Global Economic News

Calls for Debt Audit Point to Illegitimacy of the Debt

March 8 (EIRNS)—The very legitimacy and legality of the speculative debt bubble that London and Wall Street have created, are being called into question by a growing chorus of voices internationally. Among some of them, but not all, the idea of a LaRouche-style Glass-Steagall reorganization of the international financial system is very much present—without which such an audit could not function.

On March 3, the U.K.-based Jubilee Debt Campaign, which was originally set up with significant Vatican input in the lead-up to 2000—issued an international call for Greece's debt to be audited to determine what parts are illegitimate and should therefore not be paid. The call referred to the precedent set by "an audit in Ecuador in 2008 [which] encouraged Ecuador's President Correa to default on some of the country's most unjust debt, leading to a write-down by borrowers." (EIR reported on that audit in an article in its Dec. 26, 2008 edition, "Ecuador Declares Partial Debt Moratorium.")

The latest Jubilee call was signed by 200 international economists, activists, parliamentarians, and others, including two former Ecuadorian cabinet ministers (Pedro Paez and A. Acosta), the UN's Jean Ziegler, Britain's Dennis Halliday, American economist M. Weisbrot, and some others in far left field, and/or outer space, such as Noam Chomsky.

Nationalist forces in Ireland are also picking up on the Jubilee call, and urging that the same be done in Ireland. Economist David McWilliams said the audit should be done in tandem with "a referendum on paying bankers and bandholders"—a policy most associated with Gerry Adams' Sinn Fein—and that "we could set the example for all of Europe." Fintan O'Toole and other Irish economists and trade unionists have also signed the call, according to Euobserver.com, which also notes that "Any substantial repudiation of this debt would punch massive holes in the balance sheets of the banks in the core of the Eurozone that performed much of the lending."

Spanish Banking System on Verge of Imploding

March 11 (EIRNS)—Moody's downgraded Spanish debt to AA2 on March 10, joining both Fitch and Standard & Poor's which have already stripped the country of its triple A rating. The reason given is its forecast that the Madrid government will have to spend EU50 billion, not the government's claim of EU20 billion, to bail out its savings banks. The outlook is negative, meaning another downgrade could be expected. The announcement pushed up interest rates on ten-year notes to 5.50%.

Today, the Bank of Spain demanded that 12 Spanish banks, which failed the central bank's stress test, increase their capital by a total of EU17 billion. The order applies to eight savings banks, as well as the Spanish units of Deutsche Bank and Barclays Bank. Barclays has to inject EU552 million and Deutsche Bank needs EU182 million in their capital base, in order to reach a ratio of 8%. Because of losses, Barclays is said to be preparing to close 100 of its 600 branches in the country, according to Retail Banking News. Among the savings banks, Bankia must raise EU5.8 billion, Novacaixagalicia EU2.6 billion, and Catalunyacaixa EU1.7 billion.

While the Spanish government and Bank of Spain denounced the rating agencies for exaggerating the amount of funds needed for a bail-out, the Lex column in the Financial Times points out that Fitch has calculated a EU97 billion shortfall, if the criteria that have been applied to the Irish banks were applied to Spain, including a nonperforming loans ratio of 7.4% and a 58% haircut on distressed property loans. It also points out that extra funds, especially for the savings banks, would come from the government's bank rescue fund, the FROB, which also has had its rating cut.

South Korea Invites Partners To Build a Fusion Demonstration Plant

March 7 (EIRNS)—Addressing the U.S. Department of Energy's Fusion Energy Sciences Advisory Committee meeting today, Dr. G.S. Lee, the director and driving force of Korea's thermonuclear fusion program, invited international partners to join its project to design and build a plant that will demonstrate commercial-scale fusion energy production. Dr. Lee explained that even though the International Thermonuclear Experimental Reactor (ITER) will not be completed and running experiments until the end of the decade, during this decade of preparation of ITER start-up, the next step must be planned.

Korean law mandates that a series of fusion experiments culminate in an energy-producing technology. In 2036, Korea plans to have a demonstration reactor running, and has invited the ITER partners—the U.S., Europe, Russia, Japan, China, and India—to join a consortium to design and build it. To do it alone, Dr. Lee stated, "is impossible." It will require working with "people who are creative, diverse, and committed," he said.

Explaining the Korean fusion effort, Dr. Lee said their annual budget was $300 million. He modestly described this effort as "not small," especially as compared to the GDPs of Korea and the U.S. American fusion scientists are looking at a FY12 budget request of around $400 million, a decrease as compared to the FY10 budget, which is still in play as Congress has not passed a budget for this year.

The Korean fusion program does not just rely on government funding, however. Dr. Lee proudly pointed out that over 100 Korean companies are participating, with the large ones spending their own money, to develop fusion as an energy technology. Many of these are the same companies that are the backbone of Korea's nuclear industry. Last year, Korea won its first tender to export nuclear power plants. It plans to be able to export fusion power plants, in the future.