In this issue:

Senior German Social Dem Welcomes LaRouche Role in U.S.

Germany Unemployment Highest Since 1932

Blair Wants To Put 1 Million Disabled Back to Work

German Banks Sell Off Karstadt Debt to Hedge Funds

Germany Contributes to Gulf-Arabian Railway Project

Poland Begins Troop Withdrawal from Iraq

Western European News Digest

Senior German Social Dem Welcomes LaRouche Role in U.S.

In a background discussion EIR had with a European continental source on the proposal by Lyndon LaRouche for a renewed U.S.-Eurasian alliance based on a New Bretton Woods approach and a "New Deal" for managing the planet's raw materials, the source reacted with enthusiasm.

LaRouche's proposal qualified as a "unique" idea, he said, calling it all the more important coming from a "U.S. statesman," who demonstratively declares: Let's not have raw materials wars and competition or unilateralism; let's have a "trans-Atlantic-Eurasian dialogue."

LaRouche, by bringing the Asian countries and Russia in on the side of Europe, and saying let's have a U.S.-Eurasian dialogue, goes to the essence of the great challenges mankind faces, starting with such issues as water supply, a vital resource. Rather than the "raw materials wars" which are being unleashed right now by Bush's policy in the Mideast—where the Bush Administration is creating chaos and setting the Mediterranean in "flames," the source said, LaRouche's policy of defining among nations a "common denominator," a "common interest," points a way out of the disaster which the Administration is creating.

Were it to come to a war in Iran, the source pointed out, the British this time would not support the U.S., since they have very solid "interests" in Iran—which they are not willing to sacrifice.

While the key change strategically has to come from within the U.S.—where LaRouche's fight against Bush's Social Security plans in a bipartisan way is seen as an absolutely crucial flank—it is also very clear that Europe cannot survive without Russia, and vice versa. China needs Russia's science as much as it needs the high-tech from Europe and the United States. From a global financial standpoint, Franklin Roosevelt's policy for state-credit-backed investment is seen today as the only way to achieve the necessary paradigm shift.

Germany Unemployment Highest Since 1932

For the first time since February 1932—less than a year before Adolf Hitler came to power, exploiting unemployment—Germany's official unemployment figure has now crossed the 5 million mark. According to the report published by the Federal Labor Agency on Feb. 2, the number of unemployed people in Germany increased by 573,000 during January to 5.037 million, an increase within one month of 12.8%. In western Germany, the January figures rose 14.2%; it was 10.4% in eastern Germany. The category showing the most explosive growth is the number of unemployed people below the age of 25 years. The figure jumped from 500,400 in January 2004, to 635,000 in January 2005, an increase by 26.9%.

German dailies were filled on Feb. 2 with comparisons to the 1930s, and also with references to the obvious fact that these official data, as bad as they are, still don't tell the full story. Before January 2005, the official unemployment in Germany has only been above the 5 million mark in the period between November 1931 and May 1933, peeking at 6.128 million in February 1932.

Even the German government's council of "economic experts" noted in its latest report that, on top of those people officially recognized as unemployed, are another 1.6 million people suffering from different forms of "hidden unemployment." This includes about 1 million people who were forced to take "early retirement" and several hundred thousand who are going through state-funded job or training programs.

Excluded from these figures is the so-called "quiet reserve" of people who don't have a job, but under current circumstances have given up looking for one and no longer appear in the statistics, even though best estimates suggest the figure would be in the range of 1-2 million. If all of these categories are taken into account, the number of unemployed in Germany is well above 8 million, out of a total population of 82 million.

At the same time, the number of jobs in Germany that include social security protection is shrinking rapidly. Out of 38.9 million jobs at the end of January 2005, only 26.7 million included full social security coverage, 337,000 less than the year before. In contrast, the category of jobs which are expanding are "mini-jobs," or part-time work at low wages and only partial or no social security coverage. The number of people in mini-jobs only—sometimes more than one such job—reached 4.86 million in November 2004. Some may just be looking for a part-time job and nothing else, But according to estimates, at 1-2 million of the mini-jobbers want a full-time job if they can find one. Thus, the number of missing jobs in the German economy is about double the official unemployment figures, and actually comes close to the 10-million mark.

Blair Wants To Put 1 Million Disabled Back to Work

On Feb. 2, British Prime Minister Tony Blair said that reducing the 8-billion-pound annual cost of the incapacity benefit, or disability, is the center of his five-year program to cut welfare payments and allegedly increase the state pension fund. Blair also wants to put another 300,000 single parents back to work.

