The Spark

the Voice of
The Communist League of Revolutionary Workers–Internationalist

“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx

Eastern European States:
Sliding Deeper into Crisis

Apr 29, 2009

In Eastern Europe, governments are thrown from office one after the other. In six weeks’ time, three Eastern European countries (Latvia, Hungary and the Czech Republic) each had to install a new government—though there was no election on the agenda. Last January, people took to the streets of Riga and Sofia, the capital cities of Latvia and Bulgaria, and confronted the police. During the same month, in Vilnius, Latvia’s capital, huge demonstrations were also organized against the government’s austerity plan which further attacked the living standards of ordinary people. The police cracked down on protesters.

From the Baltic Sea to the Danube River plains and the Black Sea, there has been a general cutback in production, and unemployment figures are skyrocketing. In just six months, Eastern European currencies have lost 20 to 40% against the euro or the dollar (the loss of the Polish zloty is even worse). In April, 11 states asked for financial aid from the International Monetary Fund (IMF) to face up to the crisis. Eight of them are Central or Eastern European countries: Hungary, Romania, Latvia, Poland, Serbia, Bosnia, Ukraine, Belarus.

However, as late as September 2008, most analysts still presented Central Europe as a zone with “strong growth opportunities.” Specialized journalists had a soft spot for the “Slovak Dragon” or, when writing about Estonia, Latvia and Lithuania, never failed to call them the “Baltic Tigers.” No longer. Eastern European countries have been hit head-on by the crisis. Recession has devastated these countries that never really “took off” after the fall of the Berlin wall in 1989—despite promises to the contrary—or after their integration into the European Union (EU) starting in 2004.

Reintegrated… into the Same Old Relationship of Forces

The group of countries that make up Eastern Europe are in fact spread out in the middle of the continent and until 20 years ago had regimes that were either officially or unofficially People’s Democracies. Estonia, Latvia and Lithuania are usually added to the lot, but they differ from the rest: they are the only states that the EU has been able really to integrate since the collapse of the USSR in 1991.

Despite the variety of countries that make up Eastern Europe, they were all hit by the crisis as soon as it crossed the Atlantic at the end of the summer of 2008. And they were hit with a violence that the rest of Europe still avoids.

At the end of the 19th century, Turkey was customarily called “the sick man of Europe.” In the early years of the 21st century, marked by yet another crisis of the capitalist system, these countries appear to be much sicker than the rest of the continent. Despite the proclaimed equality of all European countries, they fundamentally remain in a subordinate position, dominated as they are by international big capital. Of course, their subordination takes on different forms and varies a lot from one country to the other. However, they all find themselves in a rather unfavorable situation on the international level. The form assumed by their inferior position has changed, but it is not basically different from the situation they were in at the time of the Cold War and the “iron curtain.”

The Slovak “Little Dragon”

Central and Eastern European countries were completely reintegrated into the imperialist camp two decades ago, but their perspectives have not been any brighter for it. The promises they were made by the professional devotees of capitalism were a sham. The more integrated they were, the more vulnerable they turned out to be when the capitalist system was struck by the crisis. Hungary and Latvia, for instance, were presented as perfect examples of a successful integration in the market system: they were also among the first to find themselves on the edge of the cliff when the crisis broke out.

The reintegration of Eastern Europe in the imperialist bosom had a cost that the people living in these countries started paying long before the crisis. As early as the 1990s, the big industrial, commercial and banking conglomerates of the Western world took the lion’s share of the markets that were then opening up. They got rid of companies that were not profitable enough in the eyes of shareholders—most notably, in heavy industry, mining and shipbuilding. Even with the well-paid help of local leaders, it was not always possible to part with these companies for a token price. So companies that could have been serious competitors were simply shut down. In banking and insurance (sectors that yield very high profits rapidly, because they do not demand huge investments), Western capital—and in particular German, French, British or Austrian capital—soon ran the whole show. The same holds true of sectors like supermarkets, soon dominated by Auchan, Carrefour, Intermarché and their German counterparts. In the car industry, Renault, Peugeot-Citroën, Volkswagen, Suzuki, South Korea’s KIA and a few others rapidly took control of the local car makers (Romania’s Dacia, Czech Republic’s Skoda, etc.). They took over their production units or built new ones (in Slovenia, Czech Republic, Slovakia, Romania, Hungary), to take advantage of the low wage level of a very skilled workforce. Another asset was the fact that these plants, old and new, were not far from Western Europe’s markets.

