The European Union is an enormous experiment in capitalist development. Following its expansion in 2004 it now includes every significant state in Western Europe except for Switzerland and Norway, together with Greece, the bigger part of Cyprus and Malta around the Mediterranean and a line of eight states which emerged from the collapse of the Soviet Union stretching from Estonia on the Gulf of Finland to Slovenia in the north of the former Yugoslavia. However, during 2005 the moves towards "deepening and widening" the European Union, have stuttered significantly to the consternation of the bourgeois ruling class across the area.

The rejection of the Constitution in the French and Dutch referendums, the failure to agree a medium-term budget and the pressure on the euro including rumblings from "rogue elements" such as the Northern League in Italy are symptoms and reflections rather than causes of a crisis.

To understand the nature of the crisis, it is first necessary to locate the development of the EU in its historic context. Its main trajectory and development can be split into three parts, each mirroring the major segments of the last 60 years of imperialist development. From 1945 until the early 1970's, Europe experienced a period of reconstruction and capitalist accumulation. Since that time, the world economy has moved through its longest period of unresolved, crisis with a significant break at the end of the 1980's marked by the collapse of the Russian-dominated imperialist bloc.

Historic origins of the European Union

Immediately after the end of the Second World War the ruling class started to draw maps (literally and metaphorically) to allow them to best exploit the post-war conditions.

The imperialist Russian state had grown like a cancer out of the defeat of the revolutionary wave that had ended the First World War and emerged from the second bloodbath as the undisputed military power in Europe. A series of deals with its Anglo-American allies had granted it a sphere of influence which was to crystallize into an economic (Comecon) and military (Warsaw Pact) bloc at the service of the Russian state and ruling class.

The bourgeoisies to the west of the emerging "Iron Curtain" did not "enjoy" the benefits of the type of hegemonic domination that the Soviet Union exercised in the East. Whereas Russian military force and that of its lieutenants was used in East Berlin, Hungary, Czechoslovakia and Poland, the control exercised by the US over the Western half of the continent took a different form. Once Greece had, with the agreement of the Russian rulers, been bloodily embedded in the Western bloc, the US thereafter were able to maintain their domination with sizeable military units staying in their bases and capitalism being safely restored and administered by local capitalist political parties (including the Stalinist mis-named "Communist" parties for a few years from 1944 onwards).

Following the defeat of Germany and Japan, the settlement in Europe was overshadowed by the repercussions of the collapse of the Anglo-American-Russian alliance. In the US-dominated sector the bourgeoisie sought out solutions to defend their local interests and assure their US paymasters.

In September 1946 Winston Churchill, then leader of the parliamentary opposition in Britain, delivered a speech declaring that:

... we must recreate the European family in a regional structure called, it may be, the United States of Europe. The first step is to form a Council of Europe [formed in 1949 - KT]... In all this urgent work, France and Germany must take the lead together. Great Britain, the British Commonwealth of Nations, mighty America, and I trust Soviet Russia - for then indeed all would be well [but an increasingly unlikely wish even by 1946 - KT] - must be the friends and sponsors of the new Europe.

Churchill's call for France and Germany to "take the lead" took visible shape in 1950. The process is accurately described with by academic commentators on the process.

On 9 May 1950, Robert Schuman, France's foreign minister, outlined a plan to unite under a single authority the coal and steel industries of Europe's bitterest enemies, France and Germany... the plan... was developed by Jean Monnet [a prominent bureaucrat in the pro-British section of the French bourgeoisie during the Second World War, main leader of the Commissariat assuring the restructuring of French capitalism after the War, later to become the first president of the ECSC (European Coal and Steel Community) High Authority which developed into the European Commission - KT]. European governments would start with two industries essential to the making of war, coal and steel, then add other economic and political sectors until all major decisions were taken at a European level.

ECSC came into being in 1952 with the Benelux countries (Belgium, Netherlands and Luxembourg) joining Italy, France and West Germany (the eastern half of Germany was to remain in the Russian dominated bloc until 1989/90) as the founder members.

