Dominique Strauss-Kahn (IMF Managing Director), Timothy Geithner (US Treasury Secretary), Christine Lagarde (French Finance Minister) and Elena Salgado (Spanish President of the EU Council of Finance Ministers), discuss the international financial system reform plan at the joint IMF/World Bank meeting in Washington, 25 April 2010.
© IMF Staff Photographer/Michael Spilotro

The crisis of the euro results from a policy choice, that of the EU authorities pawning off the common currency, instead of restructuring the Greek sovereign debt. Such a restructuring could have safeguarded the euro, but it would have necessitated a cash injection from the banks, which would have forfeited part of their debt in the operation. The French financial institutions are said to have about €50 billion of Greek debt on their balance sheets, whereas €28 billion is attributed to the German banks [1].

However, the protection of several dozen billions of euros held by the financial institutions does not justify such risk-taking. The fundamental stakes, in putting pressure on the euro, is to make the workers pay for the crisis and thus to effect a gigantic transfer of income from households to business, principally towards the financial institutions.

An American offensive

The scale of the transfer is such that it can only be managed by the European institutions, though it is actually driven by the markets and their armed wing, the US Administration. The euro crisis has been triggered by the concentrated attack of the American ratings agencies Standard & Poor’s, Moody’s and Fitch against the debt of Greece, Spain and Portugal. The downgrading of these three countries - especially Greece - to the ’speculative investments’ category is the result of a concerted action. The downgrading follows a series of repeated and pressing decisions. These attacks have been endorsed by the US-state machinery, notably through the alarmist declarations of Obama’s economic adviser and former chairman of the American Federal Reserve, Paul Volcker, who spoke of a prospective disintegration of the euro zone. The attack against the euro appears like even more of a pretext when considering that “we’ve known since 2004 that the Greek authorities have been lying” [2], which, however, induced no reaction from the ratings agencies.

This offensive against the euro is primarily intended to funnel to the US the foreign capital necessary to cover the growing US balance of payments deficit. It is a warning signal to countries like China which has begun to rebalance its currency reserves in buying the euro to the detriment of the dollar. For the US, this is a matter of urgency. Until 2009, the financing of its deficits and the defense of the dollar were assured by a positive balance of financial flows. But, during that year, the balance of financial flows turned negative ($398 billion), adding to rather than offsetting the ongoing net foreign borrowing requirements of the US economy [3]. At a purely economic level, the offensive against the euro is in the same vein as the struggle against tax evasion, initiated by President Obama in 2009 [4]. They are both a matter of drawing capital into the fold of the US.

An operation to dismantle the EU

This tactical action is coupled with a strategic operation, that of a drive to dismantle the EU to the advantage of an economic union spanning the two continents. The project to create a grand transatlantic market [5] is the most visible manifestation of this thrust. It is in light of the second objective that one is able to understand the attitude of Germany which, just as readily with the struggle against tax evasion as with the attack on the euro, has provided support for the American offensive. This two-fold approach is consistent with the commitment of this European state to the establishment of a transatlantic economic union.

The EU has been constructed around Germany and structured according to its interests. The most important economy at the time of the creation of the common market, Germany has been able to exploit fully its comparative economic advantages, without political constraint or broader economic oversight, and without significant transfers towards the EU’s disadvantaged zones. Until this year, the euro zone absorbed three quarters of German exports [6]. Through the declarations of its politicians and bankers, as well as by its ostensible dithering, Germany has contributed to the offensive against the euro. More, this country is able to finance its own deficits cheaply. The crisis and the flight towards quality that this has engendered allow German bonds to be placed at a reduced interest rate.

If, in the end, Germany gives the impression that it is sawing off the branch on which it sits, it’s because it has decided to switch branches and integrate in a bigger ensemble: the large transatlantic market. The ‘European construction’ is currently at a crossroads. Until now, it has permitted the long-term development of Germany. This process cannot continue according to the same modalities. The EU cannot escape the crisis without setting up an economic cabinet managing a common economic policy, a harmonisation of economic growth and, to achieve that, without undertaking sizeable financial transfers to disadvantaged countries and regions. This political management is totally at variance with the simple Stability Pact promoted by Germany. The fiscal policy of accelerated deficit reduction, refloated for the sake of this pact, acts to the detriment of local purchasing power and is not realisable without recession. The euro zone can no longer be the preferred outlet for German exports. Germany has made its choice: that of the transatlantic market and the global market.

A setting under IMF control

Instead of restructuring the debt of the defaulting countries, Europe has put in place two funds for intervention. The Eurogroup, formed by the eurozone’s finance ministers, has deployed a new mechanism of €750 billion in loans and guarantees, to assist eurozone countries that could experience difficulties borrowing on the capital markets. The plan provides for €60 billion of European loans secured on the EU budget, €440 billion of guarantees supplied by the member countries of the euro zone, as well as €250 billion in loans from the IMF, that is to say a total of €750 billion [7]. This plan of assistance is designed to last for three years.

Although it would have been financially feasible to take over the entire capital, the Eurogroup chose to join hands with the IMF, in which the USA has the majority of voting rights. This mechanism of bondage reproduces, and magnifies, the scheme already constructed to help Greece. The Greek component involves a sum of €110 billion, of which €30 billion is sourced from the IMF.

