present particularly in Germany and France (as in the case of local banking sectors in Germany and decentralised welfare provision in France). Instead of multiple economies of scale being developed, ranging from the local to the European level, with manufacturing, alternative energy and forms of services and finance existing at all levels and freed markets with a maintained European polity and sociality developed through decentralism, the EU is encouraging state-led capital growth with its attendant entry barriers (as is the case of the US) and entrenching poverty-inducing specialisation throughout Europe as well as destroying conceptions of collective bargaining, thus commodifying the labour market (again in a US style manner). In the end, Europe is maintaining a reliance on US capital hegemony (whose days seem numbered) while at the same time undermining its particular advantages in industrial relations and innovation. Alas, the EU and its constituent states have combined to subsidise, and effectively destroy, what little economic advantages it has. A coercive body killing an economy, who’d have thought it. (by the blog author)

by Alan W. Cafruny & J. Magnus Ryner


Scholarship on the European Union (EU) has been overtaken by events. The ‘non’s’ and ‘nee’s’ on the Constitutional Treaty, two decades of economic stagnation in ‘core Europe’, welfare state retrenchment, the increased propensity of Europeans to vote for populist mavericks, the inability of political elites to respond credibly to these phenomena, and the failure of the common foreign and security policy as exemplified by the Iraq War contradict euphoric academic assessments.

EU studies have consistently sung the praises of the Union and its project of a common currency. The European Monetary Union (EMU) is widely seen as spearheading a ‘European challenge’ to the United States. For Kupchan, ‘Europe is arriving on the global stage. Now that its single market has been accompanied with a single currency, Europe has a collective weight on matters of trade and finance comparable to that of the United States.’1 Others see the EMU as part of a successful ‘self-transformation’ of the ‘European social model’.2 But when the ‘basic force’ and formalistic assumptions about power are abandoned, and a structural conception is adopted, different conclusions emerge.3 The EU’s aspiration to build a monetary union to promote competitiveness, sustained growth, regional autonomy and social cohesion is self-limiting because the Maastricht design of the EMU is inherently connected to a neoliberal transnational financial order that displaces socioeconomic contradictions from the USA to other parts of the world, including Europe. Europe’s subordinate participation within this order pre-empts the possibility of resolving structural problems of post-industrial or, as we prefer, post-Fordist society in a manner consistent with Europe’s social and Christian-Democratic social accords. Economic stagnation, uneven development and the widening gap between new forms of economic governance and social citizenship amplify legitimation problems and political conflicts, with adverse effects on the EU’s political ability to mobilise a counterweight to the USA.

After a conceptual discussion clarifying central terms, including crisis and American, in addition to neoliberal, hegemony, we account for EMU’s embedding in American ‘minimal hegemony’. We then demonstrate the lack of correspondence between the design of the EMU and European long-term growth prospects (although this is not to say that policies do not serve the interests of particular – and powerful – European class fractions and regions). Finally, we outline the attendant socially disintegrative implications. Focusing on France and Germany – EMU’s core states – we account for a crisis of representation resulting from a politics of welfare state retrenchment that is counterproductive in its objective to revive growth in the European economy.

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