From Volume 4, Issue Number 36 of EIR Online, Published Sept. 6, 2005

Western European News Digest

Europe Offers Aid to Katrina Victims and Rescue Workers

With hour-by-hour coverage in the European news media on the Katrina hurricane disaster in the U.S. Gulf Coast region, and the unfolding tragedy, several European governments have expressed their condolences to the U.S. government and offered immediate help in the ongoing rescue efforts.

German Chancellor Gerhard Schroeder in an official statement declared that even though he knows that the U.S. has many resources itself, he nonetheless would want to offer all possible help and coordinate with his ministries, if help is needed. "The U.S. should know that Germany stands at the side of the U.S."

From Russia, Emergency Situation Ministry head Yuri Brazhnikov offered help to the head of the U.S. Federal Emergency Management Agency, stating that Russia would be ready to send equipment to conduct relief work, including Situation Ministry planes with rescuers and a helicopter on board.

The spokesman of the French Foreign Ministry, Denis Simoneau, stated that France would be ready to send soldiers and rescuers from the French Caribbean base.

Statements of condolence and support also came from Pope Benedict XVI and Vatican the State Secretary Sodano.

Villepin Announces 'Social Growth' Program To Counter Sarkozy

In a surprise move, French Prime Minister Dominique de Villepin, at a press conference Sept. 2, announced a series of measures aimed at winning the 2007 Presidential elections. Among them:

1) Cutting income taxes, especially those of the middle classes, by 3.5 billion euros;

2) Incentives for unemployed or socially assisted persons to go back to work, via special cash contributions offered by the state to those who decide to take jobs;

3) A series of measures aimed at increasing state construction of low-cost housing and improving conditions under which people can buy their own homes; and,

4) Ten billion euros to come from the privatization of the national highway company, to be oriented towards public investment: including the Rhine-Rhone and Bordeaux high-speed trains, a railway to the Charles de Gaulle airport, etc.

The new, more flexible contract created by de Villepin three months ago apparently is a big success, with 30,000 new jobs created last month alone. Basically, a lot of small, well-distributed measures aimed at countering Finance Minister Nicolas Sarkozy's far-right neo-con ideology, without, however, challenging the present system.

Briton Warns of 'Mini-Hiroshima' If U.S. Attacks Iran

Former British Labour Party Cabinet Minister Tony Benn warned in a column in the Aug. 31 Guardian that "Now that the U.S. President has announced that he has not ruled out an attack on Iran, if it does not abandon its nuclear program, the Middle East faces a crisis that could dwarf even the dangers arising from the war in Iraq. Even a conventional weapon fired at a nuclear research center —whether or not a bomb was being made there —would almost certainly release radioactivity into the atmosphere, with consequences seen worldwide as a mini-Hiroshima."

While the attack would be carried out allegedly to uphold the Nuclear Non-Proliferation Treaty, in reality, it is "the Americans" who have "launched a program that would allow them to use nuclear weapons in space, nuclear bunker-busting bombs are being developed, and depleted uranium has been used in Iraq —all of which are clear breaches of the NPT. Israel, which has a massive nuclear weapons programme, is accepted as a close ally of the U.S., which still arms and funds it."

Even those who oppose allowing all nations to develop nuclear weapons, should "accept that nuclear power for electricity generation need not necessarily lead to the acquisition of the bomb." Benn himself had been pressured, as Secretary of State for Energy, to agree to sell nuclear power stations to the Shah of Iran, by the International Atomic Energy Agency and Westinghouse.

President Bush could well see bombing Iran as a "way to regain some of the political credibility he has lost" due to the Iraq disaster. But the U.S. cannot invade Iran: "what must be intended is a U.S. airstrike, or airstrikes, on Iranian nuclear installations, comparable to Israel's bombing of Iraq in 1981," with possible Israeli cooperation.

