From Volume 5, Issue Number 39 of EIR Online, Published Sept. 26, 2006

World Economic News

Maglev Disaster: Probe Does Not Exclude Interference

The German police investigation began Sept. 23 into the accident that killed 23 passengers aboard a magnetic-levitation train in Lower Saxony the previous day. While Thyssen-Krupp, the manufacturer, has issued a statement saying that all they know so far is that there was no technical malfunctioning of the maglev system as such, a spokesman for the company rejected as "far too early" a conclusion that the cause of disaster was human failure.

Although no one in print has dared to pronounce the word, the door is open to "sabotage," as a third possibility, whether in the form of long-term budget-cutting, or something more specific.

Der Spiegel online reported Sept. 23, that the maintenance vehicle was doing its routine job. Every morning, the vehicle goes through the entire 30 km long track, in order to clean it from debris. Once it has finished that, it gives a radio signal to the control center, signalling that the track is cleared.

The State Attorney of the Oldenburg district said that all radio records have been seized, to find out whether there has been a malfunctioning, a breakoff, or an interference with the radio communications.

The catastrophe occurred at about 10 a.m. local time at the TransRapid system test track in Lathen, Lower Saxony, when the maglev with 31 people on board—testing personnel and their relatives—hit a maintenance car shortly after its start. The maglev, which was operated automatically from the test center, was accelerating and was travelling at the speed of 200 km/h (about 135m/h), when it hit the maintenance car, which obviously was not supposed to be on the track. The maglev sprang off its (elevated) track, bent over without falling down and caught fire, making the rescue operations very difficult, and time consuming. Ten injured people were rescued, and immediately taken to nearby hospitals.

Chancellor Angela Merkel immediately cancelled all her meetings in Berlin and rushed to the place of the accident. Federal Traffic Minister Tiefensee, who learned about the incident while in China meeting with the Chinese railroad minister, interrupted his trip and flew back to Germany.

It is not clear how this accident happened. All decisions are made at a central command. Either the maglev was not supposed to get the clearance to start while a maintenance car was working on the track, or the wagon was not supposed to be on the track while a maglev was travelling. This is the first accident ever on this test track, which has been operated since 1984, i.e., for 22 years with about 1,000 visitors per day, and without incident. Initially, the authorities, while obviously frantically involved in the rescue operation, called it a "human failure," since no obvious technical failure was involved.

The catastrophe occurred in the midst of the final decision, whether China will definitely build the extension of the maglev track Pudong-Shanghai (the only commercial maglev track worldwide) for another 175 km—which most probably was also on the agenda of Minister Tiefensee's present trip—and also in the absolute end phase of the fierce battle over a (short) commercial maglev track in Germany, connecting the Bavarian capital Munich with its airport.

German Fin Min Calls for Hedge-Fund Regulation

In a short feature in the German-language Financial Times on the collapse of the Amaranth hedge fund, Sept. 22, it was reported that German Finance Minister Peer Steinbrueck is emphasizing that Germany will make hedge-fund regulation an important issue of its G-7 presidency next year. Steinbrueck said that U.S. Treasury Secretary Henry Paulson would at least favor more hedge-fund "transparency," while the Securities and Exchange Commission (SEC) plans to investigate the relations between hedge funds and the big banks. (See InDepth for "Largest Hedge Fund Collapse Since the LTCM Case of 1998," by Lothar Komp.)

Bank Regulator Who Criticized Hedge Funds Now Under Attack

In September 2005, Jochen Sanio, president of the Federal German financial supervision agency BaFin, delivered a speech in New York City in which he described hedge funds as the "black holes" of the financial system and called for worldwide regulation of the hedge fund 'sector'. EIR published Sanio's full speech in October, 2005.

Now, Sanio is coming under heavy attack, and may be ousted from his position, reported Handelsblatt on Sept. 19. First, there was an embezzlement scandal. A person working in the BaFin software department admitted that he had systematically embezzled money from BaFin over years, in total taking out about 4 million euros. The state prosecution is investigating the case, and Sanio was blamed as at least partially responsible by failing to introduce tighter internal control systems.

Late the previous week, it was reported that, concerning Sanio's plans for a limited restructuring at Bafin—which would involve fewer part-time jobs, but more jobs in the analysis department—a "state of war" has erupted between Sanio and the workers' council. The council issued a letter to 1,500 BaFin employees saying that it no longer has any confidence in cooperating with the president.

According to the Financial Times Deutschland Sept. 22, there will be a top-level German government meeting on Sept. 26, concerning Sanio's position, involving representatives of the Christian Democratic Union (CDU), and the Social Democratic Party (SPD), and the German Finance Ministry. The meeting will start one hour before the BaFin supervisory board will gather, among other things in order to decide on the fate of Sanio.

Jobs Move to Poland for Cheap Labor

According to the Polish TV News, Wiadomosci, Western investors claim that in 2006 they will create 30,000 new jobs in Poland, a move which part of globalized outsourcing based on cheap labor. The report focussed on American computer company Dell, which has announced construction of a new factory in Lodz, where it plan to employ 3,000 people. Other companies that will soon start projects: Rockwell is building industrial equipment plant in Katowice; Toshiba will start production of TV sets near Wroclaw; Bridgestone—production of tires; Sharp—electronic equipment; Indesit—production of AGD equipment. All of these companies receive long tax "holidays," state-provided "refunds" of the cost of employing workers, and other state money.

For example, Toshiba's investment is worth 160 million zloty (about $54 million), which includes 30 million zloty from the government ($10 million). They also demand very low prices for land (Dell demanded 100 hectares for 1 zloty per hectare) plus perfect infrastructure around their installments.

Commentators admitted that Polish entrepreneurs could never dream of such good conditions. Even an expert from the Adam Smith Center, which usually supports the free market, noted that a small Polish businessman, who plans to add two new jobs to his firm, will have to give up the idea due to higher taxes collected from him to finance one new job opened by a foreign investor.

All rights reserved © 2006 EIRNS