Le Monde carried an article on Saturday bearing the headline ‘At the intersyndicale, hardliners lose ground (A L’intersyndicale, la ligne dure perd du terrain)’, an analytical report direct from the meeting of the various French union centrals by Claire Guelaud. Apart from the interesting journalistic point I could make that such illuminating industrial reportage, once a prestigious ‘beat’ (the Industrial Correspondent), particularly in the UK and latterly almost extinct, is vital for any informed citizenry, the article more importantly shows how far from adhering to the stereotype we have beyond France (and even domestically) that the French are incorrigible ‘greve-ophiles’, ready to descend into the street at the drop of a beret, the movement is heading toward a defeat consciously constructed by a majority of the union leadership, who are petrified at a ‘debordement’, or overflow of the struggle beyond their control.

The unions have called for two further days of action - one of strikes and demonstrations on 28 October, during the week of a parliamentary vote, and a second of ‘mobilisations’ on 6 November, ahead of the promulgation of the law by the president. All of which might on the face of it suggest the union leaders remain committed, and that the movement will continue. Le Monde’s reporter describes how the union leaders are conscious that the persistence and strength of actions since the beginning of the autumn “renders impossible a premature halt to the movement.”

The mobilisations will continue both during the coming week’s All Saints holiday that Sarkozy has hoped would interrupt and drain the energy of the movement - particularly of students and pupils - and afterward. All the ‘reformist’ unions (Le Monde’s term for the more conservative unions, not mine) - the CFDT, the UNSA, the CFTC, and even the ‘tres reservé’ CFE-CGC - have all called on their troops to keep up the pressure.

However, as the journalist accurately notes, “the centre of gravity has shifted and the hardliners have lost ground.”

The FSU and Solidaires union centrals, both of which had wanted earlier days of action, and Force Ouvriere, which continues to call for a general strike, did not win the day. (The latter two did not sign the resulting intersyndicale communiqué, but the FSU did.)

The crucial quote in the article is the one from Marcel Grignard, the ‘number two’ in the CFDT, the union central close to the Socialist Party, which quietly, and not so quietly in the form of Dominique Strauss-Kahn, the head of the IMF and frontrunner to be the party’s presidential candidate next time around, has supported the pensions reform.

Grignaud: “Our responsibility as trade unionists is to construct compromises that make sense, and not to threaten the legitimacy of parliament or politics.”

The intersyndicale communiqué reminds that the mobilisations will continue “respecting property and people” and makes no mention of other actions and strikes concurrently underway, making links with other confrontations and thus generalising the movement.

Finally, reading between the lines, the UNSA and CFDT have already signalled their surrender, so long as Sarkozy is able to complete passage of the law, saying in essence that this would end the current level of industrial action.

“We will stay together for as long as the parliamentary debate lasts and the imposition of this reform,” said Jean Grosset of the UNSA.

“For the CFDT, the closure of parliamentary debate and the promulgation of the law will create a new situation,” said Grignard.

The CGT, the union close to the Communist Party, for its part has effectively done the same. In the words of Nadine Prigent, a member of the CGT executive: “We demand the immediate opening of negotiations. We will see what the head of state decides and will proceed step by step.”

The reporter is clear to say that none of this suggests a progressive “atterrisage” or “landing” of the movement: What direction the leadership of the CGT takes to manage the various internal tendencies within the union is crucial in the coming days, such as signs of a “wise prudence” on their part. She notes that the desire on the part of the CGT to maintain a unity of action with the more moderate CFDT weighs heavily: “The CGT knows that the the unitary character of the movement is decisive,” remarked Prigent on Thursday night.

“Given these conditions,” writes the reporter, “6 November could be the last day of mobilisations and demonstrations.”

All of this is less important for what occurs in France as far as this particular law goes than for the rest of Europe in the face of the imposition of austerity. The markets, the European Commission, the European Central Bank, the IMF, and Berlin, the invigilator of EU member-state fiscal policies, are all watching the balance of forces in two member states in particular: France and Greece, where opposition forces are the most organised and politicised.

