From Volume 7, Issue 43 of EIR Online, Published Oct. 21, 2008

Western European News Digest

Sarkozy To Bush: New Bretton Woods Needed Now

PARIS, Oct. 18 (EIRNS)—French President Nicolas Sarkozy wants a Bretton Woods agreement before the end of November, headlines an article in the daily Le Figaro. Yesterday, the paper reported that when leaving Brussels, Sarkozy said he had the unanimous support of all the European partners to launch a New Bretton Woods.

Today, Sarkozy will arrive at Camp David. Sarkozy and EU Commissioner Manuel Barroso will be received for only one hour by President George Bush, followed by a social dinner with First Lady Laura Bush. Before leaving, Sarkozy told the Canadian paper La Presse, that we cannot go on managing the world economy of the 21st Century with the instruments of the economy of the 20th Century.

Sarkozy proposed that a New Bretton Woods conference take place Nov. 21-23 in New York. According to La Presse, Sarkozy pressured Bush to face the issue, and insisted on the inclusion of emerging nations such as China, India, and also an Arab country.

'The Channel Keeps Separating Two Worlds'

Oct. 17 (EIRNS)—Italian and French press reports indicate that there are at least two different approaches to the "New Bretton Woods" now pushed by the European Council: one by Britain, and the other by France/Italy. For instance, the daily Il Foglio reports today that "France and Italy could build the hard core of a European upswing plan, with the strengthening of the state over the market." But others are against this. "Gordon Brown, according to accounts by British diplomats given to us, has insisted on 'erasing' from the conclusions of the European Council any reference to the need to react to the collapse of demand, and to the contraction of investments. The British Premier was much more prudent than other leaders, in saying that hedge funds and the USA are responsible for the stock market troubles.... Brown sees the state as the 'last resort' to save the system, and his new Bretton Woods aims at the Bretton Woods that Sarkozy will present tomorrow in Washington to US president George W. Bush [and] is instead aimed at 're-founding capitalism.' Between state and market, the Channel keeps separating two worlds."

In another indication of the split between London and the French-Italian axis, the Financial Times yesterday published an attack on Italian Finance Minister Giulio Tremonti's proposal to shut down hedge funds. The Times' Lex column, entitled, "The Italian Locust," worries that "Tremonti wants to abolish hedge funds. All of them. Everywhere. The Italian Treasury minister has declared that hedge funds are 'absolutely crazy bodies which have nothing to do with capitalism.' [Actually, Tremonti used the word "demented"—ed.] He has warned that when Italy takes over the presidency of the G8 from Japan in January, it will put the utter destruction of this 'hellish $2,000 Bn industry' on the agenda."

Der Spiegel Evokes 1931: Compares Bailout to Schacht

Oct. 15 (EIRNS)—With amazing bluntness, Germany's leading Anglophile weekly, Der Spiegel, wrote in its current issue, that the "rescue fund is a British idea," while its London correspondent added that "instead of billions or even hundreds of billions, the losses stemming from the financial crisis could now number in the trillions. Mountains of public debt could limit the ability of governments to act for years, if not decades."

The same report recalls another Black Monday, namely July 13, 1931, when the German government of Chancellor Heinrich Brüning shut down all bank trading after the default of the Danat Bank, going into a giant bailout operation for the German banks, which, in many cases, made the government the majority shareholder of troubled banks. By the Summer of 1936, the crisis was over, the banks were reprivatized, the article stated, advertising that as a lesson to be learned today. Apparently, this is an advertisement for the policy of debt collecting and rollover which Montagu Norman, then governor of the Bank of England, promoted in the Weimar Republic through Reichsbank President Hjalmar Schacht, his favorite asset in Germany's banking sector.

Today's German government walks in the footsteps of late Weimar, Der Spiegel insisted: "The [Eu500 billion] program, if ultimately approved, would resemble in some respects, the measures taken by the government of Chancellor Heinrich Brüning in 1931. But the similarities don't end there. Then, as now, it all began with a speculative bubble. In the 1920s, investors gambled with debt-financed stocks, and in the 2000s it was credit derivatives. Then, as now, politicians initially underestimated the extent of the crisis, and their reactions came too late and lacked coordination."

Bailout Fallout: Brutal Austerity, Unemployment

Oct. 15 (EIRNS)—It is already starting in Britain: Centered around a streamlining plan for the Justice Ministry and the legal apparatus, about 10,000 jobs are to be cut, setting the standard for the rest of the public sector. Also, Britain was expected to announce a sharp rise of 30,000 in unemployment today, the Daily Telegraph reported, with "unemployment poised to increase above 1 million before the end of the year and could reach 2 million in 2009."

In Spain, the governor of the central bank called for "wage discipline" in order not to disturb the bailout, and attacked the Socialist government's plan to finally fulfill its promise to increase the minimum wage, which, at 600 euros, is still below the official poverty level.

At the same time, Italian banks are cutting credits to small and medium-sized enterprises. The daily Libero has published a policy paper of a large bank, ordering all its offices to suspend loans to small enterprises and to cut down mortgage loans to private customers.

Also chief City of London mouthpiece Ambrose Evans Pritchard writes in the Daily Telegraph today under the headline, "Bank crisis ends as the economic crisis begins," how after saving the banks, now the economic crisis has to be faced. Pritchard claims the "years of excess debt are slowly being purged from the system," and people will start "to lose their jobs in earnest."

OECD Issues Damning Report on BAE Corruption

Oct. 18 (EIRNS)—The Organization of Economic Cooperation and Development has issued a 75-page report on the corruption by BAE Systems and the British government in bribery allegations in massive arms sales to Saudi Arabia. This is the infamous transfer of hundreds of millions of dollars in bribes by the British government and the British aerospace company BAE Systems to Saudi Prince Bandar. These bribes were deposited in banks in the United States and used by Bandar and his British masters as a massive slush fund to finance intelligence operations all over the world. The U.S. Department of Justice has been investigating BAE and these bank accounts for violation of money-laundering laws.

The OECD report, drafted by its Working Group on Bribery, headed by Swiss law professor Mark Pieth, condemned the British government's toleration of corruption, especially its failure to pass an effective anti-corruption law. The study group said it was "disappointed and seriously concerned" by British behavior. The report stated that despite promising for the last six years to pass a new anti-corruption law and prosecute major cases, the British government has done nothing.

The report goes so far as to say that if Britain continues to refuse to conform with its treaty obligations under the OECD's anti-bribery convention, it may "trigger a need for increased diligence over UK companies by their commercial partners or multilateral development banks," according to an OECD press release. This recourse is usually reserved for countries led by allegedly corrupt dictators.

The full report is available on the OECD's website.

All rights reserved © 2008 EIRNS