As world capitalism entered a period of prolonged accumulation the "European" vision of Churchill-Schuman-Monnet developed as the six member states agreed to a series of treaties, trade agreements, economic structures and transnational bureaucracies, which by the end of the 1960's had become the European Economic Community, colloquially known in Britain as "the Common Market".

Geographic growth and economic crisis

As the period of capitalist accumulation came to an end early in the 1970's the European project entered a new phase of geographical expansion incorporating six further states from the US-dominated bloc. Denmark, Ireland and the United Kingdom joined in 1973, Greece in 1981 and Spain and Portugal at the start of 1986.

As the bourgeoisie struggled to chart a way through the waves of economic crisis, the expanding "European Community" became a vehicle for attempted solutions based on active economic intervention by the national states and their new transnational arrangement. A system of subsidies had underpinned the farming sector since the 1960's and were supplemented during the 1970's and 1980's by a system of "Structural Funds" aimed at cushioning the most severe effects of the crisis in those area of the 9 states seen to be suffering the worst deprivation.

These elements of "interventionism" produced a complicated series of "winners and losers" within and between the national bourgeoisies. Examples are numerous and beyond the scope of this article. They include the particular success of the Irish state in attracting resources, the spreading of agricultural subsidies from its core base in France to benefit the new members around the Mediterranean and Britain's "rebate".

During the 1970's and 1980's the European Community was thus able to "broaden and deepen". On the world stage the US broadly approved of these developments as a strengthening cooperation between its allies in Europe fitted well with a strategy of challenging and isolating the Soviet bloc. However, that strategic agreement between the European Community (which formally became the European Union in 1991) and the US lost its validity when the Russian bloc exploded, firstly allowing its satellite states in Eastern Europe to realign and then leading to the disintegration of the Soviet Union.

The new "world picture" which has emerged during the last 15 years has seen the European Union (EU) turn from an ally of the US to an uneasy rival in terms of world trade, economic domination and military-political-diplomatic positioning.

The collapse of the Soviet bloc

The gradual and planned growth of the predecessors of the EU had been a relatively orderly process. The world-strategic realignments since 1990 have, on the other hand, been a case of humanity (in this case European capitalists) "making history but not in circumstances of their own choosing".

Over time West Germany had become the economic leader within the EU. Its period of accelerated economic growth during the 1950's and 1960's had led to it becoming the European "paymaster" being the biggest net contributor to European budgets. Ironically, it was West Germany which was forced to take the first "leap in the dark" by absorbing the East German state released from Russian domination. The Eastern Lander were enormously economically backward compared with any of the then areas within the EU and brought other significant problems such as ecologically primitive industry. German capitalism, within the umbrella of the European Union was forced to unexpectedly bear the costs of social and economic assimilation, a process which remains unresolved after fifteen years.

At the beginning of 1995 the EU was able to achieve a further step in its geographical expansion with the absorption of three states, none of which brought with them any of the problems that East Germany had posed. All three of Sweden, Austria and Finland were relatively advanced and stable models of capitalist development with well-developed elements of "Welfarism". For the last two the option of aligning into the EU was a further result of the Soviet bloc which had removed the historic imperative to maintain elements of neutrality.

The 1995 expansion can be seen as a further step in the EU's gradual growth and development but occurred at a time when stresses and strains were already apparent.

During the period until 1990 the process of integration had been marked by a preparedness of the member nation-states to hand over elements of decision-making to the European transnational structures. That strategic direction was made easier because the incremental steps were supported by the US "overlord" and the European national bourgeoisies involved in the process were united against the overriding common enemy, the USSR.

More recently, the loss of those unifying structures have coincided with a process where the internal dynamics within the EU have also posed questions to which the respective bourgeoisies did not have an agreed answer.

