Can someone explain to me the Eurzone and why it was created?

[Questionable]

I tried reading an article today but it was just a bunch of Idealist crap about how Germany felt bad for WWII and wanted to make it up to Europe by giving everyone the same currency or something.

What is the real reason for the Eurozone, and how should we as Marxists interpret it?

[Workers-Control-Over-Prod]

Basically: West Germany annexed low-wage GDR, hence spurred its low wage export economy once again and rocked the whole European exchange rates. The Bourgeoisie of France was becoming endangered by the German competition, German capital said Italy must join because its northern indutry was causing German capital trouble and Goldman Sachs helped fix the numbers for Italy to get into the currency union, so Greece took the opportunity and did the same.

Well, that project failed because no one played by the rules. The whole point of creating a currency union is to stabilize exchange rates and have more stable ways for capital to move across borders. But the main policy demands for the currency members states of the European commission, were never held, and so the national bourgeoisies of Europe showed once again that they are incapable to cooperate. More to the reason for the EU crisis here (http://www.revleft.com/vb/european-crisis-heart-t174495/index.html?t=174495).

[Questionable]

But the main policy demands for the currency members states of the European commission, were never held

What were these demands? Also, how would acquiring the same currency help the national bourgeoisie not be threatened by each other (If I'm understanding you correctly)?

[Workers-Control-Over-Prod]

What were these demands? Also, how would acquiring the same currency help the national bourgeoisie not be threatened by each other (If I'm understanding you correctly)?

Inflation rate/wages is what we're really talking about. Workers' wages in germany have been stagnating since two decades while southern European workers fought for higher wages and german banks even threw debt at the southern European markets to buy german goods. Higher worker wages means that southern European costs of production for investment capital were higher and increased spending means higher bidding up of prices, which is called inflation.

So while northern European workers have had stagnating real wages since the whole existence of the Euro, northern European inflation was lower, equal to lower prices for investment capital. This means that while everyone has the same currency, the prices are increasingly antagonistic so long these central policies remain. Capital invests into the more profitable enterprises, and the statistics prove that these are the countries with lower inflation (northern European countries). A currency union means that when capital wants to move to 'foreign' markets it does not have to take into account the changing national exchange rates. It mainly means that common goals should be set, but that never was implemented with the Euro.

[Workers-Control-Over-Prod]

The general effect of these severe inflation antagonisms is that, increasingly, growth rates of countries fall off to the benefit of others. Had german workers fought for higher wages and Greece been an export based economy (which is of course not the case because Germany has no resources and relies on exports and Greece, it has nice islands), it would be the German economy that would have not gotten any investments and suffering negative growth rates, germans taking austerity cuts for a few billion euro transaction from southern european governments to pay the interest on the sovereign debts to southern european banks. But in this case it's the other way around, thank god.

[L.A.P.]

The general effect of these severe inflation antagonisms is that, increasingly, growth rates of countries fall off to the benefit of others. Had german workers fought for higher wages and Greece been an export based economy (which is of course not the case because Germany has no resources and relies on exports and Greece, it has nice islands), it would be the German economy that would have not gotten any investments and suffering negative growth rates, germans taking austerity cuts for a few billion euro transaction from southern european governments to pay the interest on the sovereign debts to southern european banks. But in this case it's the other way around, thank god.

I thought Germany, along with the Nordic states, had tons of natural resources?

[Questionable]

The general effect of these severe inflation antagonisms is that, increasingly, growth rates of countries fall off to the benefit of others. Had german workers fought for higher wages and Greece been an export based economy (which is of course not the case because Germany has no resources and relies on exports and Greece, it has nice islands), it would be the German economy that would have not gotten any investments and suffering negative growth rates, germans taking austerity cuts for a few billion euro transaction from southern european governments to pay the interest on the sovereign debts to southern european banks. But in this case it's the other way around, thank god.

Sorry that I'm not understanding this immediately, but I have a few more questions. So are you trying to tell me that reason countries in the Eurozone are going poor is because their workers fought for high wages and this is keeping capital from investing in those nations?

[ComradeOm]

Basically: West Germany annexed low-wage GDR, hence spurred its low wage export economy once again and rocked the whole European exchange rates. The Bourgeoisie of France was becoming endangered by the German competition...Hmmm. Except that reunification did not lead to a "low wage export economy". Productivity in the East was significantly lower than in the West while the inflated conversion rate between the two Marks kept wages in the East artificially high. German exports actually fell (http://www.eurotrib.com/files/3/061211_exports_US_DE_JP_CN_82_06.jpg) during the early/mid-nineties as West German firms re-geared to capitalising on the new internal (ie East German) market while the immense costs of reunification took a decade to pay dividends in the form up upgraded infrastructure and plant in the East

So yeah, I don't see reunification as a cause of the Euro. Particularly not when plans for its implementation were advanced before anyone even dreamed that the Iron Curtain might come crashing down so suddenly


Well, that project failed because no one played by the rules. The whole point of creating a currency union is to stabilize exchange rates and have more stable ways for capital to move across bordersThe Euro, along with measures such as SEPA, unquestionably has facilitated capital movements. Which is why the current crisis has been so wide-ranging: the Franco-German banks have immense exposure to losses in Greece, Spain, Portugal and Ireland


So are you trying to tell me that reason countries in the Eurozone are going poor is because their workers fought for high wages and this is keeping capital from investing in those nations?These countries are poor because they've always been poor. They have long histories of poverty and, with the exception of Spain, are the minnows of the EU (http://static.seekingalpha.com/uploads/2010/5/3/22392-127292625445774-David-White_origin.jpg). The question is not why this is the case - which is a much, much bigger issue - but why they've been hit disproportionately hard in this crisis. Even if the two are related

What we're seeing here is a classic, and simultaneously bizarrely modern, form of trade dependency. The Euro has been a major boon to Germany in that it allows it to export manufactured goods to other European countries at low cost. Once such growth would have been punished by a strong currency (which hinders foreign trade) but this no longer applies within the Eurozone. (Outside the Eurozone it's even better for Germany as the weak Euro makes its goods even more attractive to the US or China.)

So the question is not investment - and tens of billions have been distributed by the various EU structural funds, with French and German banks also investing heavily - but the imbalance between producer and consumer regions within the EU. All that money has gone into infrastructure, housing booms and unsustainable largess, not developing modern economies capable of competing with Germany. In the case of Ireland for example, the real economic growth of the 1990s ended in 2002 when exports started shrinking and the prime driver of growth became the construction industry. That's just unsustainable and when the bubble burst there was nothing left to fall back on

In short: German industry is flourishing at the expense of the weaker and more import orientated economies which generally lack a modern industrial base

[piet11111]

The euro was formed to make it easier for trading and economic integration to form an economic bloc capable of standing on equal footing with the USA and other economic powers.

However since having 1 currency but still different economic policy's all economies where moving in different directions some building up huge debt while others where expanding exports at the expense of the weaker country's.

One of the demands the germans made was that fiscal deficit spending did not exceed 3% of GDP.
But no country managed to do that during the crisis and only a few before.

Before the Euro they could just devalue their currency but they can not do so now instead they have to do an "internal devaluation" meaning the slashing of social spending and wages.