In this issue:

French Government Will Step in To Prevent the Collapse of Alstom

German Christian Democrat Calls for Berlin-Moscow Maglev

Mahathir, Sakakibara Renew Call for Asian Monetary Fund


From Volume 2, Issue Number 32 of Electronic Intelligence Weekly, Published Aug. 12, 2003

World Economic News

French Government Will Step in To Prevent the Collapse of Alstom

The French government will step in to prevent the collapse of engineering flagship Alstom, the producer of high-speed trains (TGV), cruise ships, and power turbines. The Alstom group, with 110,000 employees internationally, is struggling to service its huge $4.9 billion in debt, while the worldwide economic downturn has caused a sharp fall in its sales and orders in recent quarters. Among the top customers of Alstom is the French government. The Alstom stock price has crashed 90% in the last 12 months, and lost another 63% on Aug. 4 alone, due to talk of an imminent liquidity crisis.

According to the French daily Les Echos on Aug. 4, there had been an emergency gathering on Aug. 2, including French Finance Minister Francois Mer and the top executives of France's three largest banks (BNP Paribas, Societe Generale, Credit Agricole). The banks told the government that a bankruptcy of Alstom would threaten the French and European financial system (and, of course, first of all the three banks, themselves). The French government, according to Les Echos, acknowledged that an Alstom collapse would be a financial, industrial, and social catastrophe.

Late on Aug. 4, Alstom requested the suspension of trading in its shares. The following day, Les Echos reported that the government was ready to step in with 300 million euros, which would make the government the largest Alstom shareholder. Moreover, the government might guarantee up to 2 billion euros of Alstom's liabilities. The private banks would have to write off other parts of the debt. The French government on Aug. 5 confirmed that it is participating in negotiations with 60 banks on a bailout for the Alstom group. A decision was scheduled to be released before stock trading resumed on Aug. 6.

German Christian Democrat Calls for Berlin-Moscow Maglev

Peter Gauweiler, a leading official of the Christian Social Union in Bavaria, and a member of the national parliament, published an article in the Aug. 8 issue of the Sueddeutsche Zeitung, endorsing a maglev project between the capitals of Germany and Russia. The call is apparently a reflection of the impact of the programmatic campaign for the September state elections in Bavaria by the Civil Rights Solidarity Movement (BueSo), which is led by Helga Zepp-LaRouche.

With Europe and the former Soviet Union area still divided in the railway sector by the differing track gauges, unified high-speed transport for the entire continent is possible only with a new technology, the maglev, Gauweiler writes. The technology allows speeds up to 400 kilometers/hour, which according to a survey of the European Union would allow travel from Berlin to Moscow in less than five hours; Berlin-Warsaw in about two hours; Berlin-Minsk in three hours; and Berlin-Smolensk in four hours. The world's only currently functioning maglev, the Transrapid, was made in Germany, and is running in China.

Those who argue such a project is too expensive and could never be financed, should notice that it would cost less than the Iraq War (which Gauweiler opposed), he writes, and the state could step in through issuing special bonds that would be bought on the private capital market. The Trans-Siberian Railway was financed by French and German capital, in the 19th Century.

"It is true: Germany is in a conjunctural low. But the German economy will not walk up the mountain, if Germany no longer wants to push through grand projects," Gauweiler writes.

Mahathir, Sakakibara Renew Call for Asian Monetary Fund

Malaysian Prime Minister Dr. Mahathir bin Mohamad presented the opening speech to the inaugural meeting of the East Asia Congress in Malaysia, Aug. 4-6, which included participation from 13 East Asian countries. Speakers included former Japanese Minister of Finance Dr. Eisuke Sakakibara; former South Korea Deputy Prime Minister Prof. Han Seung-Soo; Singapore Development Bank managing director Dr. Fong Cheng Hong; South Korean Institute of International Economic Policy Director Dr. Cho Jongwha; ASEAN Tourism Association Secretary-General Tunku Datuk Seri Iskandar Abdullah; Prof. Kenichi Ito, CEO of the Japan Forum on International Relations; and Special Advisor to the Cabinet of Japan, Prof. Kuroda Haruhiko.

One of the main proposals by Mahathir was reviving the call for an East Asia Economic Group (EAEG), which he first proposed a decade ago. But, opposition from the United States prevented its implementation. The ASEAN+3, linking the ten Association of Southeast Asian Nations countries with China, South Korea, and Japan, approximated the original idea.

Dr. Mahathir said in his speech: "There must be no retreat behind a great East Asian economic barricade, there must be no circling of the wagons and no hiding behind great walls.... We must seek to contribute to a sense of security and well-being on the part of all the countries of East Asia, not only for the strong and wealthy, but also for the weak and poor."

Asked about an Asian Monetary Fund (AMF), Dr. Mahathir said, "We have to have an Asian Monetary Fund simply because the IMF is not as independent as it should be. As we know, there are other hands which are controlling it and those hands have other ideas contrary to the prosperity of East Asia."

Dr. Sakakibara added that the AMF might have taken off, had Japan sought China's full backing in the 1990s. "We could have said to the rest [of the world] that this is Asian business, don't bother us." He said China must be "centrally involved" in the creation of an EAEG and not be viewed as a threat.

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