May ended in Spain with frantic attempts to prevent the collapse of the banking system, saddled with a massive amount of toxic loans linked to the housing bubble. The government attempted to involve the European Union in the rescue of Bankia, while there were rumours of IMF plans for a bail out of Spain. Meanwhile miners have gone out an all out strike in defence of jobs.
The miners are blockading roads with burning barricades in the mining counties and 10,000 of them marched in Madrid and warned that “next time round we will come with dynamite”. It was a graphic image of the enormous contradictory tensions which have built up in Spain and which now are reaching boiling point. The capitalist class wants to make the workers pay for the crisis, but the crisis is so acute that this is already creating a massive social explosion. The “markets” (i.e. bankers, investors, speculators) doubt that Spain will be able to solve its crisis, sending the risk premium on Spanish bonds to unsustainably high levels. The differential between Spanish and German bonds is now over 5.4 percentage points, a record high, and Spain is being asked to pay 6.6% interest on state bonds, very close to the 7% level which triggered the bail outs of Greece, Portugal and Ireland.
As we have explained before, the two fault lines of the crisis of capitalism in Spain are the massive debts accumulated in its banking system as a result of the housing bubble which fuelled the previous growth cycle, and the budget deficit which has been accumulated by the state as a result of the economic crisis itself and the initial bailout of the banks.
House prices in Spain have only come down by about 20% since their peak (much less than the 45 to 50% drop in Ireland or the US for instance). Some economists calculate that they have to fall by at least another 20% before they stabilise. The banks lent massively to individuals to purchase their homes. Many of the borrowers cannot pay for their mortgages as they have lost their jobs (unemployment has risen from 1.8 million in 2007 to 5.6 million now). The banks also lent massively to building companies, many of which have gone bankrupt or are sitting on an enormous amount of empty finished houses or empty land which they cannot sell on the market.
The total amount of housing credit (to individuals and building companies) on the balance sheets of Spanish banks is probably close to one trillion euro. There are different calculations of how much of that is “risky” or already non-performing. Estimates vary between the €150 billion officially recognised and €250 billion, but as the crisis worsens (Spain is in recession again), this figure is likely to grow even further.
Spain went through over 14 years of uninterrupted economic growth during the period of the boom. European banks were happy to lend massive amounts of money to Spanish banks and became heavily exposed to the Spanish banking system. German banks alone hold 180 billion euro of Spanish private debt.
The banking crisis has come to a crunch with the collapse of Bankia, the country’s fourth largest bank. The bank was created in 2010 through the merger of a series of cajas (regional savings banks) that were in difficulties and €4 billion of state money. Now the government has been forced to nationalise Bankia and will have to pump in another €19 billion. Some 340,000 small investors, who were tricked into believing this new bank was sound as it was backed by the state, stand to lose everything.
It is not only Banka that is in trouble. The Spanish government, which has already been forced to nationalise 8 banking institutions, has passed a series of financial sector reforms, forcing the banks to find tens of billions of euro to cover themselves against non-performing housing related loans.
The key question is: where the banks are going to find the necessary money (over 80 billion euro) to comply with the new government regulations? It is clear that they cannot go to the markets to raise the money, but the state cannot raise the necessary amount to bail them out. The low estimate of the cost of this bailout is €100 billion. As a comparison, the budget cuts approved this year amount to around €30 billion.
Spain wants the European Central Bank (in effect Germany) to intervene. The ECB is resisting. The US has said it backs Spain’s position... which is that Germany should pay! It is of course easy to be generous with someone else’s cash. The Spanish government complains that it has already done everything it could to put its house in order with massive cuts in public spending, a brutal counter-reform of the labour law, etc. This is all true. However, those “reforms” are not enough for the markets to recover their “confidence” in Spain and the risk premium on Spanish bonds keeps rising. No sane investor will trust a government that ran a budget deficit close to 9% of GDP in 2011. The European Union therefore replies that the measures are not enough, that cuts and “adjustment” must be implemented quicker (for instance bringing forward the rise in the retirement age), but that it is prepared to give Spain an additional year to meet the target of bringing the budget deficit down to 3% of GDP (a target which is completely impossible to meet anyway).
