The calculations of European politicians have come unstuck. Political favours, patronage, trusted allies and deals that worked to produce results in the past now do not work at all. The evolution of the crisis says: ‘You have no more money’. That is the simple message that has led to the resignations of Berlusconi, imperious clown of Italy, and Papandreou, dynastic head of Greece.
As previous articles on this blog have shown, things are getting worse. The impact on Europe has hit the headlines most in recent weeks, with the media focus on rising bond yields, reflecting the lack of credibility that governments have in resolving the crisis. Even the European Financial Stability Facility (the more words, the less content) faces rising yields, leading to a situation where, as one market analyst put it, “the vehicle that’s supposed to borrow on behalf of countries that can’t borrow, can’t borrow.” Read that two or more times, and you will get the idea. How the EFSF is meant to leverage its remaining funds to €1000bn in this situation I will leave to the geniuses of financial engineering.
The capitalist solution to the crisis involves a wholesale destruction of conventional living standards, and more besides. There are no solutions that any political party in crisis-stricken countries can propose that will get widespread support, but the destruction will get under way in any case. More Italians may hate Berlusconi now, but his exit will do nothing to resolve Italy’s problems. The resolution implies austerity, and no reduction in Italian bond yields based on his demise will prevent that. The same thing applies to Greece, which seems to have stepped back from the brink of what may have been an even bigger shock to its living standards – leaving the euro – than is now going to happen, minus Papandreou.
The main European imperial powers, Germany and France, have their own reckoning to ponder. Busy trying to maintain the system they built, they have found their own finances under threat, as reflected in the weakened position of the EFSF, Sarkozy’s worries about French banks and Merkel’s troubles in the Bundestag. ‘Merkozy’ can deliberate, but the capitalist market decides. That is what the Law of Value is all about.
Tony Norfield, 8 November 2011
 See ‘It Can Always Get Worse’, 22 September 2011.
 See Lex Column, Financial Times, 3 November 2011.
 In my view, the costs for Greece of leaving the euro are huge. There are no historical examples of leaving a currency system after having given up the domestic currency and having spent a decade writing commercial contracts in a joint currency. The banking system may collapse within the euro system; it would definitely collapse outside of it.