Global Economic News
Is an Emergency $300 Billion Bailout for Spain Next?
June 16 (EIRNS)The EU, the IMF, and the U.S. Treasury Department are working around the clock to cobble together a $300 billion bailout package for Spain, according to a Spain's El Economista today. European Central Bank sources told the daily that there was a secret, emergency meeting of the IMF board of directors to discuss the project, in order to have somethinganythingto wave around at tomorrow's EU summit meeting in Brussels, in light of the accelerating meltdown of the Spanish financial system.
The Economista story says that the idea is to avoid Spain having to resort to the $1 trillion bailout fund set up by the EU around the Greek crisis, as such a move "could unleash panic in financial markets," and would mean the end of the euro system altogether. That view was seconded by London financial press, such as the Financial Times and Daily Telegraph.
British Deputy Prime Minister Nick Clegg was in Spain on June 11 to discuss the crisis with Spanish authorities; and IMF chief Dominque Strauss-Kahn will travel there on June 18 with the same agenda. All of this is meant to "pile pressure on Prime Minister Zapatero to sharply reduce the country's budget deficit," according to the EU Observer.
Zapatero today caved in to one of the points of London's pressure, announcing a unilateral government labor "reform" which will lower wages and increase unemploymentin a country already suffering an official 20% unemployment rateand likely trigger a general strike. Many observers are asking if Zapatero's government will long survive, if it implements the full London plan.
South Korea Imposes Derivatives Restraints To Halt Hot Money
June 15 (EIRNS)South Korea, which already has strict controls on hedge funds, has imposed restraints on currency derivatives to restrain the flow of hot money, rather than trying to defend the currency against speculators. "These measures are aimed at reducing the volatility in capital flows that pose a systemic risk in the country, instead of driving the exchange rate into a specific direction," South Korea's Finance Ministry, two financial regulators, and the central bank said in a joint statement.
The European crisis has provoked volatile shifts in currency markets in Asia. The new restrictions, which were announced well in advance and will be applied over a two-year period, put limits on banks' and other financial institutions' currency forwards and cross-currency swaps. The curbs will apply to both domestic and foreign banks, but official data showed foreign bank branches are the ones that will be immediately affected, because they are the most involved in such speculative activity.
The central bank will also take steps next month to limit foreign currency lending by banks to local companies, by allowing such lending only to finance documented deals with foreign entities.
China in Greece; Infrastructure versus Finance
June 15 (EIRNS)While European and American banks are pulling out of investments in Greece as rapidly as they can because of the Greek government's sovereign debt problems, China is expanding already significant investments in infrastructure development, mostly centered around the port of Piraeus outside Athens.
Chinese Vice Premier Zhang Dejiang and Greek Deputy Prime Minister Theodore Pangalos are due to sign a memorandum of understanding today, to cement cooperation between the two countries in the maritime sector, a senior Greek government official said. "These concern maritime affairs, telecoms, and a project to renovate a landmark tower building in Athens' port of Piraeus," the official said. Deals for joint ventures, charter agreements, and shipbuilding deals worth $615 million with Greek shipping companies will also be signed.
China's state shipping company, Cosco, which already controls a container terminal at Piraeus under a $4.2 billion long-term concession deal, is expected to make a joint bid later this year with Greece's state ports company to create a $185-250 million logistics hub near Athens to distribute goods for China in the Balkans. China, under separate agreement, will also be constructing some 15 new dry-bulk vessels in China for Greek use.
Nuclear Energy: Malaysia Now, Indonesia Later?
June 19 (EIRNS)Malaysian Energy Minister Datuk Seri Peter Chin indicated that the country should plan to have nuclear-generated energy now, rather than later, as it would take a long time for such facilities to be developed, according to the state news agency Bernama. "As our population grows, its needs and energy demands would also grow. As a minister responsible, I feel this option [nuclear power] must be taken into planning."
The June 18 issue of EIR contains an article, "Malaysia's Young 'Nuclear Ambassadors'" by Mohd Daniel Davis, physicist-in-training, and son of long-time EIR Malaysian collaborator Mohd Peter Davis. Highlighted in the article is the outstanding progress made by South Korea in the development of advanced nuclear power.
Meanwhile, in neighboring Indonesia directly to the south, President Susilo Bambang Yudhoyono, talking to journalists at the Presidential palace, was only able to say, "One of these days, Indonesians may finally be able to welcome the use of nuclear energy and see it as a solution to our energy problem.... But for now, the current government has no definitive plan for that." The Indonesian President was recently in Norway getting praise from British royalty and receiving a $1 billion bribe to the country, to "preserve" forests, i.e., stop development, allegedly in order to "fight global warming."