As we have explained before, the problem with Spain (and also Italy) is that these two countries’ economies, unlike Ireland, Portugal and Greece, are too big to be bailed out. Spain is the fourth largest economy in the euro-zone. The cost would be unbearable for the European economy as a whole. However, they are also too big to be allowed to collapse. This is the contradiction that Spanish and European (in particular German) capitalists are faced with.
In order to try to solve it, or delay the day of reckoning, they try to find all sorts of deals and stop gap measures. The Spanish government proposed that the banks should be recapitalised by giving the banks state bonds which they could use as collateral to get cash from the ECB. Anyone can see that this is a trick; in effect it would be just another way of getting the ECB to inject money directly into the Spanish banking system, something it does not want to do.
The depth of the crisis and the social unrest it is creating has led to massive pressure from the ruling class in favour of national unity. The Spanish congress passed a resolution, voted by the ruling right-wing PP and the social-democratic PSOE, arguing that Spain should have a common voice in Europe and hinting that Euro bonds are the way forward. The only parties voting against were the left-wing coalition United Left and the small left-wing nationalist parties of Catalonia, the Basque Country and Galicia.
There have been a number of secret and public meetings between PP leader Rajoy and PSOE leader Rubalcaba to find a common position. As always, when the fate of the capitalist system is at stake, the social-democratic leaders can be counted on to behave in a “responsible, serious and statesman like manner”. The “national interest” (read “the interest of the ruling class”) must be put above party politics.
A growing movement of the working class and youth
At the same time, the attempts to unload the burden of the crisis onto the working class have provoked enormous opposition and a series of mass movements over the last year. The spontaneous explosion of the movement of the indignados on May 15 last year reflected a profound change in consciousness among wide layers of the masses in Spain.
While previously people were dissatisfied with the cuts, there was a certain feeling that nothing could be done about them. No alternative was offered by the leaders of the trade unions, who signed up to some of the austerity measures under the previous government of Zapatero, or left-wing organisations. The movement of the indignados at least offered a channel through which all the anger could be expressed.
After a series of mass mobilisations involving millions across Spain, in May, June and October, the movement shifted to the field of struggle against the cuts. We witnessed massive strikes in education in Madrid, a mass movement of the students in Valencia, etc. The massive general strike on March 29 against the counter-reform of the labour law showed the potential for sustained mobilisation against the austerity measures.
The trade union leaders are still not taking a lead, however, and have been unable to place the one day general strike in the context of a sustained and growing plan of struggle. They are now proposing that the next step should be a peoples’ referendum... sometime in the autumn!
Regardless of the intentions of the trade union leaders or their total lack of any strategy, the workers and youth have no other alternative but to come out in struggle. May 22 saw a massive strike of the whole of the education system, from primary to higher education, for the first time in 30 years, and the strike was accompanied by huge demonstrations in all the main cities.
The all out strike of the miners starting on June 1, brings another element into the equation. Up until now it was the public sector workers (education, healthcare) and the youth who were at the forefront of the movement. Now, the heavy battalions of the working class are being literally forced into the battle, as cuts in subsidies to coal mining mean the death of mining counties.
On the same day, shipyard workers also erected burning barricades in Cadiz and demonstrated in Ferrol, Galicia. The demonstration in Ferrol was significant. The mood was extremely angry. The workers, particularly those from the auxiliary companies, had no patience with the pacifying speeches of the trade union leaders and removed them. They forced their way into the local town hall and a Bankia building (the bank which has just been bailed out) with the slogan “the money of the bankers for the shipyard workers”.
The issue of the bailout of Bankia has brought the question of priorities to the minds of millions of people. Healthcare and education have been cut to the tune of €10 billion. Bankia is given 19 billion. The 63% cuts in subsidies to mining amount to under 500 million euro. Something is clearly wrong. Ordinary working people are being asked to pay for the losses of the banks, while members of the boards of these same banks walk away with millions in redundancy packages.
The growth of United Left and its limitations
The main political force which has benefited from this situation has been the United Left. It already scored a high of 12% in a recent poll (up from 6.9% at the elections in November 2011). The PP government is losing significant support in the opinion polls (between 4 and 7 percentage points lower). The PSOE barely benefits from this and, in some of the polls, it even loses votes.
The situation is tailor made for United Left. Many left and trade union activists in Spain are looking to France and Greece and the successes of Melenchon’s FdG and SYRIZA and are hoping that the United Left can match those results.