Internal dynamics of the latter phases of integration

A significant step in "the European project" was marked by the Treaty of Rome (1957) which formally established the "European Economic Community". That treaty "Determined to lay the foundations of an ever closer union [our emphasis - KT] among the peoples of Europe". That quote is of interest not because it serves to support the conspiratorial nationalist paranoia of political formations such as the United Kingdom Independence Party (UKIP) or the Northern league in Italy. However, it does reflect a dynamic of "broadening and deepening" which was to run smoothly for more than 30 years after the Treaty but has now run into contradiction with other realities since 1990.

Early in the 1990's the process had arrived at a commitment to develop a European Monetary Union which was then joined by commitments to generate EU-wide approaches to "Justice and Home Affairs" and a common "Foreign and Security Policy". It is a matter of conjecture whether the continuation of the pre-1990 world structures would have allowed the national bourgeoisies to effectively hand over such areas to the European transnational structures. In fact, the reality of the post-1990 world has caused all those aims to become enmeshed in the reality of an emerging Franco-German led Europe - a project which has turned from a dream of Anglo-American imperialism to a rival to the US's ability to exercise its desired hegemony. Dragged between the two poles the feeble British state has strived to maintain its client status in relation to the US while holding on, where possible, to the benefits of European integration.

The new phase in imperialist rivalry has had its effect on all three aspects referred to at the start of the previous paragraph, most clearly around monetary union (embodied in the euro currency) and the extreme discontinuities in moves towards an EU Foreign policy. A more indirect linkage can be identified with the moves on "Justice and Home Affairs", where the clashes of national interest strengthened by the loss of the common enemy has produced an unevenness in the agreements between the member states. That was reflected, for example, by the refusal of states such as Britain and Denmark to join the Schengen Convention which first came into force in 1995 to help reduce border controls and move towards the harmonisation of aspects of legislation including sections of financial policy such as customs duties and VAT.

Those aspects where the new imperialist relationships have had the clearest effects are the euro and foreign policy. The latter has become most marked as military conflicts have broken out, including ex-Yugoslavia, Central Africa and Iraq. The vision of a joint foreign policy has become a more distant aspiration as national self-interest has been allowed to overtake the drive towards European integration. In all those areas of conflict, sharp strategic differences have appeared between the various European states and, of course, between the Franco-German core on one side and the pro-US states such as Britain, Italy and the new members in Eastern Europe on the other.

The development of the euro (which again the British state avoided reflecting its desire to straddle between the US and the Franco-German led alternative) was a further step in the development of the EU as an actual and perceived rival to the US. The currency has become a viable rival to the dollar as a possible vehicle for international trade transactions up to and including those around that most vital commodity of the current age, oil.

2004 - A new level of problems

The current state of impasse and confusion in the EU was definitively ushered in by the accession of ten new members on 1st May 2004.

Pushed by the imperative of concretising their gains from the collapse of the Soviet bloc seven states formerly within Comecon and Slovenia, formerly part of Yugoslavia, were absorbed into the EU. Assimilating these countries and controlling a larger EU has presented new problems. These problems were, however, anticipated and subsidies for the new countries are to be phased in from a low level over a period of years while the larger group was to be controlled by the new constitution. The fact that this constitution was voted down in the May referendums in France and Holland has caused a crisis.

It is clear that the differences amongst the EU bourgeoisie over how to attack the European proletariat and how to relate to US imperialism are behind this crisis. It is, however, economic imperatives which are driving the EU and the political structures will one way or other be pulled into line with the demands of European capital. We can be sure that there is no going back to the concert of national states which existed in the decades after the war. This is the programme of the petit bourgeoisie in the UK and France and does not represent the interests of capital in general.

