Western European News Digest
London Source: Huge Derivatives Blow-Out Feared
There is a potential mega-disaster in the derivatives market, a City of London source warned, in a discussion with this news service Dec. 3. The source said that a derivatives disaster of potentially systemic dimensions cannot be ruled out.
The recent China Aviation Oil (CAO) bankruptcy in Singapore, due to derivatives losses of $550 million, is a very serious matter, the source said. Comparisons to the Barings case (the Barings Bank collapse in February 1995 was caused by out-of-control derivatives speculation) are not an exaggeration, as we do not have a clear picture of all counterparties, do not know what the financial condition of the counterparties is, nor what their leverage position is, he worried. We do not even know what the second circle around CAO is, not to speak even of the third, fourth, etc., circles. In particular, we do not know if CAO is but a small aspect only of something much, much bigger, and that is connected to the question: Why did the oil price go down by $5 in the past two days?
There are rumors that a really big player, much bigger than CAO, is also in serious derivatives troubles, which need not necessarily be directly connected to CAO.
There are rumors that British Petroleum, one of the biggest derivatives traders, has large derivatives contracts that have gone awry, and that it is forced to sell off large quantities of oil in order to get cash quickly. The idea that reports on U.S. oil inventory figures would depress oil prices by $5 in two days, is ludicrous, the source said. For sure, we know that someone big is in distress and is making large distress sales.
Regarding CAO, the source noted statements by Chinese central bank deputy head Li Ruo Guo, who had mentioned two weeks ago that China has little experience with derivatives. The source said that the Chinese will now be even more cautious and careful on the issue of flexibility of the renminbi.
Tietmeyer Blamed for German Budget-Cutting Insanity
Former Deutsche Bank president Hans Tietmeyer is to blame for the introduction of the budget-cutting insanity of the 1980s, according to Albrecht Mueller, former head of the planning staff under Chancellor Helmut Schmidt, who left office in 1982. At a seminar of the Green Party's Heinrich-Boell Stiftung Nov. 27, Mueller lambasted the German obsession with budget-cutting as "insanity.... We're cutting ourselves to death."
Instead of doing what the French have been doing to a certain extentnamely, increasing public spending in some select areas to stimulate production growth and consumptionthe red-green German government from the era of Chancellor Helmut Kohl, from October 1982 on, has made one budget cut after another, each making things worse.
Asked by a LaRouche representative during the discussion period, why relevant legislation from the last big crisis, that of the mid-1960s Stability Law, which would enable the government to intervene, is not being used instead of the Maastricht "Stability" pact, Mueller said the Social Democrats as well as the Greens are followers of neo-liberalism; they don't like such laws, which for them represent the Keynesian enemy of the free-market ideology. He added that Hans Tietmeyer was a key figure in the change of belief systems in Germany, during the 1980s and 1990s, and that Tietmeyer's leading position in the Initiative for a New Social Market Economy propaganda machine reflects that role.
Mueller later added that the 1996 open letter that former Chancellor Helmut Schmidt wrote, attacking Tietmeyer for repeating the mistakes of the late Weimar Republic's central bank officials, was right on the mark, as recent developments have shown. Albrecht Mueller is the author of a best-selling book, The Reform Lie, which attacks 40 flaws and false axioms of present budget-cutting policies. (For more on this, see "Hans Tietmeyer's 'New Social Market-Economy Initiative'Cui Bono?," by Elke Fimmen, in this week's InDepth.)
Former CDU Party Manager Blasts Merkel's 'Thatcherism'
In a guest column published in the German edition of the Financial Times Dec. 2, CDU party manager Heiner Geissler excoriated party chairwoman Angela "Anglo-Dutch" Merkel, for her heartless "Thatcherism." Geissler wrote that "protecting the dignity of man" and morality is one of the basic values of any human society that deserves the name.
Geissler added that "In England, citizens older than age 80 get no bypass operation, no artificial hip, and they are turned off from the dialysis machine. The exception is if they have enough money to finance it privately. This selection according to age and income has also advanced in Germany, and is a moral disaster.
"Poverty is increasing on a world scale: 2.6 billion human beings have less to live on, than Europeans and Americans spend for dog food. At the same time, according to the World Bank, 225 individuals have managed to accumulate private property of $1 trillion, which is the equivalent of the annual income of 3 billion human beingshalf of mankind, that is."