Last week, the IMF and the Greek government began to tentatively discuss an extension repayment of Greece's €110 billion loan. While Brussels and Berlin immediately rejected the idea out of hand, Costas Lapavitsas, a Greek economist at the University of London, told the EUobserver, the EU affairs online newspaper, that he believes that this opening of the discussion on Greek debt repayment is actually an indication that the Greek government and the IMF are beginning to feel more confident that the austerity shock measures are working.

"This is basically signalling a new phase of the crisis. They believe that they are meeting success in stabilising the deficit. The recession is still unfolding and is pretty serious, but the government believes that this is looking like it will be within what the IMF expects for this year," he said.

He also said that a second crucial factor behind the comments is that the IMF and Greece have managed to push through the programme without stirring massive popular opposition to the extent that was originally feared.

"There has been discontent, to be sure, but not in an organised or decisive fashion that could threaten the political situation."

Elites feel, with some justification, that they have held the line in Greece. Thus it is not even that the failure of the French popular movements to halt Sarkozy’s pension reform will only add to their overall confidence, but that it will send a signal to them that they can push through anything.

The struggle in France is pivotal. The state of the struggle across Europe hinges upon what French grassroots forces beyond the trade union leadership are able to achieve in the republic in the coming hours and days.

***

For additional information and perspective, see the following pieces: "The Revolt Shaking France", and "France: a key moment as unions meet to consider next move".

Lord Hutton of Furness has produced his interim report on public sector pensions. This is the important thing you need to grasp: the main reforms are proposed with a specific aim of squeezing revenue out of public sector workers so that the Treasury can pay off the bankers. This is not about fairness, much less about "gold-plated" public sector pensions. It is a simple raid on the future wages of the lowest paid workers for the benefit of the rich. Secondly: this transfer of wealth to the rich is part of an ideologically-driven class-motivated attack on the welfare state. We know the background. There is no urgent need to pay off the deficit. Most of the debt doesn't mature in less than three years, and the cost fo borrowing is still low for the UK. There is also no particular need to pay off the deficit by attacking the public sector. Higher taxes on those who bear most direct responsibility for this crisis could easily pay off the deficit. Alternatively, a redistribution and stimulus-based growth strategy would produce the revenues needed to pay it off. So, these are elective measures reflecting the class interests and the ideological priorities of those driving the policies. And Cameron has made it clear that he intends to make these cuts permanent.

Some context. One of the most shameful things about the last government was the way they proceeded to attack the fundamentals of the pension system without ever consulting the public. In their last term especially, they planned a wide-ranging series of neoliberal reforms as the Blairites became impatient to make their mark in a lasting way. At bottom was New Labour's determination that the burden of pensions should shift from state provision through taxation to private sector provision, based on financialised packages. Peter Mandelson had been very impressed on a 1996 visit to Chile with the privatised pension system set up under Generel Pinochet. He in turn impressed the incoming Blair government with his findings. This aspect of New Labour thinking arose as private sector employers were attacking their own defined benefits and final salary pension schemes, as part of their drive to raise shareholder value and reduce the cost of employment. So, just as the private sector pensions system was falling to pieces, the government saw fit to attack state provision, and a tripartite consensus evolved on this issue. One of the few things restraining the government's blows was that pensioner poverty was a hot political issue. The government found this out to its cost when a political backlash engulfed it over a miserly 90p rise in state pensions in one budget. This was at a time when public sector spending was being deliberately slashed by the government, and the spending as a proportion of GDP sank well below the levels of the Major administration. They could get away with deep, though temporary, cuts in spending on health and education, but on pensions they were forced to retreat. So, the conundrum for the government was how to reduce the amount of state provision in a politically acceptable way. In its last term, with Blairites like James Purnell and John Hutton itching to make their mark, New Labour contracted the services of the princes of capital, such as Lord Turner and David Freud to fundamentally reform the whole benefits and pensions system, with the aim of qualitatively reducing state provision. This involved, among other things, raising the retirement age to levels over and above the age to which many working class people can expect to live.