The EU capitalist class, like the capitalist class worldwide, is faced with problems of declining profitability and it is this which the EU is attempting to address. In regard to the organisation of capital, there is a need for economic integration to increase the scale of capital's operation. Capital needs to be concentrated and made more productive (profitable) at the level of a European bloc. Unproductive national expenditures, i.e., taxes on profits of capital, need to be reduced. The speed of turnover of capital needs to be increased and the volume of trade needs to be increased. In addition to these organisational changes it is now essential for the EU bourgeoisie to reduce the value of labour power. This requires a direct attack on the working class to introduce direct cuts in wages via flexibility, e.g., short term contracts, part time working, use of women workers at lower pay, use of immigrants, self-employment, etc. In addition, cheaper workers from other regions of the EU need to be brought into the central countries to reduce the average wage. On the other hand, indirect cuts in wages via cuts to the social wage in the form of benefits, health education pensions, etc., need to be carried out. For the bourgeoisie as a whole it is essential that this process continues.

The extension of the EU, particularly to the former Eastern Bloc countries, has benefited EU capital by providing a cheap source of skilled labour. This has prompted both emigration of this labour to the central countries and the relocation of capital to the Eastern border countries of the EU. However, the problem of reducing labour costs in the central countries remains. We have previously written on the attacks on the social wage in the central countries such as the Hartz 4 legislation in Germany ⁽¹⁾. The central countries are proceeding with caution in this attack; however, this caution has not been enough to prevent the governments becoming massively unpopular, and this was undoubtedly a factor in the voting down of the constitution in May.

The position of the EU is further complicated by the opposition to, and mistrust of, the whole project which now comes from the US since it now sees the EU as a rival centre of imperialism in the making. This is, in fact, exactly what is occurring and is recognised by some of the EU states. The central powers of Europe recognise that the need for economic integration must have political consequences. They favour the creation of a political bloc to fight for the interests of EU capital on the world stage. Obviously the EU is already doing this via the EU commission, for example the disputes which it takes to the World Trade Organisation over Airbus/Boeing, but this is not adequate for the larger interests of the bloc in strategic areas such as the Middle East. In strategically important areas where, for example, oil interests need protection, such protection requires political and military means. The EU's imperialist interests cannot be effectively defended with the present structure of a loose trading bloc. The Iraq war showed the weakness and ineffectiveness of the present EU structure. The central states favour the EU evolving into a pole of imperialism to counter the US.

Other EU members, notably the UK and some Eastern European states, fear the construction of a new pole of imperialism since they see correctly that it will lead to conflict with the US. In fact, the conflict with the US is already occurring and they fear its escalation. For them there is no alternative to their present role as junior partners to the US. They see the best strategy as cooperating with the US and accepting the crumbs which drop from the table of US imperialism.

That is the essential background to the current crisis.

Options for the bourgeoisie

Europe's "Ever Increasing Union" has developed with no clear blueprint. The only form approaching a transnational state solution in the imperialist epoch was the Stalinist Soviet Union which was in effect a continuation of the Tsarist "prison-house of nations". Although many other transnational state structures exist (e.g. UN, WTO, NATO) and have done so on a considerable scale since the end of the First World War these have not attempted the degree of cross border integration that is embedded in the dynamics of the EU.

Their options and ours

Although we can be sure that the economic imperatives which are pushing the EU towards greater economic and political integration will continue it is difficult to forecast the outcome to the crisis. A possible result may be around the much-floated "multi-speed" Europe with the firmest unity bringing together France, Germany and the Benelux countries and the remaining states being part of a web of separate but overlapping and partly complementary treaty arrangements.

Much of the European far left (and indeed the far right) are advocating "national self-determination" as against the strengthening of the EU. Our position shares nothing in common with their starting points or their conclusions. Objectively the real benefactor from their position is U.S. imperialism which currently see their Franco-German led rival political bloc and currency both enmeshed in the severest problems for decades.

The starting point for an approach in opposition to capitalism is the understanding that workers have nothing to defend or gain in any of the national or supra-national options on offer. The only benefit which such changes can bring is greater unity for Europe's workers.

(1) See Revolutionary Perspectives 31, "Germany is No Exception" and Revolutionary Perspectives 29, "Pensions and Social Benefits Under Attack"