Western European News Digest

French Economist: Crunch Could Cause World Depression

Aug. 9 (EIRNS)—The well-known French economist Pierre-Antoine Delhommais warns today in Le Monde that if there is a financial collapse, it will be global.

At the end of June, Delhommais says, Bank for International Settlement (BIS) director general Malcolm Knight spoke of a "golden age" for the world economy, questioning whether it could endure. But now, globalization is full of "shocks and shockwaves." He demonstrates how the collapse of home prices in the U.S. could destroy the economy of every nation, including China and those in the euro bloc. If America's economy collapses, there will be no market for Chinese exports.

"Globalization is full of shocks, because it is full of speculative bubbles," Delhommais says, noting that the financial assets bubble is three times the world's GDP. "After the tulip bubble in the 17th Century in Holland, and the 1929 crash, we now have the American crisis of subprime mortgages, whose impact no one can forecast. Some are already dreaming about the 'the big one' that would bring into question the ... overwhelming power of the markets."

Delhommais concludes by quoting the late American economist John Kenneth Galbraith, "What we know with certainty is that speculative episodes never end lightly. It is wise to forecast the worst, even if, according to most people, it is unlikely."

LaRouche Economics at Center of French Website Debate

Aug. 8 (EIRNS)—The webmaster of a website (www.top-debats.info) that covers general information with emphasis on economics and finance, felt obliged to respond to those who disagreed with his occasionally running Lyndon LaRouche's and Jacques Cheminade's analyses (from the French website, www.solidariteetprogres.org). At the center of the debate is the accuracy of LaRouche's forecasts. The webmaster writes in a "Note from the webmaster—Lyndon LaRouche":

"...[W]hen certain of his analyses are shared by other economists or enlightened observers, or do correspond to my viewpoint, I will publish them in parallel with other articles. That is, in particular, the case with respect to his views on: 1) the subprimes, ... and 2) the LBOs (leveraged buyouts)....

"These huge volumes of speculation—playing ground for institutional investors—are a threat to the underlying economy and, in particular, for the individual investor who is tributary to the reactions of these stock market giants. THE RISK FOR A CRASH IS FROM NOW ON AT ITS PEAK!" (emphasis in the original)

Spanish Banks Will Sink with the Real Estate Market

Aug. 8 (EIRNS)—Spanish banks are in an extremely vulnerable position, due to their large exposure in that country's real estate market, according to the Bank for International Settlements' (BIS) latest annual report. The report, which, according to Chile's Diario Financiero, also warns of the risks to the global economy posed by the collapsing U.S. real estate market, describes Spain as the industrialized economy currently most exposed to this risk.

This is because bank mortgage loans, as a percentage of the total loans of the banking system, is far higher in Spain than in Australia, the U.S.A., Germany, or Japan, for example. Extending credit to the speculative real estate sector has become one of the Spanish banking sector's most important activities in recent years, and a source of lucrative profits, the BIS explains. But now, six Spanish banks listed on the Ibex-35 stock exchange have lost 9.1 billion euros in their share value just since July 18, the date on which Bear Stearns revealed that two of its large hedge funds had gone under.

As revealed by the Facset consulting firm, the Spanish construction sector is also highly vulnerable, with over 100 billion euros in debt.

Le Figaro Covers Panic on Everywhere Street

PARIS, Aug. 7—With a picture of a teetering New York Stock Exchange, the Paris daily Le Figaro describes the panic overtaking the world markets. "A Wall Street Star in the Storm," referring to Bear Stearns, is the headline describing the market panic after the subprime burnout. Although some sense of reality penetrates, the dangerous illusion that disintegration can be controlled, remains dominant.

"The American subprime crisis has not failed to spread to Europe. In Germany, two cases—IKB last week and Frankfurt Trust yesterday—had to halt redemption from their funds, when panicked investors demanded to have their cash back. While Frankfurt Trust in vain explained that it had made no investments whatever in risky real estate credits over the last two weeks, investors demanded the return of EU40 million out of the EU160 million placed with the fund.

"In France, the most banks exposed to the U.S. markets also saw their stocks falling when the markets opened. This compelled Dexia and Natixis to publicly detail how exposed they were to the subprime market."

BAE Brushes Off DOJ Probe: Says It's 'Business as Usual'

Aug. 9 (EIRNS)—At a press conference announcing a 27% increase in earnings for the first half of the year, largely based on its U.S. defense contracts, BAE Systems dismissed questions about the U.S. Justice Department bribery investigation, claiming that neither the DOJ investigation in the U.S., nor the continuing but curtailed Serious Fraud Office investigation in the UK, will have any effect on its business operations.

"That's for the lawyers to take care of," said CEO Mike Turner in response to a reporter's question. He did, however, acknowledge that the company has "no idea" how long the investigations will continue. And despite the U.S. investigation of BAE's Saudi dealings under the Foreign Corrupt Practices Act, BAE expects the U.S. and Saudi Arabia to be its major growth areas.

However, the Times of London reports at least one way in which the Saudi slush fund scandal—widely known as the "scandal of the century"—is having an effect. This involves the anticipated signing of a 20 billion pound-sterling agreement between Britain and Saudi Arabia, for 72 Eurofighter Typhoons, to replace the Tornados bought as part of the original 1986 al-Yamamah deal. The new deal would be called "al-Salam."

Originally, the Typhoon contract was to have been signed in a public ceremony during the state visit of Saudi King Abdullah to the UK in late October, but this has now been scrapped, reports the Times, "to prevent embarrassing questions being raised about the involvement of the Saudi Royal Family in previous defense contracts with BAE." Instead, al-Salam will be announced quietly in a few weeks, and at today's press conference Turner said he did not even know when that would be.

Is Big Pharma Behind Brit Foot-and-Mouth Disease Outbreak?

Aug. 6 (EIRNS)—A lab owned jointly by Big Pharma conglomerates Merck & Co. and Sanofi-Aventis SA of France is the focus of an ongoing investigation into the latest outbreak of foot-and-mouth disease in Britain. The strain that has begun to infect cattle in Surrey, England, has not been found in animals recently, but was isolated 40 years ago. It is similar to the strain used at the Merial Animal Health lab in Pirbright, Surrey. The lab, which had $2.2 billion in 2006 sales, has voluntarily ceased production.

The European Union has imposed a ban on importing all live animals, fresh meat, and milk products from mainland Great Britain. Announcing its ban, EU Commission spokesman Philip Tod declared all of Britain, except Northern Ireland, as a "high-risk area." Reuters reports that EU veterinarians plan to meet Aug. 8, at which time further restrictions may be imposed.

The outbreak is the first in Britain since 2001, when the government was criticized for its slow response. This time, Prime Minister Gordon Brown has vowed that the government would do everything in its power to halt the outbreak, according to CNN.

Debate Reflects Danish Schiller Institute Maglev Campaign

COPENHAGEN, Aug. 8 (EIRNS)—Under the headline "To Shanghai at 431 kph—By Train," Denmark's Jyllands-Posten translated a Bloomberg wire about the Shanghai maglev line, focussed on its non-technical problems. But, Jyllands-Posten—reflecting the major impact of the Schiller Institute proposal for a Danish national maglev system as part of the Eurasian Land-Bridge—added just under the headline, "The dream of a maglev connection between Copenhagen and Aarhus is often discussed in the Danish transportation debate. In China, they did something about it."