COVID-19, The Next Financial Crises And The Next Political Revolution

By Theodore Shoebat

According to a recent report from Euractiv, the European Union is “facing the prospect of slipping into recession by the end of the year.” This recession will be merely a continuation and exasperation of what the 2008 financial crises triggered. As former Greek finance minster Yanis Varoufakis warned: “Undoubtedly, the coronavirus is going to accelerate the post-2008 crises. Now, don’t let anyone tell you that that crises ended and now we have a new one. The 2008 crises never ended.” Varoufakis also pointed out in an article that there is a “massive recession already in progress following the lockdown of much of Europe’s society.” These loans are described by Varoufakis as “a drop in the ocean.” Another recession will further reveal the class and nationalist divides within Europe. Varoufakis warned about the rise of racial and class tensions in the midst of the coronavirus crises, and referred to “the nationalist, the ones who want to build taller walls between our countries, and the ones who are benefiting politically by turning one proud against another, one person against another, one member of the working class against another member of the working class”

Even when the coronavirus’ lifespan ends, many businesses and jobs will be lost, and Europeans will not earn enough money to pay back that they owe on taxes which have been postponed during quarantine policy and new taxes. “Europeans needed a tax haircut. Instead they got a deferment,” explains Varoufakis, “a kind of state loan by which to repay their taxes later. Yet more spectacular proof that the Eurogroup has not learned its lesson from the 2010 euro crisis: Loans to the bankrupt do not help!” In an article published on Project Syndicate, Varoufakis reported that finance ministers in the Eurogroup could not agree on a serious fiscal response “to the enormous recessionary effects of the COVID-19 pandemic.” To demonstrate that Europe is not coming up with a significant reply, he points to German government’s financial aid package to the private sector, touted by the media as a 550 billion euros ($600 billion) solution, but which Varoufakis calls “no more than a water pistol.”

The European Investment Bank will offer 8 billion euros to 100,000 European firms, and wants to increase this to 20 billion euros. This solution may keep things afloat, but it will be temporary. Within the German government there has been serious talk about the country heading towards a recession if the quarantine rule continues to be applied. According to the best-case scenario, if the lock on the market lasts five weeks, there could be a recovery within three weeks. Germany’s GDP will shrink by 2.8%, while next year it will grow by 3.7%. If the market stays closed for seven weeks, the recovery will take five weeks respectively and GDP fall to 5.4%. According to the most pessimistic scenario, GDP will fall by 4.5% and by 2021 will achieve a very slow recovery, with only 1%. Merkel’s financial advisors are predicting the worst recession since 2008. The economy to shrink by 2.8% in 2020, according to the German Council of Economic Experts. They concluded: “In all three scenarios, the spread of the coronavirus abruptly ends the emerging economic recovery, so that a recession in Germany in the first half of 2020 will be unavoidable.”

Currently restrictions on shopping and business are to continue until April 20th, but if they get extended by a longer period, the economy may experience a recession of 5.4%. In both cases this will be the worst decline since 2008. Economic consultants within the German government reported: “The outbreak of coronavirus has halted the initial recovery. The German economy will shrink significantly in 2020”. 

The head of the European branch of the International Monetary Fund (IMF), Paul Thomsen, estimates that the economic impact of the coronavirus pandemic on Europe will be particularly significant. According to Thomsen, the pandemic hit Europe with incredible savagery, and he wrote: “We may not know how long the crisis will last, we know the economic impact will be severe,” Thomsen stresses.

Greece will be hit the hardest out of the European countries, since it has never fully recovered from the 2010 crash in which it was in the worst position of the Euro Bloc. Indicative of this is the fact that the Greek government has allowed for employers to reduce salaries by 50%. The opposition party within the Greek  government said:

“Greece is the only country in Europe that, instead of the government supporting workers and businesses, leads thousands of workers to layoffs and salary reductions of up to 50% indefinitely, creating a new generation of unemployed and poor.”

The economic situation will be a catalyst for several things: one, it will bring society to an awareness of how much we rely on the working class, the blue collar worker; it will be said that during this crises, what kept nations alive were those who, for such a long time, have been deemed as “low skill laborers,” and that such a view needs to change from one of low esteem to one of praise and appreciation. This view, while good and necessary, will also be used by socialists as a way to foment class tensions between the workers and the elites, the landlords and the employers. This is what took place in England in the late 1300s, when the plague killed so many peasants and the working class (people who labored for the land owners) was limited and thus realized their necessity, sparking an anti-elite sentiment that imploded as the Peasant Revolt of 1381.

