From Volume 4, Issue Number 29 of EIR Online, Published July 19, 2005

Western European News Digest

Unemployment in Britain Up for Five Consecutive Months

The number of newly unemployed in Britain has risen for the fifth month in a row, the longest sustained rise since the recession of 1992. The Office for National Statistics said 8,800 more people had signed up for jobseekers' allowances in June, for a total of 864,900, bringing the official unemployment rate to 4.8%. Hardest hit is industry: The manufacturing sector has laid off 81,000 employees in the three months ending in May.

At the same time, figures show a drop of 72,000 in the number of people working, over the three months ending in May. This is the biggest drop in the working population in 12 years. The biggest changes are among people who are under 35 and full-time employed. The number of people classified as economically inactive, including non-working mothers, students, people in early retirement, and those on disability benefits, rose by 125,000 to 7.9 million, a full 20% of the working population.

Meanwhile, industrial workers are getting less overtime and other pay. What remains of Britain's industry is being hit hard by high raw material costs. In May, factory workers' pay, including bonuses, only rose by 1.7%—less than inflation, and down from a purported 3.8% rise in April. In the rest of the private sector, pay rose by 3.9%. But in the big public sector, workers' pay rose by 7.6%.

U.S. Neo-Con Richard Perle Would Vote for France's Nicolas Sarkozy

Richard Perle, one of the neo-cons who conspired to bring about the Iraq war, and later had to resign from the Defense Policy Board because of charges of corruption, told reporters for the French publication Metro on July 12 that he would vote for Nicholas Sarkozy, leader of the ruling Union for Popular Movement (UMP) party in France, if he had the right to vote there. Sarkozy, nicknamed "Sarkoleon" for his Napoleon complex, is the leading rival to President Jacques Chirac within the ruling party, and thus the statement signals Perle's dislike of Chirac. Perle, who has a home in France, made those statements while attending a meeting organized by the Circle of Economists at Aix-en-Provence.

Neo-Con Holidays in Southern France

The Circle of Economists held a three-day panel in Aix-en-Provence on July 9-11. Invited speakers included Paul Wolfowitz, new boss of the World Bank, and Richard Perle, the two best-known neo-conservatives of the Bush team. They were scheduled to debate with former Foreign Affairs Minister Hubert Vedrine, a strong critic of U.S. "hyperpower" politics. One can expect they will dive into the swimming pool of Perle's nearby vacation home, where he often meets Jeane Kirkpatrick and Laurent Murawiec, known for being "a perldiver."

France Announces 1.5-Billion-Euro Industrial Policy

What can be said of Prime Minister Dominique de Villepin's recently announced new industrial policy for France, is that it's not very expensive. De Villepin announced that this money—800 million from the new Agency for Industrial Development, 400 million from the "Caisse des depots et des consignations" (the closest thing today in France to Germany's Kreditanstalt fuer Wiederaufbau), and 300 million from the National Research Agency—will be used to finance high-tech R&D industrial projects of large French companies, operating on a national or international level, along with equal sums to be matched by large industrial entrepreneurs.

The state will contribute to reorganizing French industry into what they call "competitive poles," i.e., Silicon Valley-type organizations bringing together in one area industry, research centers, and universities. Some 67 such poles have been created, among which are the following:

1) "Aerospace Valley" in France's Southwest, where 94,000 employees and 8,500 scientists are already working on the aerospace sector, and where a myriad of small and medium-sized high-tech companies have emerged which work together with the very large companies such as Alcatel, Airbus, Dassault;

2) "Therapeutic Valley" in Alsace, where investment has heavily concentrated on treating life-threatening diseases such as cancer, Alzheimer's, brain degenerative diseases, etc., with emphasis on medicine and new instruments (nanotechnologies, robots, IRMs). Four top scientists will be deployed there: the president of the Pasteur Institute, a Nobel Prize winner in chemistry, the head of mini-surgery center, and a top specialist on molecular biology.

Angela Merkel's CDU Campaign Platform Backs Budget Cuts

Despite the expected lip-service to "democracy and social market economy," the common program of the Christian Democratic Union/Christian Social Union parties, announced on July 11, lists several policy projects of a CDU-led new government with an unmistakable austerity content:

1) Keep the Hartz IV austerity program but "optimize" it; subsidize minimum wages for "simple professions"—but below the average standard income; increase the value-added tax from 16% to 18%, in order to create new subsidies for low-income jobs.