It is at this crucial juncture that a section of the United Left leadership has backed regional government agreements with the PSOE in Andalucía and Asturias. This amounts to political suicide. In the context of the deep crisis of Spanish capitalism and the harsh limits on regional budget deficits (1.5% of GDP) that the Madrid government has imposed, it means becoming partly responsible for a policy of cuts and austerity.
While it is correct to vote for a PSOE regional government if the United Left votes are necessary to keep the right-wing PP from taking over (as was the case both in Andalucía and Asturias), it is a most serious mistake to actually join a PSOE government that is clearly going to carry out cuts, or to support such a programme.
This false policy has been very quickly exposed in practice. In Andalucía the new joint government of the PSOE and United Left has just announced a budget which includes all sorts of cuts, particularly in wages and conditions for public sector workers. The unions, correctly, are up in arms. This has led to opposition from within the ranks of the United Left (IU) and the Communist Party (the main organisation within the IU coalition) in Andalucía. The Andalucía Communist Youth, the Communist Party branches in Seville and Malaga and a whole host of local IU assemblies have passed resolutions in opposition, to one degree or another. Some are asking IU regional MPs to vote against the cuts, others are demanding that IU regional councillors should abandon the government.
A regional meeting of representatives from local branches took place on May 27, gathering a wide layer of people beyond the traditional left opposition within IU in Andalucía.
As a result of what has happened in Andalucía, a referendum of rank and file members of the United Left in Asturias narrowly rejected a similar proposal by the regional leadership of IU to join a regional coalition government with the PSOE.
Through their own experience, but also by looking at the experience of other countries, above all Greece, different layers of the masses and of the activists are drawing conclusions.
Ruling class stepping up repression
The ruling class is fully aware that it is playing with fire. In the last year, faced with a growing wave of protests, strikes and demonstrations, it has sought to perfect and sharpen the tools of repression at its disposal. We have seen an increase in the use of agent provocateurs against the demonstrations of the indignados, the passing of new laws which make civil disobedience, peaceful resistance and even advocating such methods on social networks a criminal offence, the brutal repression against school students in Valencia, etc. All of these are signs that the ruling class is conscious of the fact that their policies are building up an enormous amount of pressure which will lead to an almighty explosion.
The police repression in the aftermath of the March 29 general strike is a case in point. Throughout Spain, trade union and youth activists, including shop stewards and other elected officials, have been picked up by the police, in most cases weeks and even two full months after the events, with all sorts of charges and in some cases given unconditional jail pending trial.
In Valencia, for instance, the general secretaries of the UGT, CGT and CCOO branches, as well as the president of the shop stewards committee at the Vossloh factory, were arrested on April 23 accused of “disobedience and violation of the right to work.” Also in Valencia, four other trade unionists were arrested in April, accused of organising a “criminal organised group”, for their participation on picket lines during the general strike.
In Barcelona, on April 25, the police went to the SEAT car factory in Martorell and detained two shop stewards from the CCOO and UGT. The police handcuffed them and took them away for questioning in relation to incidents with the factory’s private security on the day of the strike. This is an extremely serious provocation. The police have not dared to enter a SEAT factory for a long time and even less in order to arrest trade union leaders.
In Barcelona we also had the case of three student activists, members of the Association of Progressive Students (AEP), who spent five weeks in preventative prison without bail for their part in road blockades during the general strike. They have now been released on bail of between €4,000 and €6,000, pending trial.
Perhaps the most serious case is that of Laura Gomez, the local organisation secretary of the CGT trade union in Barcelona, who was arrested on April 25 and spent four weeks in preventative jail with no bail, for her part in a protest outside the Barcelona stock exchange on the day of the strike in which there was a symbolic burning of bank notes. She has now been released on a bail of €6,000, pending trial, with the judge banning her from taking part in any protests. The prosecution is asking for 36 year jail sentence.
The ruling class is clearly taking measures to intimidate the growing movement of the workers and youth. Unfortunately, the movement is not yet fully armed to respond; above all is not armed with a clear programme against the crisis of capitalism.
The need for a socialist programme
There has not been a more fertile ground for the explanation of an anti-capitalist programme in Spain for decades, probably going back to the Spanish revolution in the 1930s.