What is behind the intention of the European Council to incorporate the IMF in the euro zone rescue plan? If one looks at the formula applied by this international institution to the countries to which it has made loans, the modus operandi is immutable: the imposition of wage and salary reductions both directly and indirectly, the privatisation of public services and the abolition of social policies. The policies of the IMF have consistently led to the significant impoverishment of the population [8].

In case of depression or even economic stagnation, the ‘policy of consolidation of public expenditure’ is doomed to fail. The foreshadowed €750 billion of aid will be used to pay back the banks to the detriment of taxpayer’s purchasing power, and this payment to financial institutions will further enhance the recession. Thus, IMF control and creation of funds to help the banks are two complementary dimensions of the same policies. The point is to effect a significant redistribution of income in favour of financial institutions.

What future for the EU?

Such an operation against people’s incomes necessitates the neutralisation of all decision-making processes at the level of national states - a structure in which citizens still maintain some means of defense - for the benefit of market mechanisms, placed completely out of range of all political pressure. The question is to know what role the European institutions are to play in this process of submission to the financial markets?

A first answer is to be found in the accord by which the budgets of the euro zone member states will be put under the control of a body composed of the European Commission, the European Central Bank and the Eurogroup.

The countries that do not manage to reduce their total debt to less than 60% of GDP will have their budgets amended by Brussels. The text envisages the possibility of penalties even when the current limit of 3% of GDP for annual budget deficits, established by the Stability Pact, has not been breached. The idea will be to trigger procedures, for excessive deficits, for the countries whose debts is not being adequately reduced [9]. Later, a modification of the treaties is not ruled out, in order to permit the suspension of voting rights at the time of ministerial meetings.

The German model inscribes, in the Constitution, the principle of budgetary balance – supported equally by France, and destined to be generalised. That will remove any possibility, already weak, of fiscal initiative. The member states will be, vis-à-vis the EU, like the American states vis-à-vis their federal state. However, it is necessary not to deceive oneself; it involves not a consolidation of the European structure, but, on the contrary, of the dissolution of any possibility of political initiative in order to reinforce the absolute power of the markets.

The current European edifice has been imposed by the US which, after the war, had made it a condition for the granting of Marshall Plan aid
 [10]. It has been built around Germany, whose immediate interests were complementary to those of the US. The attack against the euro and the dismantling of the EU is also the result of an offensive launched by the US and is equally transmitted by the leading economy of Europe, as well as by Brussels. The Commission and the Council thus confirm their involvement in the breakup of the EU and in its integration into a new transatlantic political and economic system under US direction, a model already at work in the negotiations on agreements to transfer personal data on European citizens to the US [11] and negotiations around the creation of a market merging the two continents.

IMF control of European economic policy represents a supplementary stage in the dissolution of EU member states’ capacity for initiative and a phase of transition for their integration into a transatlantic body. The euro will be maintained as a simple empty shell. The abolition of the common currency would not be advisable, neither for Germany, for which a return to the Deutsche Mark with hard currency status would be suicidal for its economy [12], nor for the US, which has no interest in extending sovereignty over the dollar and the privileges attached to its use.

Evan Jones


 "Reforming the international financial system", by a group of experts of the IMF and the World Bank, Voltaire Network, 8 July 2010.
 "France: Concluding Statement of the 2010 Article IV Consultation Mission", IMF, 15 June 2010.

[1Paul Seabright, "Ce sont les banques que l’on sauve, pas la Grèce", Le Monde, 17 May 2010.

[2Statement by Jean Arthuis, chairman of the French Senate Finance Commission, in "Grèce: le rôle des agences en question", AFP, 28 April 2010.

[3Bruno Zeni, "Les flux financiers and la pérennité du dollar", Economie et crise aux USA-Blog Le, 19 April 2010. [Translator’s note: Net borrowing requirements data is sourced from the Federal Reserve’s Flow of Funds Account, Table F.107 line 9 ( The translator was not able to source the data on capital flows cited by Zeni (and referred to by the current author) from the US Treasury International Capital System website].

[5"Le futur grand marché transatlantique", Réseau Voltaire, by Jean-Claude Paye, 4 February 2009.

[6Michel Aglietta, "La longue crise de l’Europe", Le Monde, 17 May 2010.

[8Raphaël Massi, "Le FMI attaque", International Nieuws Agoravox, 13 June 2010.

[9Guillaume Errard, "Déficits : Bruxelles devra valider les budgets nationaux", Le, 6 June 2010.

[10"Histoire secrète de l’Union européenne", par Thierry Meyssan, Réseau Voltaire, 28 June 2004 and "L’histoire du Bilderberg racontée à Y. Calvi et J.F. Khan", by Laurence Kalafatides,, 20 May 2008.

[11"Affaire Swift: un nouvel abandon de la souveraineté européenne", by Jean-Claude Paye, Réseau Voltaire, 20 December 2009.

[12Jean-Michel Vernochet, "€uro: the worst case scenario", Réseau Voltaire, 18 May 2010.