From Volume 36, Issue 39 of EIR Online, Published Oct. 9, 2009

Global Economic News

Economic Breakdown in Germany; IMF Spreads 'Recovery' Delusions

Sept. 30 (EIRNS)—While the IMF is predicting a global economic upturn for 2010—3.1% increase of growth for the world economy, of which especially Germany would profit—the ugly reality of the breakdown is becoming clearer by the day:

The German Federal deficit in the first six months climbed to more than EU57 billion. This is 50 billion more than last year, which is due to the enormous costs of "fighting" the financial and economic crash. This includes the costs for the financial rescue package, reduced hours for workers, and both "conjunctural programs" (which do not really work, with municipalities not able to get access to the funds, since they are not able to put up their share, among other problems). At present, German state indebtedness is a whopping EU1.6 trillion.

Siemens has announced a 20% drop in orders in their core areas of industry, health, and energy compared to last year. Shipbuilding is cut, with the city of Emden losing more of its capacities. The Nordseewerke of Thyssen Krupp will be sold to a wind energy machine producer. Much wind for nothing or worse.

On Sept. 30, the new unemployment figures were presented, which are slightly better than expected. But mass layoffs are expected soon. The unsustainable 1.4-1.5 million workers on reduced hours has already taken a heavy toll: so far this year, EU14 billion in extra expenses. The state pays 6 billion, firms 5 billion, and workers 3 billion (in loss of income). Unit labor costs (the relation of labor cost to productivity) have increased in industry by 25%—making the reduced hours instrument much too expensive for firms, especially those with no perspective of getting new orders.

Also, now, after the Sept. 27 election, it is admitted that there is a credit crunch. According to the IFO Institute, 54.4% of all big firms in manufacturing are suffering from this, and of very small firms (less than 50 employees), 43%.

Worldwide Automobile Sales Take Another Nosedive

Oct. 2 (EIRNS)—The car-scrapping bonus in many countries (cash-for-clunkers), which provided the automobile sector with an artificial "boom" during Spring and Summer, has expired, and leading car producers suffered a disastrous month once again in September. In Germany, new car sales dropped by 48.7%; in the United States, GM sold 45% fewer and Chrysler 42% fewer cars. Also German car sales in the United States dropped by 16-22%, with the Daimler-Benz firm selling no more than 814 of its Smart compact cars last month.

Former Icelandic Ambassador Slams Legality of IMF and British Demands

Sept. 30 (EIRNS)—Olafur Egilsson, former Icelandic Ambassador to Great Britain and the Netherlands, posted a commented in the London Guardian criticizing the paper's coverage of Iceland's conflict with the IMF over forcing the country to accede to demands that they pay the British and Dutch depositors of the Icelandic banks that collapsed.

Olafur writes: "I am surprised to see no mention of the opinion of leading European law experts that the relevant EU regulations are, to put it mildly, far from being clear on the obligation of Icelandic taxpayers to refund customers of Icelandic private banks operating internationally. Or the fact that Nordic loans are being withheld and normal procedures not being adhered to by the International Monetary Fund in the case of Iceland, because of pressure from the UK and Netherlands governments."

The three Icelandic banks that collapsed were all private, and some of them had British nationals as major shareholders. According to press reports, Icelandic criminal investigators have been looking into whether these shareholders were getting preferential treatment in receiving loans. If this is proven to be the case, then the banks collapsed because of fraud, which has as its source British nationals, and a British liability. This would call into question demands by the British and Dutch governments to hold Iceland liable for a fraud made in the City of London.

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