While their country’s economy fell under the control of Western capitalist groups, the population discovered the threat of unemployment. For most elderly or not-so-young workers, this was a new thing. As for younger people, they have always worked in a situation where it was difficult to find—and keep—a job. Describing a small industrial town in the south of Slovakia, the author of an article published in Sme (“Us”) wrote: “Since the overhaul of the mining sector in the late 1990s, the unemployment rate was never lower than 25% of the workforce. The last magnesium mine is about to shut down and, pretty soon, it’s one out of three persons of working age who’s going to be jobless.”

On January 1, 2009, Slovakia adopted the euro as its official currency. Slovakia also has the lowest wages of the whole euro zone. The average monthly salary is 600 euros, only one quarter of the wages in neighboring Austria and Germany. But the prices of consumer goods are practically the same. Slovakia imports a great deal of its consumer goods because the country’s former leaders, in an attempt to attract foreign investors, had encouraged the development of industries working for export—especially the car industry. Producing a million vehicles per year, in a country that has 5.4 million inhabitants, Slovakia is the car manufacturing champion of the world. Obviously, unemployment and reduced wages swept the country when there was a slump in the global demand for cars. Foreign car makers, who represent one third of the country’s exports, immediately reduced the work week and the workforce. Over 100,000 jobs have been lost since last fall. In early 2009, the country’s total output was believed to have dropped by 50%. Unemployment, which had already reached 12% nationally in 2008, is now 15%.

The big companies, for whom Slovakia’s leaders transformed their country into a capitalist dreamland (low wages, a skilled workforce, a single-tax system with taxation fixed at 19%), are using the threats that come with the crisis (the threat of leaving for China or Bosnia, the threat of more job cuts) to get even more concessions. The country’s biggest employer, U.S. Steel, had already been exempted from taxes. It has now been promised it won’t have to pay any taxes for social benefits. The government run by Robert Fico (leader of Smer, a Social-Democratic offspring of the former so-called Communist Party) is currently studying the possibility of extending the measure to the other foreign companies established in the country!

The Polish Plumber’s Comeback

With the help of local government, a handful of big companies, within a few years, have reorganized Slovakia to suit their own needs. They imposed an export-oriented economic system, practically based on a single type of production. Other economic sectors have been treated like the population in general: they have been ignored and left to fend for themselves. In order to attract the car industry and its promises of a brighter future, the Slovak state, like all its counterparts, spent a good deal of its resources on all sorts of tax breaks, rebates and “favors.” It went heavily into debt in order to make the country’s infrastructures meet the standards of international conglomerates. The sums thus spent meant jobs for a fraction of the working class, but jobs were missing in other sectors where they might have benefited the entire population. In short, a minority of workers were “allowed” to be exploited by Western capitalist groups that boasted record growth rates and profits, but even that minority feels today that they might have been conned after all. Having worked in a Western capitalist plant is a poor consolation for a jobless, penniless worker!

Nevertheless, some commentators (another word for boot-lickers) continue to pretend that Slovakia would be, along with the Czech Republic and Poland, in a better position than the rest of Eastern Europe to weather the crisis. This is a pipe-dream.

Indeed, the situation of Slovak workers is similar to that of other workers of Central Europe. French television recently broadcast a news report illustrating their situation. It showed workers, who used to be employed in Bohemian glass factories, explaining that the plant shutdowns killed the whole region. They were going through the same ordeals as the Polish workers of the Baltic Sea shipyards who, after overthrowing General Jaruzelski’s regime, saw the shipbuilding sites shut down one after the other. This program also showed the former miners of Poland or the Baltic countries who have to go down the shafts of abandoned mines with a pick and shovel to extract small quantities of ore—risking their lives trying to make a living.