Now, amid a uniquely devastating global crisis, the government has sought to shift the burden of the crisis from the banks to the Treasury, and ultimately onto the working class. A gold-plated government of millionaires has appointed a gold-plated New Labour Lord, John Hutton, to draft a report justifying attacks on what the Deputy Prime Minister Nick Clegg calls "gold-plated public sector pensions". The result so far is this, Hutton's interim report pending a final report in two years' time. In a nutshell, Lord Hutton - former work and pensions secretary under New Labour - advises the government to increase employee contributions to the pensions, as the most effective short-term way of raising funds for the Treasury. This is specifically cast in terms of raising revenue in the short-term. The government is also urged to increase the retirement age in the public sector, though this is more of a long-term measure as it is considered an unlikely candidate for the immediate fiscal gains the Treasury seeks, and reflects the wider commitment to reducing the scope of the welfare state. Bear in mind that new entrants to most public sector occupations already retire at the age of 65, with the only exceptions being the police, the fire service and the armed forces, who retire at 60 due to the physical demanding nature of their jobs. Hutton also advises the government to look for ways to end the final salary pension system, which he judges is "inherently unfair". Instead, he urges shifting to a pension scheme based on some sort of "career average".

To believe that public sector pensions are "gold-plated", you'd have to be living most of your waking life in the comment pages of the Daily Telegraph. The average public sector pension is worth £7800. In local government, it's £4000, dropping to £2800 for women. For this pension, public sector workers contribute over 6% of their wages throughout their working lives. Hutton, in his report, acknowledges as much, dismissing talk of gold-plated pensions as "mistaken" since for "the most part", these pensions are "fairly modest by any standard". If they seem generous to some, he says, it is because the private sector pensions system has been so degraded over the years. But given such an acknowledgement, the standard of justification required for an attack on such "modest" provision becomes all the higher.

Hutton's approach in that regard is standard Blairite 'modernising' talk. People live to a grand old age these days, we are informed, and the buggers cost more to feed and clothe. Some people, Hutton points out, spend 40% of their lives in retirement. But this is not the case for the vast majority of public sector workers, who are among the lowest paid skilled workers in our society, and many of whom work until the physical nature of their jobs means they can no longer do it. They do not have the option to work longer. Meanwhile, some of the features of some public sector pensions go back years, and years. For example, the final salary principle has been in place in the civil service, in different ways, since 1859 - though the system has been through numerous reforms since then, the basic principle has remained intact. Which obviously means that there must be smething wrong with it. No surprises there - Hutton was once part of a government that thought it high time to abolish rights established in the Magna Carta, such was its modernising zeal.

Further, Hutton notes, provision in the state sector is increasing overall, while defined benefit pension schemes in the private sector are diminishing in value. Thus: "around 85 per cent of public sector employees have some form of employer sponsored pension provision compared to around 35 per cent in the private sector." By the standard perverse logic of 'modernising' reforms, the failure of the private sector is used as an excuse to attack the public sector. Last example: Hutton argues that there is an "imbalance" between employer and employee contributions to pension schemes. It's a vacuous claim. What "balance" is appropriate is surely a value judgment, and the implied assumption that there is an "imbalance" which favours employees is not an explanation in itself - rather it demands explanation. For the sake of context, recent reforms have already capped employer contributions to public sector pensions schemes, leaving employees to foot the bill for any shortfall.

Overall, the claim is that changing demographics mean that a system with characteristics developed in the 19th and 20th centuries is no longer suited to the task, and must be reformed in order to reduce the cost of pensions to the taxpayer. But the cost of public sector pensions is not huge. The value of the main unfunded public sector schemes is approximately 1.7% of GDP, and it is projected by the National Audit Office not to have increased at all in 50 years time. The net public sector pension cost, defined as the difference between present employee contributions and present costs, is much lower, closer to 0.3% of GDP this fiscal year. It can vary depending on the rate of inflation, but it is still eminently affordable. According to Diane Abbott, who has been an active participant in debates emerging from the Work and Pensions Committee's proposed reforms, the Treasury spends twice as much on tax relief for private pensions as it does on public sector pensions. Repeat and underline: raising employee contributions is just a way of squeezing revenue out of public sector workers to enable the government to pay off the bankers. It has nothing to do with fairness, or affordability.

