From Volume 4, Issue Number 22 of EIR Online, Published May 31, 2005

Western European News Digest

French Nobel Economist Condemns Deregulation

French economist and Nobel Prize winner Maurice Allais pointed out the truly revolutionary ferment in France. In an interview with the May 26 issue of the daily L'Humanité, Allais reviewed how deregulation policies since 1974 have ruined the economy of France, making things worse and worse. Against that background, the current social and political upheaval in France does not come as a surprise.

Allais remarked: "Although of a very different nature, the forces of social disintegration are perhaps far stronger today, than those you would have seen on the eve of the French Revolution, and no one knows what could happen tomorrow, if 'the street' were to arise to wipe out public order. Now, as then, the unconsciousness of certain dominating feudalities who think of themselves as being protected and who take mostly undue advantage of privileged situations, is absolutely here."

The fact that Allais, who so far has written for the conservative daily Le Figaro, did the unthinkable by granting an interview to the communist L'Humanité, helps suggest the changes going on in France now.

After the Referendum: Major Crisis Expected in France

French President Jacques Chirac made a last-ditch attempt May 28 to convince the French to vote for the hated European Constitution in the May 29 referendum. According to all commentaries, he failed totally. Two polls are now crediting the "No" with 55%, and a third, with 54%. Given the level of panic, the police polls are probably higher than those of the normal polling agencies. At this point, the main parties for the "Yes" are already preparing for defeat. According to an article in Le Figaro recently, the only question is whether it will be a small "No" or a big "No."

Discussion is on the table concerning who will replace Prime Minister Jean Pierre Raffarin, who backed the Constitution. Dominique de Villepin seems to be choice number one, followed by Defense Minister Michele Alliot-Marie, who has done "well" at Defense and who is considered to be compatible with former Finance Minister, current UDR Party chair Nicolas Sarkozy. Lastly there is the lady-do-rightly of the government, Jean Louis Borloo, Minister of Social affairs who has just now proposed to create 500,000 service jobs for people in their homes!

Analysts and commentators in the media are talking about a crisis of the system which has run things for the last 30 years.

Will the French Socialist Party Implode After the Referendum?

If the "No" wins, a deep crisis will erupt in the Socialist Party. Already, the "Yes" and "No" camps in the party leadership continue to attend meetings without speaking to one another! All major decisions are taken by the "Yes" camp—Francois Hollande, Segolene Royale, Dominique Strauss Kahn, Martine Aubry, and Jack Lang—outside of the leadership body. Their strategy against the leaders of the "No," and in particular against Laurent Fabius, who still carries significant weight in the party, has been to demonize them as "xenophopic and fascistic! Polls taken within the Socialist Party, however, show that more than 60% of the membership are against the Constitutional Treaty. So clearly, if the "No" wins, the present leadership will blow up.

So, we are on the verge of a total reorganization of the French political scene. (See InDepth for more on the French Referendum.)

German Momentum Spills Over into Netherlands, France

Numerous German media report that the remoralization and beginning transformation of the SPD into an anti-monetarist, pro-labor party, is having a positive impact on the situation, especially in neighboring France and the Netherlands. There, the number of those that oppose the EU Charter, is said to have increased since the weekend.

For France, a 56% majority for a "No" to the Charter in the referendum on May 29, is no longer ruled out. In the Netherlands, where the referendum takes place June 1, the latest opinion polls see 63% against the charter, with the tendency increasing. (See InDepth for more coverage of post-election German developments.)

Schroeder Mooted as Ally of Economic Reform

German Chancellor Gerhard Schroeder could be a potential ally in reform of the European Central Bank (ECB), stated Jacques Sapir during a public meeting in Paris. Sapir, director at the High Level School of Social Sciences, made interesting statements during a speech at a "Constitutional Cafe" meeting in Paris. He polemicized against the notion of free competition which is omnipresent in the proposed European Constitution that he fights. For competition to really be fair, each economic actor would have to be perfectly informed on all opportunities of today and tomorrow and be able to process all of that information. He ridiculed such an idea, saying that one thing which is common to David Hume, Bernard de Mandeville, Adam Smith, and all the others of the same school, is that they all have in their libraries the founding books of Jansenism, the Catholic French version of Calvinism! Therefore, the "invisible hand" must be the hidden God of Port Royal.

Brown Plans Huge Bailout of British Housing Bubble

British Chancellor of the Exchequer Gordon Brown will soon announce his new plan for British taxpayers to sustain the British housing bubble, at the cost of hundreds of millions of pounds. This is being presented as a government policy to fund "cheap" mortgages for at least 100,000 first-time buyers to get them into the housing market, BBC reported May 22. These buyers would have to raise between 50% and 75% of the cost of their new homes, with the rest of the equity in the house being shared by the government and a bank or building society.

The previous week, it was revealed that house prices in some areas are eight times the average salary, and in nine out of ten British towns, nurses, teachers, and firefighters cannot afford to buy houses on their incomes.

Brown is nervous not only about the absence of first-time buyers, but also the whole shebang. If no new buyers can get into the market, the whole vast bubble of "selling chains" will collapse, and the millions, whose financial situation is based on rising property values will find themselves out on the street.

The Brown scheme, actively supported by Deputy Prime Minister John Prescott, will just expand the housing bubble further: immediately they will unveil plans to release more land for home building, cut the costs of construction, and ease planning rules.

"When Harold Macmillan said in the 1950s that he wanted a property-owning democracy, there was only 30% of the population that owned their own homes," Brown blathered. "There are a million more home owners than there were in 1997, and we believe we can get the numbers of home owners up to nearer 75%. We are probably the first government that will be able to put this asset-owning democracy into practice." What this means is that the government and banks would hold the equity in the house not covered by the purchaser's mortgage. The buyer would have to pay "rent" to the government until he finally bought the whole house.

Schroeder To Visit U.S. End of June; Agenda Still Not Public

German Chancellor Gerhard Schroeder's June visit to U.S. will take place at a crucial moment. The visit will begin less than two weeks after the June 13 special Berlin address by Schroeder on the hedge-fund issue, and last almost five days, June 26-June 29. The meeting with President Bush will most likely take no more than 30-45 minutes, translations included; the question is, therefore, who else does Schroeder plan to meet during these five days? So far, no details of the Schroeder timetable have been made public. No details on former U.S. President Bill Clinton's talks with Schroeder (and other European leaders), during Clinton's ongoing Tsunami Relief mission in European capitals, have been made known, either.

Former German Chancellor Helmut Kohl is in the States these days as well, and although he has his own Atlanticist and CDU agenda, it is known that on questions concerning the interest of Germany as a nation, Kohl has repeatedly been consulted by Schroeder, through channels sealed off from the media. In a similar category, one may assess certain missions carried out for Schroeder by Kohl's former Defense Minister Volker Ruehe, an adversary of present neo-con CDU chairwoman Angela Merkel. Ruehe was in the States last week, apparently having many meetings about which nothing has been made public in Germany, meetings that are not only related to his nominal mission, namely, rallying support in Congress for the Schroeder proposal for UN reform.

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