Western European News Digest

Putin, Prodi Defend State Infrastructure

A source familiar with the energy debate inside the Italian government agreed with EIR's evaluation, in a discussion April 4, that at their recent meeting in Italy, Italian Premier Romano Prodi and Russian President Vladimir Putin might have discussed a deal by which Italy and Russia would help each other to keep control of key strategic infrastructure. The announcement by Aeroflot on April 2, of a bid to purchase Italy's national airline Alitalia, and the announcement April 3 that ENI has won the auction for a stake in Gazprom's oil unit and other assets of Yukos, buttresses this conclusion.

Aeroflot is being helped by Italian bank Unicredito, which will buy 5% of Alitalia. Aeroflot manager Valery Okulov, who married the late Russian President Boris Yeltsin's daughter Elena, is considered very close to Putin, having served as a KGB officer in St. Petersburg during the time when Putin started his career there as a KGB officer.

In their coverage of the ENI purchase, the Financial Times April 5 stressed that "ENI has signed a call-option agreement with Gazprom, under which the Italian group could later sell a key 20% stake in the oil business Gazpromneft to the Russian group, in the event that ENI wins [an April 4] auction on Yukos assets. According to several bankers familiar with the matter, ENI will be bidding in part to help out Gazprom, which is declining to participate for fear of lawsuits from Yukos shareholders."

Unfortunately, whereas the Russian government negotiates from a position of strength, being sovereign in its decisions, the Italian government is on a weak footing, being under the boot of the ECB.

Solana, Lavrov Call for Dialogue on Missile Defense

European Union Foreign Minister Javier Solana, speaking at the EU Parliament in Brussels March 31 about the proposed missile shield, said: "We are not the ones to decide on this—that belongs to defensive alliances, but we can talk amongst ourselves in the most open way possible. Any such system can affect our relations with Russia." (See Russia/CIS Digest for Russian Foreign Minister Sergei Lavrov comments on missile defense.)

Socialists and EU Commission at Odds Over Hedge Funds

The European Social Democracy held a seminar March 28 to present a 300-page study on the need for regulating the activity of hedge funds and investment funds. The report stresses the need to "safeguard pension funds and other investors" and warns, "Conflict is now likely between Euro MPs (Members of the European Parliament) and the Commissioner responsible, Charlie McCreevy, who rejects tighter regulation and, say the Socialists, has so far provided no coherent analysis of the issues involved." Speaking at the event, John Monks, leader of the European Trade Union Federation, said there is going to be a long and bitter fight with the hedge funds and investment funds that are engaged in asset stripping and endangering jobs.

The report states, "We still believe in the market, but we insist on a social market economy, not on "a market society." It points to the fact that these funds could have negative effects on "risk for people's pensions; viability of private companies; security of service provision; decent work and a say for the workforce on company affairs; financial market stability," and "ethics, including the fees charged by the financiers and the low taxes they pay." Rasmussen stated, "Our ambition is to have a market that works better and that serves the real economy."

A group headed by former Danish Prime Minister Poul Nyrup Rasmussen, and spokeswoman on economic and monetary affairs Ieke van den Burg of the Netherlands, prepared the report.

New Danish Tax Laws To Target Locusts

The Danish government presented an agreement with the Danish Folks Party on their legislation against tax-evasion schemes by private equity funds and international corporations, according to the Berlingske Tidende April 3. The idea is to limit the amount of interest payments that the funds can deduct from their taxes, and thereby prevent the present practice in which the funds buy up profitable companies, and avoid taxes by loading the target companies up with debt, or move the tax payments to countries with lower tax rates. The extra revenue from these recovered taxes will allow Denmark to lower its corporate tax from 28% to 25%. The opposition Social Democrats did not want to be part of the agreement, since they opposed the idea of lowering the Danish corporate tax, which is already among the lowest of EU countries, and which lowering they claim will serve only to increase the profits of the financial corporations.

The new legislation, which is expected to be voted up before the Summer, is a watered-down version of the proposal made by Tax Minister Kristian Jensen two months ago, which came under heavy attack from the biggest Danish corporations. Despite the limitations of the legislation, it will probably provoke fits from the financial community, since they have grown used to being attacked by trade unions and the left wing, but not being legislated against by a Danish liberal-conservative government.

Merkel, in Beirut, Urges Syria-Lebanon Ties

German Chancellor Angela Merkel, on a trip to Lebanon which ended April 2, urged Syria to establish diplomatic ties with its neighbor, demarcate their joint frontier, and work to end cross-border smuggling of weapons, Ha'aretz reported April 3.

"Our view is that Syria, too, must play its role so that Lebanon will develop as an independent state," Merkel told a press conference after meeting Prime Minister Fuad Siniora.

Merkel offered technical assistance for establishing improved border controls and monitoring the border with Syria. She also met with Parliament speaker Nabih Berri.

British Envoy Meets Palestinian Prime Minister Haniyeh

According to Ha'aretz of April 5, the British consul general in Israel, Richard Makepeace, held a meeting with Palestinian Prime Minister and Hamas leader Ismail Haniyeh, to discuss the release of a BBC journalist Alan Johnston, who was kidnapped on March 12. Over 300 journalists, mostly Palestinians, demonstrated in protest of the kidnapping, which was most likely conducted by criminals.

The meeting between Haniyeh and Makepeace is the first meeting between the leader of Hamas and any diplomat from a European Union country.

Is Blair Considering Legalizing Afghan Heroin?

British Prime Minister Tony Blair is ordering a review of his counter-narcotics strategy, at the urging of Tory MP Tobias Ellwood, with the idea of possibly legalizing some of Afghanistan's poppy production, the Independent reported April 1. Blair argues that partial legalization of poppy production—this year's crop is estimated to be the largest ever—will help alleviate the medical shortage of opiates worldwide, and curb smuggling.