The European Parliament elections in May could turn out to be very important for Marine Le Pen, the leader of the French National Front, and for her allies throughout the EU. If, as predicted, Far Right parties perform well, it will signal the growing disaffection the working classes feel toward the policies that have driven Europe into crisis and have kept unemployment high and wages stagnant.

For nearly two centuries, the resolution of any financial crisis has always involved a fight between workers and bankers, each of whom proposes to resolve the crisis in different ways. Bankers want stability above all, which to them includes maintaining the value of debts. Workers need growth, even if that comes at the expense of the monetary system and of creditors.

The euro crisis is one in a long line of battles between the two groups. Bankers insist that countries in the EU’s periphery like Spain must act “responsibly.” To them, that means that those states must remain within the eurozone and service their debt burdens, no matter how painful it is for the economy and for workers. If any country were to leave the eurozone and to restructure the debt they owe directly or indirectly to Germany, bankers warn, the economy would fall into chaos.

Michael Pettis
Pettis, an expert on China’s economy, is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets.
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But that advice comes at a steep price. Nearly fifteen years ago, Germany initiated policies to force down the wages of German workers so that they could compete abroad. These policies have caused European demand to collapse, especially now that other countries are forced to do the same. As long as Spain remains within the eurozone and debt levels remain high, the Spanish economy must accept an excessive share of the resulting unemployment for many more years.

To save Europe, Germany must boost domestic demand by raising the income of German workers. This will allow the rest of the EU to do the same. But because Germany’s bankers are mainly concerned with the country’s debt and its banking system, Germany will not take the necessary steps to support its workers.

It is important to understand Germany’s objectives. In the 1980s, American banks were too weak to accept that Latin America was insolvent. It was not until 1988–89, after they had rebuilt their capital base sufficiently to absorb the losses, that American banks recognized the reality, and in 1990 the region began to receive partial debt forgiveness. And only then did Latin America begin to emerge from the horrible economic crisis that brought with it political instability and social collapse.

Like the United States in the 1980s, Germany today cannot accept that European debts are unsustainable. Until its banks recapitalize, which will take many years, Germany will demand full repayment. And like Latin America in the 1980s, Europe will not recover until it regains monetary flexibility and partial debt forgiveness.

This war between bankers and workers has been fought many other times. In the United States after high gold prices in the late nineteenth century put unbearable economic pressure on American workers, William Jennings Bryan, a radical progressive politician, famously demanded in 1896 that New York bankers not “crucify” the American working class on “a cross of gold.” He nearly won the U.S. presidency. It was only the lucky discovery of massive amounts of gold in South Africa that brought relief to American workers and ended Bryan’s career.

At the other end of the political spectrum, Adolf Hitler rose to power in a Germany whose workers struggled to repay the country’s enormous war debts. It has always been clear that whether the right or the left gains workers’ support during a crisis depends on who strikes out most strongly for the workers and against the interest of the bankers.

This is why Marine Le Pen matters. She has taken the lead in attacking the monetary straitjacket imposed on the French economy and has demanded that France exit the eurozone. It is for this, as well as for her anti-immigrant beliefs, that much of the French elite abhors her. But there is no question that in working- and lower-middle-class communities away from the capital, Le Pen’s message on the euro has garnered tremendous support.

In the end, Europe’s crisis will have to be resolved somehow. If the parties of the left and the center allow the extreme right to dominate the discussion, it will be the extreme right that resolves the problem in the ways it chooses. As long as mainstream politicians refuse to recognize that remaining within the eurozone and rolling over the debt will condemn the EU to many more years of economic pain, they will become increasingly marginal to the debate.

On this point, history is very clear. Watch Marine Le Pen and her allies carefully. If mainstream politicians are too frightened to face reality, she will have the workers on her side, and her ability to influence the debate about the euro will only grow.