From Volume 5, Issue Number 27 of EIR Online, Published July 4, 2006

Western European News Digest

Constitutional Reform Rejected in Italian Referendum

On June 25-26, Italians rejected by an almost 2:1 majority a proposal for more than 50 Constitutional reforms pushed by the former Berlusconi government; the vote was 61.3% against, 38.7% in favor. The reforms concerned a reform of the Premiership and the Parliament.

The trade unions claimed credit for the result, because of their mobilization especially against a decentralization of the health and school system, which would have created social imbalances between the North and South. Voting participation was the highest in a decade for a referendum, at 52.9%.

Former Bundesbank Chief Describes Euro as a 'Time Bomb'

The Frankfurt-based Center for Financial Studies (CFS) had a public event on June 28, celebrating its new president Otmar Issing, until recently the chief economist of the European Central Bank (ECB). Outgoing CFS president and former Bundesbank president Karl Otto Poehl gave the keynote speech. After pointing to the growing economic disparities inside the eurozone, Poehl warned that the future of the euro is not yet fully guaranteed. We are rather dealing with a "time bomb," he said. In the original plan, he emphasized, the monetary union was supposed to follow only after a political union of European countries had been established. But, the monetary union was implemented first. Furthermore, the process of the political union has recently run into troubles, while at the same time, the economic development in the various eurozone members is going in different directions. This could lead to political tensions which then escalate into a crisis of the monetary union. Therefore, the "final decision on the fate of the euro is still to come." He added: "I am worried that this construction is fragile."

Issing admitted that economic disparities are indeed threatening the euro project. However, he does not believe that the eurozone will fall apart, simply for the reason that any country trying to do so would have to suffer such heavy political and economic consequences that exiting would be practically impossible.

German Officials Admit Systemic Crisis, Lack of Solutions

At a public event of the Manager circle of the SPD-linked Friedrich Ebert Foundation in Berlin June 24, two German officials admitted the existence of a systemic economic crisis. One was state secretary in the Finance Ministry Thomas Mirow, the other the President of BaFin (Federal Supervisory Commission on Financial Services), Jochen Sanio.

The official reason for the meeting was to hail the usefulness of hedge and private equity funds. But in his introductory statement, State Secretary Mirow said: "Apart from the usefulness of these funds, there are also systemic risks! What if one of the big hedge funds goes bust, and if this happens in the midst of a depression? I think we have to take the warnings of the European Central Bank in this respect very seriously."

In the discussion period, an EIR representative asked how they are prepared to react to the coming crash, and if they can understand the difference between the bankers' solution, which is to impoverish the people, and the solution based on the general welfare? The answer was shockingly true: They admit there is a breakdown crisis, and they also admit that they don't know what to do. Said BaFin President Sanio:

"For me the hedge funds are the black holes in the system; they brought us into an extremely dangerous situation, which can be called a potential destabilization of the world financial system. But nobody has an answer, what to do, if there is a real crash! And we had already the big crash, that was the case of LTCM in 1998.... Although we are all sitting together in the Financial Stability Forum, I can tell you, that so far, no one has come up with any answer for what to do in the case of a crash."

State Secretary Mirow even went further: "Yes, all the finance ministers, the central banks, and the regulatory commissions are sitting together in the Financial Stability Forum, and it is true: nobody knows what to do. But: If there is a crash, we will have telephone conferences, everybody will be calling his guys, and then I hope we will come up with something!"

Moves To Revive Nuclear Energy in Germany, Britain

The Innovation Minister for the state of North-Rhine-Westphalia, Andreas Pinkwart (FDP), has called for building a new HTR reactor in Juelich, the place where the pebble-bed reactor was first built—and then closed by the Greens. "I consider the thorium high-temperature reactor to be a future-oriented technology," Pinkwart said in an interview with the Westfaelische Rundschau June 25. "We shall talk about it," Pinkwart said. In Juelich, he said, "There is a lot of available know-how. It would be stupid not to use it."

Pinkwart characterized as "fatal" the Red-Green government decision to get out of nuclear energy. NRW, he said, will not follow this path.

In Britain, Industry Minister Aleistar Darling gave a statement and an interview to the Guardian June 28, saying that there has to be a move to revive nuclear energy in Britain, "otherwise the lights will go out." He said that 20%-30% of all electricity-generating plants, not only nuclear, will be replaced.

Blair Could Quit by Next Spring

Citing unnamed "senior Blairite" members of Parliament, the Daily Telegraph reported June 28 that British Prime Minister Tony Blair could resign by next spring. This could be announced just prior to the Labour Party Congress next September.

The Guardian has a similar story, only saying that Blair is seeking an agreement with Chancellor Gordon Brown on a timetable for his succession. Blair wants such an agreement prior to September so the party congress will not be dominated by a debate on when he will quit.

This was revealed following criticism of Blair by former Home Secretary Charles Clark, who was forced out as a result of the recent cabinet shuffle.

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