Western European News Digest

Blair Loses Again in Local Elections

Tony Blair's Labour Party has come in third in Britain's local elections, held May 4. Preliminary figures gave Labour 26%; the Liberal Democrats, 27%; and the Conservatives 40%. Of the 4,360 council seats that were up for election Labour lost more than 200 councillors and relinquished control of 16 towns from the previous election, mostly to the benefit of the Tories. Even the tiny neo-fascist British National Party took 11 council seats from the Labour Party, doubling its councillors.

Sky News is already predicting that in the next general election the Tories could have a 10-seat majority in the House of Commons.

The losses for Labour are double what they had said they could live with. Within hours of the results, Prime Minister Tony Blair announced a Cabinet reshuffle. Rumors were afoot, which Chancellor of the Exchequer and chief Blair rival Gordon Brown had to deny, that a group of Labour backbenchers were petitioning for Blair to step down and begin an "unified and orderly" transition of power.

On top of the election debacle, scandals continue to plague the Blair regime: Home Secretary Charles Clark, who has been under attack for two weeks because of the failure to deport dangerous prisoners, was dropped from the Cabinet altogether. Deputy Prime Minister John Prescott, who was at the center of a sex scandal, was removed from his departmental responsibilities.

While these changes were expected, others were not. Jack Straw was dropped as Foreign Secretary and will become speaker of the House of Commons. He was replaced by Margaret Beckett, the former Environmental Minister and Blair loyalist. Some press claim that Straw was looking for a way out of the Cabinet.

Other changes: Defense Secretary John Reid takes over Clark's position as Home Secretary; Des Browne, who had been a junior minister, will now be the new Defence Secretary.

Bush-Merkel Summit Ends: Agree Only To Meet Again

German Chancellor Angela Merkel and U.S. President George Bush held a press conference May 4, at the conclusion of their White House meeting. They focussed, Merkel said, on maintaining "step-by-step diplomatic" measures having to do with Iran. The only concrete result of the meeting is that the President will visit Germany, including the city of Stralsund, in Merkel's election district, on July 14. That may turn out to be a great burden for the citizens of the city and the surrounding region: When Bush came to Mainz in 2005, the entire city was sealed off, and emptied of all public activity and traffic for an entire day.

French Power Struggle Intensifies

The revelation that French Prime Minister Dominique de Villepin ordered an investigation of his major rival, Interior Minister Nicolas Sarkozy, in connection with the investigation of the Clearstream financial scandal, has taken on a new dimension, according to the Financial Times and other media April 29. Charges that President Jacques Chirac was personally behind the investigation of Sarkozy, were angrily denied by Chirac.

But shortly afterward, a former leading French intelligence officer, Gen. Philippe Rondot (ret.), told Le Monde that he carried out the investigation of Sarkozy on orders from de Villepin, and he, in turn, got instruction from Chirac to do so.

The bitterness of the power struggle was characterized by National Assembly President Jean-Louis Debre: "Sarkozy has put a bullet in de Villepin's head. He wants to put a second one in straightaway, to make sure he is dead. De Villepin reckons that he is far from finished, and wants to put two bullets into the heart of Sarkozy."

Volkswagen Enters GM-Like Crisis

Drastic cuts in expenses and in employment are on the agenda, for leading German carmaker Volkswagen: CEO Bernd Pischetsrieder was approved by the shareholders at their meeting in Hamburg May 2, and therefore he will go ahead with his streamlining policy.

That implies the firing of up to 40,000 of the 105,000 workers in Germany; another 6,000 of the 22,000 in Brazil; and a couple of hundred each, in Spain and Portugal. That is also the agenda of the hedge and private equity funds that have supported Pischetsrieder against his main inner-VW rival, Ferdinand Piech, whose removal from the advisory board they are urging.

That does not imply that Piech, who is to blame for a lot of the running-down of Volkswagen in the past, is any better than Pischetsrieder; he has warned, at least, that the latter's frontal attack on expenses runs into big conflicts with VW workers.

Pischetsrieder pushed through a cost-cutting program last year, in the range of 3.5 billion euros, which is said now to be "only the first step toward consolidation." In Germany alone, a quarter-million jobs in supply-sector firms depend on Volkswagen.

'Big MAC' Trap Sprung for Berlin

The capital of Germany is being pushed into a trap which resembles the Big MAC plan Felix Rohatyn sprang on New York 30 years ago. The "extreme budget situation" which the Berlin Administration cited in its April 26 call for emergency funding at the Constitutional Court, is the first step into that trap.

With standard methods, there is no way out of Berlin's staggering public debt of $62 billion euros. Berlin only has tax income to pay for 40% of its 2006 fiscal-year budget. It does not have money to invest, because it pays 2.5 billion euros in interest alone, to the creditor banks. Berlin actually has to borrow, to pay the banks. Budget cuts and privatizations of the sort the present Wowereit-Sarrazin administration are doing, only worsen the situation.

Berlin Minister of Finances Thilo Sarrazin's argument at the Constitutional Court is that Berlin has been in the "extreme budget situation" since January 2002—when he took over the municipal department of finances, and "discovered" what the real situation was. If the Court rules in favor of Berlin, to support its claim for extra funding from the Federal government and the other 15 state governments, Berlin will have to continue the austerity, to honor that ruling. This is the setting orchestrated for the creation of something like a Big MAC for Berlin. That would open the second phase of the de-urbanization: privatize the bus service, sell off 240,000 flats still owned by the municipal administration, sell off more real estate, invest in media and tourism, but not industrial jobs.

Berlin should have learned its lesson from Argentina: Berlin could have made itself the leader of an all-German municipal revolt against the debt, for reindustrialization, and gone to court in this role. Berlin should not have privatized anything, but, like the Argentines, should have revolted, and it should have revolted three times as much, because its per-capita debt was, and still is three times that of Argentina.

More From Berlin: Transit Company Deals in Real Estate

The Berlin transport company BVG "improved" from a deficit of EU106 million at the end of 2004, to a surplus of EU247 million at the end of 2005. However, the transport part of the operation showed a loss of EU49 million, in 2005.

The alleged "profit" was made through the sale of 5,100 flats owned by the BVG's real estate department, for EU296 million, to a real estate entity called Corpus (or Corpse?). The entity is a joint venture of the municipal savings banks of Frankfurt, Cologne-Bonn, and Duesseldorf, which, since 1995, have invested in takeovers of real estate in the rest of Germany. With a property valued at EU3 billion, Corpus, today, is one of Germany's biggest real estate entities. Corpus also has a special consultative partnership with the Morgan Stanley bank.

The money BVG made from its housing sale went straight back to the creditor banks of the BVG, to reduce its outstanding debt from EU1.069 billion to EU788 million. The Berlin population had no benefit at all: they pay increased prices for BVG tickets, and those BVG workers earn 10% less.

Flu Outbreak in England Is Low-Tox Version of Avian Flu

Some 35,000 chickens have been culled in Norfolk County in the eastern U.K., the Yorkshire Post reported May 1. Three farms, at least two of them with free-range flocks, are involved. One poultry worker developed conjunctivitis from exposure to the virus.

The important thing about this is that it shows that, if the H5N1 virus were there, it would be able to spread. England's vaunted detection and prevention program needs improvement.