Default and exit from the eurozone: a radical left strategy

Costas Lapavitsas

Abstract


The world crisis that began in 2007 has summed up contradictions, tensions and imbalances accumulated in the course of the financialization of capitalism. The crisis originated in mortgage lending to the poorest and most marginal workers in the US; it assumed a global dimension because of securitization and related innovations by financial capital; it became a recession that was exacerbated by the relative weakness of productive capital in the US and the UK; it affected developing countries severely through collapse of exports and tightness of credit; it then turned into a crisis of private and public debt in the eurozone, revealing the unbalanced character of the European Union (EU) as that is reflected in its common currency.

The eurozone crisis is thus an integral part of the world crisis of 2007 which is an event of rare historical significance in the development of capitalism. State intervention in 2008-09 pacified the banking crisis and ameliorated the recession in the US and other parts of the developed world. But the eurozone crisis, which burst out in 2010 and became progressively worse in 2011, showed that the malaise of financialization is deep and structural. As peripheral eurozone states approached default, the prospect of a renewed and global financial crisis could no longer be discounted. A generalized banking crisis, in turn, threatened to usher in economic depression.

The eurozone has become the weak point of the world economy for reasons associated with its exploitative and unequal nature. For the same reasons, the attempt by several European powers collectively to create a new form of world money has effectively failed. The euro in its current form is untenable and might even collapse altogether. The economic, social and political unrest that has emerged offers to the left the opportunity to shift the balance of forces against capital and in favour of labour. For the left to succeed, however, it must propose radical solutions for the crisis. This requires a break with the hold of Europeanism that has dominated left thinking for decades.

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