A New Debt Crisis in Europe—And the U.S.

Oct 3, 2011

For almost two months, U.S. stock markets have gyrated wildly. These huge leaps up and down in stock prices are warning signs that the European debt crisis is spreading to the U.S.

Behind the European debt crisis are the big European banks, which have been speculating on European government debt, forcing European governments to pay them higher and higher interest rates. This has been very profitable for the European banks.

But the U.S. banks have been sharing in the spoils. They are some of the largest stockholders in the big European banks. For example, investment funds run by such Wall Street giants as BlackRock, Wells Fargo and J.P.Morgan Chase are among the biggest stockholders of the French bank, Societé Generale. U.S. banks and money market funds are also major lenders to European banks. And U.S. financial institutions also insure a lot of the government debt that the European banks bought, through the so-called “credit default swaps,” collecting rich premiums for the insurance.

In order to keep the money coming in, the big banks on both continents have been pushing the governments of Greece, Portugal, Ireland, Spain and Italy to impose ever harsher austerity measures on their populations: big public sector layoffs, cuts in pensions, and cuts in public and social services. And the banks want governments to “sell” them valuable publicly-owned properties on the cheap–airports, highways, electric utilities.

Government officials pretend that these austerity measures are staving off crisis. But in reality, they only feed the debt bubble for the profit of the banks, making the crisis worse.

There is no answer for the working class in any of the plans proposed by governments or international institutions like the IMF.

No matter what country we talk about, the working class must fight to protect its essential interests–jobs and wages.