"Some influential Americans appear to be convinced that the U.S. will attack Iran," Benn wrote. Right or not, "the buildup to a new war is taking exactly the same form as it did in 2002" against Iraq. While the U.S. and UK talked of diplomatic measures, leaked UK memos show that the decision to go to war had already been taken long before. "That may be the position now, and I fear that if a U.S. attack does take place, the Prime Minister will give it his full support," Benn wrote. The main reason is Britain's total dependence on the U.S. for its own nuclear military capability. "Therefore Britain could be assisting America to commit an act of aggression under the UN Charter, which could risk a major nuclear disaster, and doing so supposedly to prevent nuclear proliferation, with the real motive of making it possible for us to continue to break the NPT in alliance with America."

Former French Prime Minister Calls for New Bretton Woods

Michel Rocard, former French Prime Minister, called for a "New Bretton Woods" and "reconstruction of the world financial system," in a statement warning that the U.S. economy is a "catastrophe waiting to happen." The statement was published in Germany's Sueddeutsche Zeitung Aug. 17. It is distributed by Project Syndicate, an operation including Joseph Nye, Joseph Stiglitz, Jeffrey Sachs, and others. However, Rocard is known to be familiar with proposals by Lyndon LaRouche.

Rocard, who is a leader of the French Socialist Party and a member of the European Parliament, wrote that the French and Dutch rejection of the EU Constitutional Treaty was in reality "a rejection of unregulated globalization." Deregulation has made the social order unstable, and unemployment, especially, is becoming an "intolerable" problem. Capitalism could be reconstructed after World War II due to the stabilizing factors of social security, Keynesian operations, and "a universal high-wage policy." But this was ended after 1970, when the monetarist policies of the likes of Milton Friedman took over, and the dollar was taken off gold. "Ever since, the international financial system has endured almost constant instability."

The "greatest danger facing the world nowadays is the inherent instability" of the current global economic system, Rocard wrote. He described the massive indebtedness of the U.S. economy, and warned that the required inflows of US$1.9 billion every day, will be endangered if the dollar collapses, oil gets too high, or, "if the US economy backfires. The "US economy has become increasingly detached from reality," with manufacturing a mere 11%.

The real-estate and mortgage bubbles "have become grafted upon each other and now dominate economic activity in the U.S.A. A crash, or at least a sharp spasm, is quite likely in the near future, and the consequences —for the US and the world —may be catastrophic."

With this instability, trying to deal with other bad problems, such as sovereign debt, "suffers profoundly from erratic interest-rate and exchange-rate movements. The absence of a lender of last resort in today's world only magnifies the threat involved in each crisis." And, "the immense investments needed to overcome underdevelopment and the disabilities that it entails are increasingly forgotten by the world of international finance.

"With rich countries threatened by instability and poor countries largely left to their own devices, the reconstruction of the world financial system should be at the top of the international agenda. A new Bretton Woods could not be more urgent," Rocard concluded.

Senior Economist Warns of Dangers of Hyper-Liqudity

In an interview with the Frankfurter Allgemeine Zeitung on Aug. 25, William White, chief economist for the bankers central bank, the Bank for International Settlements, noted that central bankers usually are focussed on inflation, thinking "once inflation is under control, everything is just fine." But today, we are dealing with a "very expansionary monetary policy as a global phenomenon [central bankers' language for flooding the financial system with liquidity —ed.].... We have never seen something like this before.... The abundant liquidity can generate excesses and imbalances."

Asked what markets he was referring to, White replied, "The prices of long-term bonds, the risk premiums for corporate bonds, and emerging-market bonds. As well as the stock markets in several countries. But, more than everything else, to real estate prices. Almost everywhere in the world —besides Germany and Japan —there is a strong rise of housing prices."

On a macro-economic level, housing prices do not represent "wealth," contrary to popular belief, White emphasized. Either they are just being pushed up temporarily and then come down, or, if high prices are maintained over a longer period, they increase the cost for everybody to buy or rent a home. And when the housing prices fall, the high mortgages remain. To see such a dynamic "almost everywhere in the world" at the same time, is "really worrisome," White concluded.

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