And of course, there is the famous “Polish plumber” who, a few years back, was presented as the vanguard of a genuine invasion of Western countries by low-paid skilled workers. He is treated just like his brothers and sisters, the miner or teacher, the nurse or assembly line worker, who came from Poland, Romania or ex-Yugoslavia to work in the West: they are the first to be laid off by the bosses in construction, in services, in agribusiness, etc. A lot of them, who only had insecure jobs in which they were over-exploited, have had to go back to their own country as fast as they could—only to find that the situation was even worse than when they left. This is shown by the fact that Serbia’s application for a three-billion-dollar loan from the IMF mentioned that only part of the money would go to support the country’s currency; the rest was needed to address the plight of the migrant workers who had lost their jobs in Western Europe and had no hope of finding one in Serbia.

After the “Iron Curtain,” the Iron Heel of the Imperialist Powers

In late February 2009, a meeting was organized in Warsaw to discuss the issues of the economic crisis. The World Bank representatives made a very cautiously worded recommendation concerning Eastern Europe. They called for “pump-priming policies by industrial states to encourage production across the board, and not just inside national borders.” Not a very radical position, to say the least. And one that had no chance of modifying the political line of the industrialized world. In early March, during the summit of the EU’s 27 member countries, the then Hungarian prime minister, Ferenc Gyur-Csany, made a declaration denouncing the West’s protectionist policies: “We cannot allow Europe to be divided by a new iron wall, twenty years after the fall of the Berlin wall.” In a sense, he was the mouthpiece for the seven Eastern European countries that were trying to set up a united front, asking Europe’s rich countries to launch a “Marshall Plan” of sorts to help them survive the crisis. They were collectively asking for 190 billion euros, but the EU agreed only to double the amount of the existing emergency loans (a good deal of that money has already been spent or is currently withheld for “examination”), raising it from 25 to 50 billion. It also “promised” to increase its contribution to the IMF, which needed funds to support the Eastern and Central European countries.

Finally, at the end of the summit, it was estimated that these countries could borrow 24.5 billion euros over two years from the European Bank for Reconstruction and Development (EBRD), the World Bank and the European Investment Bank (EIB—another institution that, like the EBRD, was set up to facilitate the absorption of the former People’s Democracies).

This “aid” to Central Europe appears very limited, especially if one compares it with the hundeds of billions that France alone put on the table to bail out the French bankers. But even this paltry aid is not for free. Not only won’t it ever reach ordinary people, but they are the ones who will be forced to foot the bill through massive new austerity plans.

Connected to a Profit-Making Financial Lifeline

Last fall, Hungary and Ukraine called for help. Since then, other countries have also asked the IMF, the World Bank and the EU for help. Even Poland, which was considered one of the few European countries whose Gross Domestic Product (GDP) would not decrease in 2009, has just asked for a 20 billion dollar “credit line.” Polish Finance Minister Rostowski declared that, unlike his counterparts in neighboring countries, he did not want an “emergency” loan, but aimed at “immunizing Polish economy against the virus of the crisis and against speculative attacks,” adding that this would allow “the reinforcement of Poland’s role as a pillar of stability … stabilizing the economies of neighboring countries.”

A good example of wishful thinking! In the face of the crisis, the leaders of the great powers find it difficult to hide their growing wariness and like to be told that there is at least something they can hang on to.

Last fall, for instance, when the IMF, the EU and the World Bank decided to grant a 25 billion euro loan to Hungary, the Financial Times explained that it was necessary “to prevent the markets’ panic from sweeping the rest of Eastern Europe.” We know the end result: within a couple of months, the whole of Eastern Europe was shaken, and not just Poland and the Czech Republic—countries that the Financial Times had described as “vulnerable to contagion.”

Estonia, the wealthiest and most developed Baltic country, had offered to join the group of international financial backers who were about to help Latvia, which was overburdened with debts like most of its neighbors. Estonia is now expecting an 8.5% drop in its GDP, while official statistics showed that Estonia’s unemployment rate had reached 12%. Concerning the other “Baltic Tigers,” the official 2009 forecasts are the following: a 12% recession in Latvia (following a 9% yearly growth rate between 2000 and 2007) and a 10.5% setback in Lithuania (after a 3.5% increase in 2008).