The unions are warning of anger, as well they might. Unison is "adamant" that replacing final salary pension schemes with career-based schemes will sharply reduce the incomes of public sector workers in their retirement, which is in fact the purpose of such reforms. Unite points out that this attack on pensions will hit women the hardest, as 70% of public sector workers are women. The unions uniformly point out that public sector workers are already living with pay freezes and de facto pay cuts. Changes to the calculation of pensions, using the Consumer Price Index on inflation instead of the Retail Price Index, has already wiped billions of the value of public sector pensions.

Noticeably, however, the tone of the responses from Brendan Barber and Dave Prentis, and the GMB, including a cautious welcome of some of the interim report's points, suggests that the larger unions are breathing a sigh of relief that it wasn't much worse, and are themselves unlikely to mobilise over this issue. If anything they want to use Hutton's report as leverage to resist some of the more aggressive Tory plans. In truth, as anyone looking at the right-wing press coverage could detect instantly, the Tories didn't need Hutton to endorse the most slash-and-burn approach. It endorses the basic idea that public sector pensions are unaffordable, which is crap, and encourages the government to undertake both short and long-term reforms to dramatically reduce the cost to the Treasury of those pensions. That's all they needed. Unless the unions do begin to mobilise far more quickly than they have been ready to so far, the Tories will use every opportunity to cut deeper than anyone expected.

So, George Osborne has sounded the trumpet blast of the Tories' war on public spending, finally acknowledging that the cuts he intends to make will approximate 20% across departments, and will take aim at welfare, tax credits, and pensions. This was always in the pipeline. Nick Clegg has tried to soften the blow by insisting that there will be no return to the mad, belligerent era of Thatcherism, and that the cuts will spare the vulnerable - but pensioners, the poor and welfare recipients (as well as the consumers of public services more generally) are in fact "the vulnerable". They're among the most vulnerable people in society. As Stumbling and Mumbling points out, moreover, Clegg is being extremely disingenuous, to the extent that Thatcher never acheived anything like the level of cuts that ConDemNation intends to deliver.

There is a potential element of shock-and-awe strategy going on here, as the Tories talk up their intended cuts, only to watch the relief set in as they introduce cuts of "only" 15% or 10%. When Cameron warns that the reduction of the public sector will fundamentally alter the British "way of life", it certainly looks like an attempt at rhetorical escalation. But the trouble is that in order to reduce Britain's long-term structural deficit, as the coalition is committed to in its founding pact, meet its new spending commitments, keep to its tax cuts, and ring-fence spending in defence etc., it has to cut spending by even more than it is presently advertising.

The key justification for this policy is the need to restore 'confidence' in the markets. Investors, bonds traders, currency dealers, etc., must have 'confidence' in the UK before they will resume speculation and lending, and thus trigger a renewed period of growth. After all, the financial sector has been the engine of the British economy for a generation, so how is it possible that it won't do so now? Between 1992, following Britain's withdrawal from the ERM, and 2008, Britain experienced an unprecedented period of continuous growth. It was slow growth, at times very weak, but the fact that it was uninterrupted for so long gave the neoliberal consensus a degree of credibility among policymakers, treasury technocrats and Bank of England governors, which was difficult to reverse. This was why the moves to nationalise Northern Rock and involve the government in buying shares in the banks were so reluctant, and so staggered.

To the extent that neoliberal doctrines were taken seriously, government intervention could only be seen as creating economic inefficiency (since a crisis was required to flush out toxic debts, bad investments, failed enterprises, etc.) and "moral hazard" (since irresponsible behaviour would not be punished, but protected and rewarded). But the ruling class is nothing if not pragmatic, and the crisis did produce a demand from businesses for heavy government intervention. Henceforth, the prevailing doctrine among capitalist elites has been the sort of regulatory liberalism proposed by Stiglitz, Sachs et al, which retains the basic structures of liberal capitalism but with increased powers for regulators, and the return of old restrictions on financial activity. However, financial capitalists are fighting hard to limit this, and the signs are that Osborne is prepared to fight their corner. To that extent, the cuts policy points to the continued ability of the financial fraction of capital to assert its hegemony. Especially since manufacturing and services capital is heavily financialised and depends for a considerable portion of its profitability on the City, which redistributes global surplus values to the benefit of UK capital.