There are no “realistic” solutions within the limits of the system. The idea of a different policy, one based on the “promotion of growth”, of Eurobonds to share out the burden of the crisis amongst different European countries, of the need to tax the rich in order to finance investment in the productive sector of the economy, etc. All of these proposals, which are advanced by some left-wing economists and by the leaders of the United Left are based on the premise that, somehow, the current wave of austerity measures is based on some ideological “market fundamentalism”, put forward by Angela Merkel. If only there would be a change of policy, the argument goes, “from austerity towards growth”, then everything would be solved. There would be productive investment, creation of jobs, the expansion of the market, etc.
This premise fails to address the real crisis that capitalism is facing. The reason capitalists are not investing is because there is already too much unused productive capacity for a capitalist market which is still paying a heavy price for the excesses of the past. The massive expansion of credit (to companies and households) which artificially prolonged the previous boom is now coming back with a vengeance in the form of massive indebtedness of banks, private companies and households which makes it extremely difficult for any meaningful recovery to take place.
The massive private debt is threatening to bankrupt the whole of the Spanish banking system and the attempt to save it with a massive injection of public money is leading to brutal austerity cuts. These cuts are paid by the working class in the form of lower wages and worse conditions, higher taxes and worse services and welfare protection. In turn this leads to a further shrinking of the consumer market (retail sales fell nearly 10% in April) which makes the recession worse.
Furthermore, Spanish capitalists are not investing. Industrial production collapsed by a further 8.3% in April, with production of durable consumer goods going down by 16% and production of capital goods falling by 14%. Foreign capitalists are withdrawing their money from Spain to the tune of €97 billion in the first quarter of 2012. This is equal to 10% of GDP.
In these conditions what needs to be explained is that this is a crisis of capitalism. In the words of Marx:
“The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit.”
In the case of Spain the argument is clear. There are 5.6 million people, with skilled hands and alert brains, condemned to idleness. They could all be put to work to carry out tasks which would be useful from the standpoint of the general needs of society. However, this is not the case, while billions of Euros of capital lie idle in the accounts of the companies, the banks are being bailed out to the tune of billions of Euros, and 26% of the existing productive capacity is also idle.
The only obstacle for all these factors to being put to work (human labour and capital, both money and machinery) is the fact that production under capitalism only takes place if there is a possibility for the owners of the means of production to make a profit out of it.
The conclusion is obvious. The private profit motive has to be eliminated. The means of production have to be taken into public ownership so that they can be harnessed into a democratically decided plan of production to the benefit of the majority in society.
This means a radical change in approach. Instead of trying to fix the capitalist system (something which cannot be done), what is required is a strategy based on overthrowing it and replacing it with a rational and democratic system of production: socialism.
The United Left is already benefiting from the growing mood of questioning of the capitalist system, at least in the opinion polls. It needs to adopt a clear socialist program linking all the different struggles which are taking place – against cuts and austerity measures, in defence of jobs, conditions and public services, against home repossessions by the banks, in protest at the bail out of the banks, etc. – to the central question of the ownership of the means of production.
Such a program should include a sharing out of work through the reduction of the working week to 35 hours without loss of pay, the opening up of the books of all companies implementing lay-offs or redundancies so that workers can see where the profits created by their labour have gone, the nationalisation under workers’ control of all companies going bankrupt or laying off workers, the nationalisation and centralisation of the whole of the banking and finance sector so that its resources can be invested in the productive sector on the basis of social needs, the repudiation of public debt, the nationalisation of all empty homes to rented out as part of a social housing sector with rents not higher than 10% of average wages.
A bold program of socialist measures would be an extremely powerful point of attraction for the millions of workers and youth that are being awoken to political life by the hammer blows of the crisis of capitalism. United Left should use its parliamentary tribune as a loudspeaker for these struggles and to explain a socialist alternative to the crisis.
The main task of the day, therefore, is to gather the most advanced activists of the working class and youth movement around a clear understanding of the need for a Marxist approach to the crisis we are facing and a socialist programme which provides an alternative. This programme needs to be defended within the movement in general, but in particular within the ranks of United Left.
Stormy events are being prepared in Spain which will make the last one year seem like a period of relative calm. In the course of these events, a growing layer of workers and youth, on the basis of their own experience and the patient explanation of the Marxists, will come to the conclusion that capitalism needs to be overthrown.
Website of the Spanish Marxists: Lucha de Clases