In comparison, Romania’s debt is relatively small, but its government was compelled to ask the IMF, the World Bank and the EU for a 20 billion dollar loan. According to the IMF, this fresh cash should allow these countries “to minimize the consequences of a sharp drop in capital flow and to address the tax and foreign trade deficits.”

Fancy words, but ones that explain why so many huge loans have been granted to Eastern European countries. In a nutshell, international financiers see Eastern Europe as the base for a “flow of capital,” in other words, an area that recently attracted capital owners dreaming of a fast buck. They wanted profit rates that the West could no longer guarantee, while Eastern European countries offered low wages and a “flat tax” system benefitting big foreign companies and reduced social benefits guaranteeing capitalists a “low-cost” state machine.

Monetary Speculation and Loans in Euros

These days, the economic press often points to the so-called “consumer frenzy” that had swept Eastern Europe. We are told that this massive public consumption built up mountains of debt that aggravated the consequences of the global crisis on these countries’ economic system and on the population.

This type of “explanation” is as scornful as it is biased. A news agency mentioned the “spending binge” of Romanians. But how could Romanians become “shopaholics” with wages that are five or six times lower than in Western Europe! And a lot of people don’t even have a salary!

As for the “mountains of debt,” the truth is that in some of these countries, the arrival of foreign investments and the ensuing economic boost meant that a significant number of petty-bourgeois or even working-class people no longer feared to get into debt.

After all, wages and jobs were developing and, so it seemed, in a durable way. At least, that is what people hoped. The governments, the press, and European authorities were all permanently singing the praises of the small “dragons” and “tigers.” Western banks were of course on the spot and waging a ferocious war against each other for a share of the market: to attract prospective clients, they offered them more and more interesting conditions—or conditions that could appear to be interesting. Banks were very eager to offer loans, because lending money is a very profitable business. Loans were most of the time in euros or dollars, that is, in the currencies of the Western powers. That made borrowers feel more comfortable than if loans had been made in the local currency. The backer of each currency (the Czech and the Slovak koruna, the Polish zloty, the Hungarian forint, etc.), was a small and economically very weak state, which is even weaker in the monetary markets. In fact, the very existence of separate currencies in Eastern Europe meant that each one of them was a possible prey for speculators. There were speculators who tried to take advantage of the different rates of exchange between local currencies; others tried to make a quick buck by playing the local currency against monetary heavyweights like the dollar or the euro. For years, bankers from Eastern Europe and elsewhere, international investment funds and finance sharks like George Soros made a lot of money this way. And, as far as they were concerned, the development of the crisis meant that even more money would come their way! The subsequent collapse of the Serbian dinar, the Polish zloty and the Hungarian forint, etc. is due to the unbridled activity of speculators and less so to the receding of these countries’ economies.

Given the weakness of their national currency, borrowers from the Baltic countries or from Central Europe were of course tempted to ask for a loan in a strong currency. In the West, this was the time of cheap credit. Borrowing in euros could appear a better solution than taking on credit in the local currency. As a result, more than 60% of Hungary’s private and public debt is said to be in euros or dollars. This ratio is almost 90% in Latvia and practically 100% in Estonia.

Of course, when economic conditions suddenly changed, these countries faced disaster. How can someone pay back his debt in euros when his salary—if he has one—is paid in devalued forints or korunas? This was further complicated by the fact that the banks’ loans came with “variable” rates attached, which means that payments were bigger and bigger as time passed and were further increased according to the inflation rate.

“Helping Eastern Europe”: A Pretext for Bailing Out Imperialist Banks and Conglomerates

For years, foreign capital owners considered general indebtedness a money-making opportunity. They made decisions that sometimes had a considerable influence on the development of this or that sector of the economy (retail trade, construction, real estate, household equipment, etc.). The banks made a lot of money financing the development of a consumer goods sector, which they presented as the driving force behind Central Europe’s expansion. But today, they blame Central Europeans for what they now call their intemperate “consumer frenzy.”