The principle of social market economy has been driven back by shareholder value, but it must be restored, Geissler wrote, in what should be read as a warning to the CDU national convention now underway in Duesseldorf.
German 'Job Creation Miracle' a Hoax
The German government's "job creation miracle" is a hoax. In order to distract public attention from the fact that at least 8.5 million jobs are needed in the German economy, the government presents its own statistics saying that since April 2003, more than 8 million "mini"-jobs, i.e., part-time, temporary jobs, etc., with a maximum income of 400 euros per month, have been created.
The Essen-based RWI, in a survey, found that of those 8 million "mini"-jobs, approximately 25% were citizens who had a full-time job previously, and that 60% were citizens in the category of mini-jobs beforestudents, housewives, retirees. Only 15% had been jobless before. That means the entire mini-job program failed (if it was intended) to re-employ the jobless.
The most negative aspect of the mini-job expansion is that more Germans work without stable social and health insurance (which one does not have to pay if one earns less than 400 euros per month), and that more Germans work at two or more jobs instead of the one full-time job they had before.
Jaguar Workers Propose Conversion to Useful Vehicles
About 2,000 workers and supporters of the luxury-class car producer Jaguar marched through the streets of Coventry, England on Nov. 28, protesting management plans to shut down most of the production there, and to fire up to 1,500 workers. Auto workers from Birmingham also took part in the protest march.
As a solution for the current sales crisis for luxury-class cars like Jaguar, workers in Coventry propose to reduce to a minimum the production of such cars, and shift to production of high-quality vehicles for common use purposes, such as firefighting cars, rescue cars for the medical sector, and care services. Workers also propose transforming the firm into a public-sector venture, run by the municipality and the state, probably also with co-ownership by the workers themselves.
Italian General Strike Brings Out Millions of Workers
A general strike mobilized several million workers for protests against the Italian government's austerity policies Nov. 30. In approximately 80 cities, workers and employees, predominantly of the transport sector, but also medical personnel, law enforcement personnel, teachers, and auto workers, took to the streets for periods between four and eight hours.
The general strike has been the culminating action of a combination of some 30 strikes, mostly nationwide, in different sectors, through the month of November.
The protest against the government is not limited just to the labor unions.
The three biggest national labor federationsUIL, CGIL, CSIorganized the Nov. 30 strike, while the industry association Confindustria signed onto an open letter of the three federations to the government.
OPEL Workers Threaten New Strikes; Belgian Medical Sector May Strike
Following several weeks of the hardline position of management in the ongoing talks on the future of 10,000 GM-Opel autoworkers jobs, the metal workers union has warned that it "will think of some kind of action," to put pressure on the management, again.
In Ruesselsheim, the main Opel site in Germany, 40,000 signatures in defense of autoworkers' jobs have been collected, as well as those of many workers and citizens who are not employed at the Opel plant. Furthermore, a solidarity committee was formed Nov. 30, involving churches and numerous other social groups, in support of the jobs.
In Belgium, government plans for budget cuts and downsizing in the medical sector have alerted labor unions in that sector, and warning strikes and other protest actions are not to be ruled out, even before Christmas, in protest against austerity plans.
Growing Scandal Threatens UK's Neo-Con Home Secretary
For days, British press have been full of accounts of scandals surrounding British Home Secretary David Blunkett, who is the key promoter of police-state "anti-terror" operations in Britain.
The scandals focus on Blunkett's relations with his married ex-lover, two of whose children he claims are his. There is also a "nanny-gate" dimension. The twist is that the ex-lover herself leaked an e-mail implicating Blunkett as having sped up a visa application for her Filipino nanny.
British Prime Minister Tony Blair has gotten into this soap opera by supporting Blunkett, but the newspapers are full of speculation that his ministerial career could be over very soon. A government review of Blunkett's conduct is now underway.
Blunkett's ex-lover Kimberly Quinn is the publisher of The Spectator magazine, which current cover story is "Blunkett's Police State."
What is clear is that "somebody is doing something to someone," because Blunkett is the champion of ID cards and other police-state measures which Blair is promoting as part of the "war on terror." That this scandal is coming down on Blunkett's head right now, is certainly suggestive.
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