2) Reduce subsidies to "old" industries, shift funds into "innovations" which are, however, not specified, except broadband fiber optics telecom.

3) Keep and intensify the Maastricht (Monetary) Stability Pact; drive new state borrowings down to zero by 2013, in order to achieve a "balanced budget."

4) Improve relations with the U.S.A.; cut Franco-German relations down to size so they lose their special character in Europe; end the "unprincipled Russia and China policy."

5) Deploy the armed forces inside Germany for the fight against terrorism.

There is no mention of fusion power; no announcement of new fission power plants; and a stated commitment to only build "one Transrapid line in Germany" (the one in Munich, that is).

Despite the fact that Germany is known best for its high culture, the CDU-CSU does not mention Schiller, nor any other name from the period of the great Weimar Classic.

CDU's Campaign a Likely Loser in Eastern Germany

According to a broad spectrum of German media, among the Christian Democrats in the eastern states of Germany, there is considerable concern about the new budget cuts in the labor sphere that Merkel proposes in the CDU campaign platform. In addition to the negative effects of the increased value-added tax on consumption, there is special concern about the proposal to eliminate commuter rebates. This is a tax rebate given to workers who work at long distances from home, for every kilometer they drive, daily. Especially in the southern regions of Thuringia and Saxony, but also in the western regions of Saxe-Anhalt, Mecklenburg, and Brandenburg, tens of thousands of citizens drive across state borders into the neighboring western states to earn their living.

Average incomes in Germany's eastern states have been in constant decline since the late 1990s: they are at about 63-65% of western German incomes now, and continuing to point downwards.

Eastern CDU politicians have warned that most recent polls, which give the CDU a ranking behind the recently created countergang, WASG, in many eastern regions, indicate that many votes could be lost in the coming early elections. And that is of significance for the national picture. "The Union [CDU—ed.] lost the elections in 1998 and 2002 in the east," Wolfgang Boehmer, Governor of the State of Saxe-Anhalt, said in an interview with the Sueddeutsche Zeitung July 14. "This must not be allowed to happen again." Boehmer urged corrections in the CDU platform.

Germany's Power Exchange Sends Rates Skyrocketing

Thanks to an oligopoly of four dominant traders—the four big German power producers—and the assistance of a group of financial investors, electricity prices in Germany were pushed up to an all-time high of 45 euros per megawatt-hour in the second week of July, up from 33 euros at the start of the year. The aluminum and copper producers Norsk Hydro and Norddeutsche Affinerie, as well as other power-intensive industrial corporations, have recently threatened to shift thousands of German industrial jobs abroad if power prices remain at present levels. The federal association of German industries, BDI, warns that up to 1.7 million industrial jobs in Germany are at risk, due to high power prices.

While the European-wide energy deregulation, in which Germany has been a front-runner since 1998, was supposed to lower power prices, the result was exactly the opposite: Electricity prices for private households increased from 13.9 cents per kilowatthour in 2000 to 18.7 cents in 2005, prices for industrial customers from 5.1 to 7.3 cents.

One of the instruments to boost electricity prices in Germany is the European Energy Exchange (EEX) in Leipzig. What London's International Petroleum Exchange (IPE) and New York's Mercantile Exchange NEMEX) are for the oil market, Leipzig's EEX is for the German power "market." Its predecessor, the European Energy Exchange (EEX) in Frankfurt, started trading electricity contracts in June 2000. Two years later, the Frankfurt EEX merged with the Leipzig Power Exchange LPX to become the Leipzig-based EEX. Today, the EEX is Europe's largest power exchange. While 90% of electricity in Germany is still traded outside the EEX, the prices of such direct contracts between producers and consumers are being updated regularly according to the prices set at the EEX.

This construction allows the control of German electricity prices by a tiny group of EEX traders.

The latest round of price increases at the EEX was managed by a joint venture of radical free-market and ecologist ideologies: the free trading of carbon dioxide emission rights. Power producers, burning coal or gas, can put as much CO2 into the atmosphere as they want, but have to cover these emissions by a comparable amount of CO2 emission rights.

These rights are handed out, in the first place, by the government. The big German power producers receive a fixed amount of such rights each year for free. And they are allowed to sell these rights to third parties. Since March 2005, the Leipzig EEX has started to trade not only electricity contracts, but CO2 emission rights as well!

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