However, not surprisingly, Thomas Mirow, the former German finance minister who was named president of the EBRD just before the Brussels summit on the situation in Eastern Europe, came to the bankers’ rescue, declaring: “We must all do our best to prevent a failure of the bank system in Central Europe.” Apart from the unpredictable consequences such a failure could have inside those countries and the ensuing social and economic chaos, it could cause whole sections of Western Europe’s banking system to collapse.

One of Vienna’s most famous newspapers, Die Presse, wrote that Austria’s banks are believed to have lent 200 billion dollars to Eastern European countries. After pointing out that this represents almost two thirds of Austria’s GDP, the author of the article logically concluded: “Eastern Europe’s difficulties could cause the collapse of Austria.” Indeed, it is likely that other imperialist states and their bank systems, notably in Western Europe, would also be shaken from top to bottom if such was the case, because they have a near monopoly over credit operations with Eastern European countries.

Up until recently, bankers found their clients, and profits, among the middle or “average” classes. But now that their clients have seen their revenue shrivel, bankers are crying out for help.

The IMF, permanently pre-occupied by the smooth functioning of a system that has more and more seized up, now recommends that the EU lower the criteria for admission inside the euro zone. The official objective of this measure is to put an end to speculation on European currencies, which was spreading throughout Eastern Europe, complicating things for capitalists, industrialists, bankers and merchants. In other words, their only preoccupation is their own interests. The decision to be somewhat more “flexible” serves their interests.

The countries that could potentially take “advantage” of the new set-up have had varied reactions. Lithuania’s prime minister said he was in favor of such a plan. But his neighbor and counterpart in Latvia rejected it. Those who were called “the Tigers” no doubt find it difficult to be treated like Montenegro and Kosovo—two countries with big financial problems that compelled them to join the euro zone (which entailed adopting the euro as their currency). However, the EU member states continue to ignore Montenegro and Kosovo and don’t even pretend they are trying to “integrate” them into their “private club.”

Of course, if other Eastern European countries agreed to become members of the EU and change their currency for the euro, they could feel better protected against monetary speculation. For instance, in 1997, Bulgaria tied the “lev,” its own currency, to the German mark and, later on, to the euro. These measures have so far protected Bulgaria from the monetary ups and downs of its neighbors. This is even truer of Slovenia and Slovakia, the only two states in the area to have recently joined the euro zone.

However, the mere fact of being allowed to use Europe’s “single currency” as its own does not automatically solve a country’s monetary problems, far from it. First of all, it does not prevent prices from flaring up, and eventually becoming higher than in the wealthier countries of “Euroland.” The value of the euro bills and coins minted by the one and only European Central Bank varies. Shopkeepers, bankers and speculators all see them with a different eye and will take into account the person who’s got them and the country where the buyer and seller find themselves.

The euro is the legal currency in Germany, Ireland and Greece. However, when an international speculator lends money to Ireland or Greece, the going rate is a few percentage points costlier than the rate he would apply if he made the same loan in euros to Germany. And the rate is much costlier if the money is lent to Slovenia or Slovakia. These two countries are the last to have been admitted as members of the EU and, as such, they are considered as “privileged” countries by their neighbors—but certainly not by the big powers that dominate the continent.

For the time being, the big powers have not yet decided to officially add a little flexibility in the criteria for becoming a member of the EU. They are the only ones who can make that decision. In the meanwhile, Western bankers have made their own decision. In Eastern Europe, credit is even more difficult to get than in the West because bankers want to protect themselves and because their headquarters (in Western Europe or the United States) tell them they need the money themselves. They need back the money they had invested in Eastern Europe, because at home, the state’s massive help was not enough to bail them out completely. As a consequence, in Eastern Europe, bankers ended up creating a “credit crunch.” In other words, they offered fewer and fewer possibilities to people in need of cash. Almost immediately, borrowing money became exceedingly costly and that, in turn, increased the slump of local economies.

As a rule, Western bankers do not worry about the dramatic consequences of a crisis that is, to a large extent, of their doing. They do not have to, since the international financial institutions and the EU are ready to bail them out by granting billions upon billions worth of credit in order to prevent the bankruptcy of the whole system and to help the big Western companies maintain their profits. Bankers and financial authorities agree: in the end, the bill will be paid by the people of the region.