The second justification for the cuts policy is that, according to Cameron, reducing the state sector will free up funds for capital investment, and open up new business opportunities. The Tories, and not just the Redwoodite nutters, are insistent that their policy will stimulate private sector growth and job creation of a far more sustainable kind than any growth produced by some bloated bureaucracy. But interest rates are effectively zero, and businesses still aren't borrowing, and therefore still aren't investing. This despite billions in bank bail-outs, emergency tax cuts, and quantitative easing. This clearly is a far deeper crisis of capitalism than the Tories' cleaving to orthodoxy would appear to admit. Martin Wolf, once a doctrinaire monetarist, is the most consistent critic of governments and policymakers demanding a tightening of fiscal policy. Today, like a good born again Keynesian, he highlights the risk of deflation if governments allow fear of 'the markets' to coerce them into imposing fiscal austerity:

[W]hat would a big tightening of fiscal policy deliver? In the absence of effective monetary policy offsets, one would expect aggregate demand to weaken, possibly sharply. Some economists do believe in "Ricardian equivalence" - the notion that private spending would automatically offset fiscal tightening. But, as Mr Posen argues of Japan, "there is no good evidence . . . of strong Ricardian offsets to fiscal policy." In developed countries today, fiscal deficits are surely a consequence of post-crisis private retrenchment, not the other way round.

In short, the deficit is not the cause of weak private sector demand and investment, but the result of it. An attack on the public sector is an attack on one of the few sources of economic growth, and thus on the basis for future taxable income and profits. It may make the deficit larger. It may tip the UK into another recession, or depression. Moreover, there is no great urgency in the UK paying off the deficit, despite the sabre-rattling of the financiers. As Wolf goes on:

As borrowers, the US and UK have advantages: first, their private sector surpluses cover some three-quarters and 90 per cent, respectively, of their fiscal deficits; second, many private-sector investors need assets that match liabilities in their domestic currency; third, because these countries have active central banks, bondholders suffer no significant liquidity risk; fourth, they have floating exchange rates, which take some of the strain of changes in confidence; fifth, they have policy autonomy, which gives a reasonable prospect of near-term economic growth; and, finally, the US offers the world's most credible reserve asset.

So, if the case for cuts as a recipe for growth is so poor, what does that leave us with? Essentially, it gives the government a rare political opportunity to raid the public sector, whatever the consequences for growth, for the benefit of capital, largely financial capital. Don't suppose for a second that the Liberals constitute a moderating input on this trend. Vince Cable is a dedicated privatizer, free trader, and free marketeer. He and George Osborne are as one in seeking to reduce the size of the state, particularly in its capacity as a provider of services, pensions and welfare.

Osborne has declared, not merely portentously, that he intends to revise the relationship between the citizen and the state. He might go further than this. We can consider the institutional arrangements that enable capital accumulation as a mixture of relations between state and capital; between labour and capital; between capital and capital; and between labour and the state. The social struggles of the next few years will be about defining those relationships, and thus the context of any future settlement. It will be in aggregate a class struggle over how much freedom is given to capital, and how much its activities are restricted in the wider social interest; over what rights labour will have with respect to capital (fewer and fewer, if recent court decisions are any guide); and over how much the state will protect labour from the workings of the market with a social safety net comprising health, benefits and free education. Talk of revising the relationship between state and society may be in some measure PR, but the Tories have made their agenda very clear now: they intend that any future settlement will be far more advantageous to private capital, that there will be fewer protections for workers, that public services and welfare will be severely depleted, and that any regulations on capital will be sharply limited and matched by a reduction in "red tape" elsewhere.

Those tailing the Labour leadership in treating this as principally a technocratic issue, an issue merely of when to introduce cuts the better to restore the old order, are thus at the very least politically naive. The old order cannot be restored, and the issues of public sector cuts, privatization and regulatory reform are fundamentally about whose interests future economic growth will serve.