From Volume 7, Issue 42 of EIR Online, Published Oct. 14, 2008

Western European News Digest

Italy To Present New Bretton Woods Draft at G-20

Oct. 11 (EIRNS)—Italian Economics Minister Giulio Tremonti announced yesterday that Italy will present a draft proposal for a "New Bretton Woods," in a press conference at the G-20 meeting following the G-7 meeting of finance ministers in Washington. (The G-20 includes finance ministers and central bank governors of 20 countries, both industrialized and developing. The G-7 includes only the top industrialized countries.)

"We will present a preliminary draft at the IMF and G-20 meetings tomorrow," Tremonti said. We must "look forward to the future system," adding, "If the crisis is a global one, then solutions cannot be local; if the crisis has been a financial crisis, then the answer must be also an institutional one." In an implicit polemic against the text of the final communique of the G-7, which speaks about saving "systemically important financial institutions," Tremonti said that "the target of the Italian government is to save all banks," because "either they are all systemic, or we will have a systemic chaos."

Tremonti also attacked the Basel II regulations, saying that they "are dead. At least, this is the impression. All failed banks were aligned with Basel II. Evidently, there is something wrong." Italian central bank governor Mario Draghi, who spoke after Tremonti, said instead that "Basel II is not dead, but must be resuscitated in other forms."

Summit Shows Death of Maastricht

Oct. 5 (EIRNS)—The four leading European heads of state and government held a summit Sept. 27, together with the heads of the EU Commission, European Central Bank, and Eurogroup, to discuss the collapsing global banking system. The meeting demonstrated the reality of Helga Zepp-LaRouche's declaration that the Maastricht Treaty's dictatorship over Europe is now dead, and that there is no solution without a return to the sovereignty of nations, and forging an FDR-style solution to the bankrupt global system.

The communique by the leaders—France's President Nicolas Sarkozy, Germany's Chancellor Angela Merkel, Italy's Prime Minister Silvio Berlusconi, and a very unhappy Prime Minister Gordon Brown of Great Britain—invoked "the exceptional character of the economic and financial circumstances," to state that "the European community will have to prove itself flexible in the application of the rules defining State aid to companies, as in the principles defining the unique market." They also took a stab at the Stability and Growth Pact, the hated Amsterdam Pact (which restricts EU members to a limit of 3% of GDP on budget deficits), which "will have to reflect the exceptional circumstances in which we find ourselves, according to the dispositions written in the Pact to that effect."

They also called for "a summit, as fast as possible ... for the re-establishment of the world financial system." Among the aims of this summit: "to decide that all the actors in the financial markets will be regulated or supervised and not only commercial banks;... this concerns in particular rating agencies, investment banks and hedge funds."

Sarkozy Moves To Prevent Panic, Stop Bank Run

Oct. 9 (EIRNS)—An article in today's Le Canard enchaîné explains why no public statement came from the Elysée Palace after French President Nicolas Sarkozy met with most of the leading bankers of the nation. During his crisis meeting with the bankers, Sarkozy gave his marching orders: In no case should people run out of cash. He then ordered the CEOs of the banking sector, with whom he met on Oct. 3: Sufficiently provision your cash distributors and banking agencies. If people were seen lining up outside the banks on the TV news, it would cause panic. The paper adds: The President has in mind the debacle which followed at the end of last year, with the footage of the long lines of people in front of the British bank Northern Rock, as well as last week's images of lines of people in front of Fortis banks in Belgium and Luxemburg, stormed by worried clients.

Sarkozy Okays Russia Proposal, with Conditions

PARIS, Oct. 9 (EIRNS)—Le Figaro leads its issue today with the "new entente" between Russian President Dmitri Medvedev and French President Nicolas Sarkozy, following their participation at the Evian conference organized by France's International Institute of Foreign Relations. Sarkozy said that realization of the entirety of the Aug. 12 and Sept. 8 Franco/Russian agreements on the Georgia/South Ossetia problem, has reopened the perspective of an ambitious framework agreement between the European Union and Russia.

That agreement, stated Sarkozy, will trace the road to a true common economic and human space between Russia and the European Union. To go for confrontation would be folly, he said, adding that Reason commands Europe and Russia to be strategic partners. Sarkozy also gave the green light for the convocation of a conference before the end of 2009 on security problems, which the Russians have been proposing.

Sarkozy proposed that it be held in the context of the Organization for Security and Cooperation in Europe (OSCE), and on condition that this dialogue, "in which we are able to enter with Russia, must associate our American friends and allies. Because if one talks about the security from Vladivostok to Vancouver, that also concerns our allies, as well as the definitive renunciation of the ambition of spheres of influence. We shouldn't forget," said Sarkozy, responding to attacks on the U.S. by Medvedev, that the "Near Abroad" of the Russians is also often that of the European Union. This area must be a field of cooperation, and not a terrain of rivalry.

German Government Desperate To Prevent Bank Run

Oct. 6 (EIRNS)—The real intention of the announcement today in Berlin, of a government guarantee for all private savings accounts, so that not one single euro has to be paid by the savings entity, was to calm the public and prevent a panicked run on the banks. Like other governments, Berlin is no more able to give real guarantees for anything near the Eu568 billion in private savings (the figure given yesterday) or Eu1,000 billion (the figure in the media this morning). Total savings in Germany are eu1.6 trillion.

The stock market is not convinced by what Chancellor Angela Merkel and Finance Minister Peer Steinbrück announced yesterday (without allowing any press questions). Within minutes after trading opened in Frankfurt this morning, the indexes collapsed by 5-6.5%

After the collapse of the first stabilization package for Hypo Real Estate late Saturday night (Oct. 4), all-day emergency sessions finally produced a second package of Eu50 billion, of which the German government guarantees Eu26.5 billion. With real estate development deals totalling Eu124 billion in 2007, and another Eu140 billion in covered bonds, Hypo Real Estate is one of the biggest players in these two German market segments. The German covered bonds market is said to be the biggest in the world, with Eu900 billion in total.

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