Social Benefits: A “Genuine Massacre”

The consequences of these international financial dealings will be dramatic for ordinary folks. They already are. At the end of 2008, a 7.5 billion dollar loan was granted to Latvia by the IMF, the EU and Sweden (whose financiers now control a good deal of the Baltic states’ economies). The objective was to absorb the shockwave of the crisis and its consequences, not as they impact the 2.3 million inhabitants of this small country, but to look after the Western companies that operated there. Latvia’s international backers ordered the government to impose their terms on the population: the public deficit was to be reduced to 5.3%of the GDP, income taxes were to be increased, cuts would be made in the state budget, and wages would also take a cut (especially those of civil servants). These decisions coincided with a growing inflation and unemployment. In January 2009, 9.5% of the active population had no job (in some areas, that was 150% more than a year before). The authorities now say that a 15% rate is to be expected before the end of the year!

The January riots in Riga, Latvia’s capital, were precisely a response to this harsh austerity policy. They were followed in February by the toppling of Ivars Godmanis’s government after it failed to obtain a majority in parliament on the issue of the civil servant wage cuts. The coalition government that took over was headed by Valdis Dombroskis, who immediately asked his ministers to come up with new budgets, integrating cutbacks of 20, 30 or 40%! Elementary schools and hospital wards have already been shut down. Civil servants have had to take a 15% wage cut. In the private sector, wage cuts often reach 30%. The petty bourgeoisie who had been encouraged by the economic boom and by the banks to apply for loans in foreign currencies (to buy apartments, cars and other consumer goods) are now facing bankruptcy due to the collapse of the local currency against the euro and the dollar. Also, their income has often followed the downward curve of the service sector, especially in the retail business, because of large losses in workers’ purchasing power.

People’s reaction to the general reduction in their standard of living has apparently gone unnoticed by international financiers. They continue to ask the Latvian state to find new ways of transferring more money from the pockets of those who have only a few pennies left. This is why the financiers recently froze the sums corresponding to the second phase of Latvia’s credit line. They will deliver the money only if the present government intensifies its attacks against the standard of living of the whole population by June.

Hungary offers another example of how the ruling classes perform their duty as the hired supervisors of big capital to make people foot the bill for the crisis.

A few weeks ago, Hungary’s Prime Minister Frenc Gyur-Csany handed in his resignation, saying that he considered himself “an obstacle to the majority that Parliament needs in order to carry out the necessary reforms.” The “reforms” he was talking about are in keeping with measures he took during his years in office—they have won him a reputation as Mr. Austerity. For five years, he did his best to reduce public deficits and force ordinary people to foot the bill. However, in the last few months, Hungary was hit head-on by the crisis. Last fall, it was on the verge of bankruptcy and could only escape total collapse thanks to a 25 billion euro emergency loan by the IMF and the EU.

In exchange, the financial backers and the big powers demanded reinforced attacks on the Hungarians’ standard of living. These modern Shylocks want repayment and do not care if it means carving up entire peoples to give them their “pound of flesh.”

Gyur-Csany cut back wages in the civil service and announced that the age of retirement was changed from 62 to 65; he announced an increase of the Value Added Tax (which means more taxes on ordinary people’s consumption); he planned more “reforms” of the school and health systems, of Social Security, in other words, of all public services.

He had launched this program without any qualms and this is no doubt the reason why he was reelected by his fellow members of the Social-Democratic Party as their leader. However, given the extent of the attacks his program implied against workers who were already suffering the blows of unemployment and inflation, Gyur-Csany chose to step down and leave the job to a so-called “technical” administration. Hungary’s political leaders obviously hope that a new team can more easily deal with people’s discontent because it is less discredited. Gyur-Csany’s successor, Gordon Bajnai, a businessman and former minister of the economy, did not beat about the bush. He started by declaring: “I must warn you all. My program is going to hurt.” His program for Hungary is indeed appalling! He has already planned a total of 1,000 billion forints (3.3 billion euros) in cutbacks. These will affect the public services, social benefits (family allowances and other benefits will be suppressed), old-age pensions, wages (the civil servants’ 13th month of pay will also be suppressed), etc. These attacks against the standard of living of ordinary people are more particularly targeted against the laboring masses. They were accurately described as a “genuine massacre” by Heti Vilaggazdasag (in The Global Economic Weekly).