Some 2.7 million people get disability benefits in Britain. Last May, a report by Sheffield Hallam University said that the benefits disguise an unemployment "time bomb" in Britain—which claims to have the lowest unemployment rate in the Group of Seven, with just 900,000 on the official "job seekers' allowance," for a supposed unemployment rate of 4.6%. Last May's report documented that disability claims have grown from 570,000 in 1981 to a "truly astonishing" 2.1 million in 2003. In the formerly industrial northeast of Britain, more than 6% of the workforce is on disability, contrasted to about 1% in the service-led economy of the southeast. Under Tony Blair's New Labour, Britain has lost 750,000 jobs in industry since 1997.

Work and Pensions Secretary Ian Johnson said the reforms would make the biggest change in benefits for the sick and the disabled since they began in 1945. The reforms are to be fully in effect by 2008. Johnson said that any of the current 2.7 million recipients who do not cooperate with job and medical assessment will be kept on a "holding" allowance at the level of the jobseekers' allowance, much lower than incapacity allowance, which begins at 56 pounds a week and rises to 74 pounds after a year. These benefits are supposedly so generous, Johnson claimed, that they make it a "penalty" to return to work.

Applicants have to be screened by a government doctor, and divided into those considered too severely disabled to work again. Others will go on a "rehabilitation support allowance" while getting work-related "help." The latter add up to at least 1 million, whom the government wants to push back to work, and includes those claiming conditions such as depression or back pain.

However, the BBC quoted Dr. Laurence Buckman, of the British Medical Association, saying he thought that very few of those getting Incapacity Benefit could work. "There are certainly very few people who've gone on the sick roll when they could be earning money," he said. "I would be amazed if it was more than 5-10%."

German Banks Sell Off Karstadt Debt to Hedge Funds

In a move unprecedented in the German corporate system, German creditor banks on Jan. 28 and Jan. 31 sold off their credits in the ailing supermarket chain Karstadt-Quelle in the secondary debt market. In autumn last year, Karstadt-Quelle threatened to cut up to 14,000 jobs in Germany and to shut down many of its supermarkets, due to disastrous sales figures. Then, in November, following extended negotiations with its creditors, the company received 1.75 billion euros in fresh credits, coupled with a restructuring package.

In late January, the same banks suddenly hit the panic button. According to reports, Landesbank Baden-Wuerttemberg (LBBW) started the action by dumping its Karstadt-Quelle debt titles. HypoVereinsbank, WestLandbank, and HeLaBa followed immediately. The banks were selling these papers at 9% below the nominal value. Most of the debt titles were bought up by the U.S. investment bank Goldman Sachs, which, according to a report in the German-language edition of the Financial Times, resold it to hedge funds and pension funds abroad. The FT quoted an unnamed banker saying that the result of the operation is that next time Karstadt-Quelle is close to insolvency, it will have to negotiate with a large group of international funds. And these funds, in contrast to German banks, could not be forced by political pressure to rescue a firm just because it employs 100,000 people.

Germany Contributes to Gulf-Arabian Railway Project

German government sources have leaked that during Chancellor Gerhard Schroeder's upcoming one-week tour of seven Arabian countries, a German share in the planned 1,980-km rail line connecting all states on the southern shore of the Persian Gulf will be discussed, among other things.

Departing from Berlin on Feb. 27, Schroeder will travel to Saudi Arabia, Kuwait, Qatar, Bahrain, Jemen, Oman, and the United Arab Emirates. German Railway Consulting has drawn preparatory surveys on the planned Mekka-Dammam trans-Saudi railway, so it cannot be ruled out that also this project will be on the agenda of Schroeder's talks in Riyadh. The Saudi government presented its plans at a London conference, Feb. 1.

The Arabian Gulf states' transport ministers gave the general approval for the project of a rail line, for commodity transport, from Kuwait to Oman, at a December meeting in Qatar. Being the first-ever rail link between the states on the southern shore of the Persian Gulf, it would be the southern complement to the Iranian section of the North-South corridor along the northern shore of the Gulf. It would also link the Gulf states directly to the larger Eurasian rail grid, through the Iraq-Syria-Turkey grid and the Turkey-Iraq-Iran grid.

Poland Begins Troop Withdrawal from Iraq

Poland is beginning to pull out one-third of its Iraq contingent, in line with Polish Defense Minister Jerzy Smajdzinski's statement to that effect on Jan. 31 in Warsaw. The 800 soldiers being pulled out, will be back in Poland by the end of February.

It is not ruled out that Ukraine, whose national parliament already voted in favor of a pullout, will begin to call its soldiers back as well.

In any case, the Polish and Ukrainian contingents have hardly moved out from their bases in recent weeks, for safety reasons.