From Volume 38, Issue 34 of EIR Online, Published September 2, 2011

Western European News Digest

Europe at Epicenter of Financial Collapse

Aug. 26 (EIRNS)—The epicenter of the ongoing collapse of the Transatlantic financial system continues to be the European Inter-Alpha banking system. In fact, the emergency bailout of Bank of America by Warren Buffett with an investment of $5 billion, has everything to do with the European crisis. On Aug. 24 the Italian daily La Stampa reported that Bank of America had to write off a lot of assets, and Reuters reports that BoA's shares have lost 35% of their value just since the beginning of August. Much of that, they said, has to do with the fact that BofA was heavily exposed in CDS on European sovereign debt, and now does not have enough capital to back that insurance.

In a desperate attempt to stop the massive selloff of bank shares, regulators in France, Italy, Spain, and Belgium announced that they had extended their ban on short-selling of shares of 60 banks through the end of the month. France could extend it to Nov. 12, and Greece's ban is in effect till Oct. 7.

Greek Banking System Imploding

Aug. 22 (EIRNS)—Greek banks are on the verge of imploding. The Financial Times reports that they are not only frozen out of the money markets, but they are now frozen out of the European Central Bank's emergency liquidity operation. They are now seeking to get liquidity from the Greek Central Bank, but this can only happen if the latter gets permission from the ECB.

In an effort to stem panic by depositors, the four largest banks, including Inter-Alpha Group's National Bank of Greece, and also Alpha Bank, EFG Bank, and Piraeus Bank, agreed to take up a EU50 million convertible bond to recapitalize Proton Bank, a small bank that has all but collapsed.

Shaky Societé Générale Signs Liquidity Contract with Rothschild & Cie

Aug. 23 (EIRNS)—In a desperate move to avoid further collapse, Inter-Alpha giant Société Générale, France's second-largest bank, whose shares have dropped by 44% since the beginning of the month, signed a one-year, automatically renewable, "liquidity contract" on its shares with Rothschild & Cie., which mandates Rothschild to trade SocGen's stock to avoid excessive price swings, according to a note posted on the bank's website.

Liquidity contracts of this type are often used by medium-sized corporations, but the participation of a bank the size of Société Générale is seen by all as a move of desperation. The reality is that they're not volatile—they're just sinking.

Spiegel Mentions Repeal of Bretton Woods and Glass-Steagall as Source Of Current Crisis

Aug. 22 (EIRNS)—The German weekly Der Spiegel's current edition is headlined "Gelduntergang" [Monetary Breakup]; the English version is "Out of Control: The Destructive Power of the Financial Markets," with a photo traders wildly gesticulating to signal their trades, and a Ben Bernanke look-alike sitting in the midst of the chaotic scene.

Buried in the middle of the article, a section goes into the various steps of financial deregulation in the U.S.: Bretton Woods, the free trading of currencies, the development of futures currency markets (Chicago), and "The kiss of death came in 1999, under then President Bill Clinton, when the Glass-Steagall Act was repealed... Eliminating this separation removed a major barrier and enabled institutions like Citigroup and Bank of America to grow into financial giants.

Irish Economist Calls for Ireland To Leave Euro

Aug. 25 (EIRNS)—A leading Irish economist, Dr. Ray Kinsella, has called for Ireland to leave the Eurozone and reestablish its own currency. On Aug. 5 Kinsella was quoted in the Irish media, including in the Irish Independent, that the Eurozone has failed for Ireland and that Ireland should leave.

Kinsella, a professor at the Michael Smurfit Graduate School of Business, declared: "All there is to show for the sacrifices are a sovereign debt rating of junk status, a shrinkage of employment of 15% and 'closed' and 'for sale' notices across the country. This is not leadership. It borders on the willful to adhere to policies that are demonstrably not working and that have mired the Eurozone in a crisis from which it is seemingly incapable of escaping.

"Ireland needs to leave."

"The Finns Showed The Emperor Has No Clothes"

Aug. 25 (EIRNS)—The agreement between Finland and Greece on extra collateral for the EU bailout loan is holding the entire bailout plan hostage, and threatening to blow out the Eurosystem altogether. The IMF, Germany, and Holland—not to mention Moody's—have rejected the Finnish deal, which is viewed by "the markets" as an admission that the EU deal will not work.

Italian economist Paolo Savona wrote today that it takes one voice to say "the Emperor has no clothes"—in this case, Finland—to make it impossible for the scheme to be continued.

Danish Elections Called for September 15

Aug. 26 (EIRNS)—At 11 a.m. today, Danish Prime Minister Lars Loekke Rasmussen announced that there will be Danish national elections on September 15, just 20 days hence. The elections had to be called before the mandate of the present parliament expires on November 13. This comes two days after a new Danish banking package was agreed on by all the main parties, which package would ensure that future Danish bank failures would be avoided with help from the government, replacing the present policy, under which two Danish banks went under with losses for the creditor banks and depositors.

Chairman of the Danish Schiller Institute and LaRouche movement, Tom Gillesberg, will run as a candidate outside the parties in the Copenhagen area, along with Janus Kramer Moeller and Hans Schultz. Election posters, for the candidates can be seen on the campaign webpage,

Obama Administration Joins British on Fishing Expedition in Witch Hunt Against Gerry Adams

Aug. 24 (EIRNS)—Last February, the British carried out an operation to stop Sinn Fein President Gerry Adams from being elected to the Dail in the Republic of Ireland last February. Among the dirty tricks was a vicious attempt to link Adams to the 1972 IRA killing of Jean McConville. That attempt failed; Adams was elected and Sinn Fein tripled their number of seats in the Dail.

But the get-Gerry Adams witchhunt has intensified with British attempts to subpoena confidential oral history records at Boston College on the subject. Now the U.S. Attorney's office in Massachusetts has joined the British in demanding that Boston College hand over the oral histories, although the College has been fighting the subpoena in court for months.

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