Both the unevenness and depth of the brewing social crisis are stark in Europe, where the less developed countries locked into the eurozone’s currency and trade union are being hammered to no end—particularly Spain and Greece.
In China, industrial production expanded slightly but at its slowest pace in eight months. New export orders have also dropped. Manufacturing jobs have been cut at the sharpest rate in more than three years, according to an HSBC report.
In the U.S., industrial production slowed to its weakest level in nearly three years, according to the Financial Times. Manufacturing contracted for a second consecutive month in July and export orders fell to the lowest level since April 2009.
Germany’s export-driven economy, the largest in Europe, has also experienced a manufacturing decline and the steepest drop in new export orders in July of any country within the 17-nation eurozone. Chinese factories buy much of their machine tools and equipment from German firms. At the same time, Germany’s unemployment rate stands at the relatively low figure of 6.8 percent.
Throughout the eurozone, factory production has dropped to its lowest level in more than three years.
As they target the working class with unrelenting demands for cuts in living standards, the propertied rulers are advancing various financial schemes to put off defaults on the massive government debt owed to banks and other bondholders in hopes of averting breakdowns in finance, on which modern capitalist economic activity depends.
Impact of crisis in SpainIn Spain, nearly one-quarter of all workers are unemployed, and for those under age 25 the figure is more than 50 percent. To survive, many workers have moved back with their parents. “Spain has the highest rate in Europe of multi-generational families bunking in together,” reported the Los Angeles Times. “Two-thirds of Spaniards under age 30 still live with their parents.”
A survey conducted earlier this year by Simple Lógica, Gallup’s partner in Spain, reported a sharp rise in adults 65 and older supporting younger relatives. In February 40 percent did so, up from 15 percent two years earlier. Pensions for the elderly are among the few benefits that have thus far not been slashed, though they have been frozen since last year, noted a New York Times article.
Among more than 5 million immigrants in Spain, the official unemployment rate stands at 37 percent. In the first half of this year about 230,000 immigrants as well as more than 40,000 other Spanish workers left the country, according to the National Statistics Institute. Spain’s population is declining for the first time in decades.
In mid-July, in response to the Spanish government’s demand for $80 billion in spending cuts for jobs and social services and higher taxes on working people, thousands of workers rallied in Madrid. They were joined by thousands of miners who had marched some 250 miles over 20 days from the Asturias region of northern Spain against cuts in mining subsidies that will result in mine closures and job losses.
Housing bubble collapseSpain’s earlier period of ostensible economic growth was based in part on massive investment in housing construction, reaching its peak in 2006. The collapse of the housing bubble has sent real estate prices tumbling. The country’s housing price index dropped 8.3 percent from a year earlier reported the Wall Street Journal in mid-July, with no indication it’s bottoming out.
“In the entire recorded history of capitalism there has never been a property crash that hasn’t been followed by a banking crisis. Spain has a huge property crash, and it’s not likely to be the first exception to that rule,” stated a May 30 MarketWatch article titled “6 Reasons Spain Will Leave the Euro First.”
In May, the Spanish government bailed out Bankia, the country’s third largest bank, to the tune of $24 billion. Two months later, eurozone authorities approved a $123 billion bailout to be directly funneled to additional Spanish banks.
This move includes a scheme to set up a “bad bank,” where worthless assets can be placed under government ownership, cleaning up on paper Spain’s banking books.
Shoring up Spanish bonds is now also being discussed. In response to interest rates hovering around 7 percent on 10-year government bonds, Prime Minister Rajoy is considering asking that “Europe’s rescue fund buy its sovereign bonds to bring down its borrowing costs,” the Financial Times reported Aug. 4.
Preparing for a euro breakup, U.S. banks are engaged in “work behind the scenes to ensure that if a country leaves the eurozone they will not have to receive payments in a devalued [Greek] drachma or [Spanish] peseta,” the paper noted Aug. 6.
In Greece, the government approved Aug. 1 a new round of austerity measures of $14 billion that include targeting pensions. Coalition government leaders from the Socialist Pasok and the Democratic Left parties, both of which had been urging these cuts be spread out over four years, decided to back the proposal of Prime Minister Antonis Samaras, leader of the New Democracy Party, to implement them in half that time.
Amid high unemployment, the government has been tightening its borders and scapegoating immigrants, whose labor is no longer in great demand by bosses. Authorities detained 6,000 people in immigration raids in Athens August 4-5. “Officers across the city were seen stopping mostly African and Asian people in the street for identification checks,” reported AP.
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