“Particular Strains”

It took only a few months for Eastern Europe, which some commentators had believed to be a promising area witnessing a strong development, to be transformed into a crisis-ridden zone where state after state suddenly found itself on the verge of bankruptcy. Even countries not well integrated into the global market (the Balkan states, for example) are hit by the crisis. Of course, it seems a bit abstract to talk about the crisis of the banking system in Sofia or Bucharest, where less than half the adult population has a bank account. However, Bulgaria and Romania have suffered the severe blows of a crisis that has many different aspects: a slowdown in construction; a slump in tourism (a big supplier of foreign currencies); reduced car production (especially in Romania, where the production of Dacia-Renault cars went down by 64% in early 2009, causing massive layoffs). Since then, the French and German governments have managed to prime the pump with the 1,000 euro bonus given to those who buy a new car in exchange for scrapping any over-10-years-old vehicle. But how long will the effects of this measure last?

In late 2008, Le Figaro wrote: “From Warsaw to Bucharest, one production facility after the other is coming to a halt.” Since then, things have gotten worse, severely affecting ordinary people’s livelihoods. But this is not what British Prime Minister Gordon Brown had in mind when he delivered a speech in which he said that the countries of Eastern and Central Europe were facing “particular strains.” French, British, German and other political leaders are above all preoccupied with the situation of their bankers and capital owners who saw in those countries “an attractive destination for foreign investors and industrialists who [were] guaranteed an interesting growth rate” to quote an old issue of an economic journal now frightened by Eastern European countries because “their economies are overridden with debt.”

Europe for the Wealthy or for the Workers?

While an important part of the continent is threatening to slide deeper into crisis, the big powers’ decision makers at the European and national level address what they view as the number one emergency: funding more credit lines in order to guarantee the profits of those capitalists who have invested in Eastern Europe. At the same time, they are increasing the pressure on local governments to force them to make their countrymen foot the bill for the crisis. That includes paying Western shareholders the dividends they were promised when they bought shares of companies that are now present in Eastern Europe or repaying—with a profit—the private financial backers who agreed to make loans to these governments.

However, the risk exists that some political leaders of Eastern and Central Europe will not accept the role set out for them and will start blaming foreign capital for the crisis and its consequences. In Latvia, for instance, the local authorities have called people to support the national currency and production against foreign competition. And that is only the tip of the iceberg. In some countries, there already exist strong xenophobic feelings (against Roms [gypsies] in Slovakia, Hungary, Czech Republic; against the Hungarian minority in Slovakia; against the Turkish minority in Bulgaria, etc.). These feelings are more and more often used by the authorities who see the “ethnicization” of social and economic problems as a way to answer people’s anger, as a decoy to divert attention from the necessary class-based struggle against the real causes of the poverty that this system has in store for them. Nothing holds back Eastern Europe’s politicians from going in that direction. For one thing, the EU’s leading circles could not care less, so long as Eastern European people foot the bill. And secondly, in some countries, the far right is already agitating around these demagogic themes. With some success, since in countries like Hungary, Slovakia and Bulgaria, the attacks against people’s standard of living were launched by self-styled “left-wing” governments. In other cases, as in Slovakia, “left-wing” parties have come to power after striking a deal with openly racist and far-right parties (like the Slovak National Party).

In the run-up to the European elections, politicians once more referred boastfully to what they call “Europe.” But seen from its Eastern end, that “Europe” is not very attractive, dominated as it is by ruthless big capitalist conglomerates. That “Europe” supports local governments that are busy dismantling the few social benefits people still enjoy. The peoples of Eastern or Western Europe have nothing to expect from that particular version of Europe. If we do not want the continent to be devastated once again by racist, xenophobic hordes, the only appropriate response to the growing crisis and the nauseating ideas that come with it is to organize the fight to rid Europe of the domination of financiers and to establish a fraternal, united and socialist Europe, a people’s and workers’ Europe.