If 2008 and 2010 saw the rise in class anger and nationalism, then another recession due to the virus will only exasperate what is already there. We are already seeing class anger in France with the Yellow Vesters and other class struggle activists. In an article published by L’Opinion, it reads that quarantine lockdown measures have given the Yellow Vest movement “a new field of expression for the slogans they wore in the winter of 2018.” This entails the defense of one’e living conditions, and at the same time, a vitriolic distrust against those who are seen as “privileged”. If a diesel tax triggered the Yellow Vest movement which lasted from 2018 to 2020, then imagine what another great recession will cause. And the economic impacts of this recession could be worse than 2008; for at least with that crises, the Federal Reserve flooded European banks with American dollars, thus allowing some form of normality in the economy. The question is, if Europe has another great recession, will the US bail out the Europeans? 

Germany is planning on increasing its budget by 750 billion euros to boost up the economy, while Italy only wants to increase its national budget by 25 billion euros – even though the Italians were hit much harder. What is being promoted is the idea of “corona bonds,” or the issuing of debt by the European Central Bank to European banks so that loans can be given to businesses and the economy can be brought to stability.

Nine of the 19 countries in the Euro Zone, including Italy and France, are exhorting for the issuing of corona bonds. The nine countries issued a statement saying:

“The case for such a common instrument is strong, since we are all facing a symmetric external shock, for which no country bears responsibility, but whose negative consequences are endured by all”.

But Germany, Austria and the Netherlands — all surplus nations of the EU — are opposing corona bonds since they don’t want to underwrite spending by poorer countries. “We made clear from the German side, but also others did as well, that this is not the opinion of all states,” Merkel said in regards to corona bonds.

Instead, the surplus countries are flirting with the idea of using the European Stability Mechanism (ESM) to support individual countries. The ESM was founded in 2012 during the euro crisis, and 410 billion euros would currently be available there. A result of the ESM plan would be more polarization between the surplus countries and poor countries, since it would disintegrate the Euro Zone into supposedly “good” and “bad” countries, with Germany being the top country and Italy and Greece being, in the words of a report from Taz, “the official scum.” The Taz report concludes: “The EU cannot survive if it is not even possible to act in solidarity in an emergency.”

The coronavirus crises is already causing polarization within the EU and weakening to integration of the Bloc. This is due to the indifference of the EU towards the country most devastated by coronavirus, Italy. When Italy appealed for help through the Emergency Response Coordination Centre, help did not come. “We asked for supplies of medical equipment, and the European Commission forwarded the appeal to the member states,” Italy’s permanent representative to the EU, Maurizio Massari, told Foreign Policy. “But it didn’t work.” On March 14th, 2020, Foreign Policy reported: “So far, not a single EU member state has sent Italy the needed supplies.”

So from all of this, we can see a number of things happening: growing tensions between the poor and the rich — class struggle; and secondly, an increase in nationalism and anti-globalist and anti-EU fury, to where people will ask the question: ‘What is the point of the EU when they did not help us in this terrible crises?’ The the weakening of the EU will put Germany in a position to increase power for herself, since she is the biggest economy and controls the EU bank, she thus has the leverage to bolster herself. Moreover, if Germany goes through a recession, nationalism will as well increase in her country. In April of 2017, the son of a major Nazi leader in the Third Reich, Hans Frank, told BBC that Germans are only clam when their economy is good, and that once the economy goes down, people will become vicious:

Economic turmoil brings about class struggle, and when the workers get angry they are easily taken like a fish in the net by charismatic ideologues who convince them of their ideologies, be it National Socialism or Left-wing socialism. The workers will think that they are combating “the elite,” when the reality is that they will be controlled by some elite who will back their ideological movement (think Brexit). Class tension leads to a situation easily controlled by despots (think Lenin’s Marxist revolution, backed by Germany); class tension leads to nationalism, and nationalism, if left unchecked, will lead to global combat.

In class struggle, it is the employee versus the employer, but this struggle manifests due to an imbalance in the relationship between worker and employer. 

“Slaves, obey your earthly masters with respect and fear” (Ephesians 6:5), the rejection of this, is revolt. “Masters, do the same things unto them, forbearing threatening” (Ephesians 6:9), the rejection of this, is tyranny over the poor. The rejection of both of these teachings means the beginning of class struggle, and thus a Marxist Fascist war.