Europe is haunted by austerity. Public sectors across the European Union (EU) are being cut back and working-class gains from the post-war period systematically undermined. It is often argued in the media that citizens of richer countries will now have to pay for the ‘profligacy’ of citizens from indebted countries. Cultural arguments of apparently ‘lazy Greek’ workers as the cause of the crisis are put forward despite the fact that Greek workers are amongst those who work the most hours in Europe. In any case, it is not the Greek, Portuguese, Irish or Cypriot citizens and their health and education systems that are being rescued. It is banks, that organised the lending of super-profits to peripheral countries, and that were exposed to private and national debt in these countries. For example, German and French banks were heavily exposed to Greek debt, and British banks to Irish debt, with much of this exposure having now been socialised through bond purchases by the European Central Bank (ECB). In this chapter, we will assess the causes of the crisis, its implications for workers and discuss the politics of labour in response to the Eurozone crisis.

Conceptually, assessments of developments in the European political economy have been dominated by institutionalist analyses from within the Varieties of Capitalism literature. As we will argue in the next section, this literature, which is beset by problems of methodological nationalism, is unable to take into account the underlying social relations of production that link the various political economies closely together, with developments in one affecting the others. Second, development within the EU, especially of countries in the periphery which are now in trouble, such as Greece, Portugal, Spain and Ireland, was generally assessed along the lines of David Ricardo's theory of comparative advantage, with the idea that everybody would benefit from free trade and ultimately reach the same kind of development level. Instead, we will argue that, as borne out in empirical reality, capitalist development and expansion is characterised by processes of uneven and combined development. Importantly, unevenness exists not only between countries in the core and the periphery, but also within countries, be they in the core or periphery.