EIR Daily Alert Service, FRIDAY, JUNE 8, 2018

EDITORIAL

New Strategic Alignment in Asia Shaping the Future: Will Foolish Europeans Be Left Behind?

June 7 (EIRNS)—“There is a clear orientation towards an Asian Century,” Schiller Institute founder Helga Zepp-LaRouche stated in her weekly webcast today. “The Asians are on a much better course right now, because they emphasize innovation, science and technology, scientific progress as the source for the increase of production. So they’re doing a lot of things right, which some of the Europeans are doing wrong, and unfortunately, as [Russian President Vladimir] Putin commented, many of the problems of the United States stem from the opposition against [President Donald] Trump, and that includes, obviously, that he’s been blocked from implementing his promises in terms of the destruction of the U.S. economy, and not only the relationship with Russia.”

As part of this new strategic alignment in Asia, the June 9-10 summit of the Shanghai Cooperation Organization (SCO) in Qingdao, China, has taken on international policy significance. Besides the SCO conference itself, the three leaders of the major Asian powers (China’s President Xi Jinping, Russia’s Putin, and India’s Prime Minister Narendra Modi), all of whom will attend the summit, have announced that they will also hold three one-on-one talks on the sidelines of the conference. Today, the Indian External Affairs Ministry told the media that Modi will hold a bilateral meeting with Xi on the first day of the summit. A Russia-India bilateral meeting had already been announced. And Putin and Xi will also be holding a major summit meeting.

The shift in relations between China and India is taking on particular significance. In late April, Modi and Xi had a two-day informal summit, much of which was one-on-one. Following those meetings, a better understanding has seemingly emerged between China and India on how to manage their differences and exploit the potential to grow, at a time when both countries are keen to move forward rapidly and assume global responsibilities. While the economic give-and-take remains the key area of their interaction, both leaders are now trying to find out how to collaborate with each other while maintaining its own interest (but not undermining the other’s), strengthening the security in the region, and helping develop the economically-weaker South and Southeast Asian nations.

Taking these developments into account, along with the continuing shift in Japan towards cooperation with China’s Belt and Road Initiative, and the promising developments around the upcoming June 12 Trump-Kim summit in Singapore, it is clear that “the momentum right now is with Asia,” Zepp-LaRouche elaborated. “The United States and the European nations should just ally with the Asian countries to develop the globe, overcome poverty, have a win-win cooperation of all nations on this world, and build a new community for the shared future of humanity.”

Zepp-LaRouche pointed to the African situation as exemplary of the options facing the planet. The continent has been subjected to poverty and wars for decades, if not centuries, and one of the consequences has been mass migration to Europe. “How do you think this problem can be solved? By the year 2040, it’s expected that there will be 2 billion Africans. Now, if you think that you can put 2 billion people in camps in Libya or in some other North African or other country as is being proposed by the EU right now, and you can keep 2 billion Africans who are fleeing from hunger and epidemics, by increasing the coast guard and efforts to prevent people from coming over the Mediterranean, that’s obviously an illusion!

“The only way how you can solve this absolutely terrible catastrophe of the refugee crisis,” Zepp-LaRouche stated, “is by large-scale development of Africa. China has done a brilliant job. They have completely changed the outlook of the Africans, who have hope for the first time that they are able to overcome poverty and underdevelopment with the help of China.”

Zepp-LaRouche also addressed the prospects for progress at the Trump-Kim summit, and beyond. “Concerning Trump, North Korea, China, South Korea, and Russia, there are all the signs that they really want to make this work.  There have been many delegations from the White House, from North Korea, in the Singapore summit; there was a statement by the South Korean President Moon Jae-in, who said that he hopes one can include in the peace treaty between the North and the South, also a non-aggression pact.  And President Putin, basically, he complimented Trump for the ‘courageous’ idea to have this personal meeting, and he promised that Russia would play an important role in the economic development of the North; and he also said that there must be 100% security guarantees for the North, so that the tragedy of Iraq and Libya is not repeated.”

Zepp-LaRouche concluded: “If you look at the New Silk Road dynamic as a frame of all of this, the reasons to believe that this can be a real success story are actually much better than in the case of the German reunification which took place under much worse geostrategic conditions.”

THE NEW GLOBAL ECONOMIC ORDER

Progress Towards Moscow-Beijing High-Speed Train

June 7 (EIRNS)—Russia’s President Vladimir Putin answered almost 80 questions (out of 2 million received) over four hours in his annual “Direct Line with Vladimir Putin” program yesterday. Only the very beginning of the Q&A has been translated and transcribed so far. Putin’s first remarks dealt with the progress of the Russian economy in view of his approximation of Lyndon LaRouche’s “potential relative population density” concept, especially featuring the 3.8% rise in real incomes over the year, the rise in life expectancy, and the planned increase in life expectancy to 80 years by a specific deadline. Part of the latter plan is a trillion ruble ($16.16 billion) fight against cancer between now and 2024, TASS reported.

In answer to a question from a Chinese schoolboy, Putin said that he expects the Russian government to make a positive decision to cooperate with China on a high-speed rail system linking Moscow with Kazan, Russia, TASS reports.  (Although TASS did not mention it, our own readers know that the Moscow-Kazan link is the first part of a planned high-speed train from Moscow to Beijing.) President Putin confessed that he had not “travelled yet on trains in China,” where he will land beginning June 7 for a summit with President Xi Jinping and the June 9-10 Shanghai Cooperation Organization summit. “I know that such a [train] trip is scheduled for me, and President Xi Jinping and I will be able to estimate China’s achievements in that field in the near future,” he said.

Italian Economy Minister Pushes Public Investments

June 7 (EIRNS)—Italian Economy Minister Giovanni Tria, a friend of China, has sent a message that he is in favor of adopting the “Chinese approach” to growth. He has authorized the publication of excerpts from an academic paper of his soon to be published in an international economic review, which makes a strong argument for public investment in infrastructure, financed with deficit spending, which the EU should allow if at the same time conditionalities of “solid fiscal behavior” are implemented.

Even before the financial crisis, public investment was dropping, co-authors Tria and Pasquale Lucio Scandizzo (economist at the University of Rome Tor Vergata) argue in a preview today in Formiche.  After 2008 they collapsed: “Fixed investments by public administrations have dropped by some 28% in the Eurozone (19 countries) between 2009 and 2019 (from 3.5% to 2.2% of GDP), with large differences among countries. In Italy the drop has been by almost 40% (from 3.4% to 2.2% of GDP) and in France about 20%.”

The lack of public investment has also produced a drop in investment in the private sector and a reduction in family income.

“Public investments … act on the productive potential through their effect on the productivity of private capital and therefore on aggregate demand.

“Empirical analyses suggest that this positive effect is particularly strong in the case of public investments in infrastructure and instruction, because the latter increase the stock of human and physical capital and therefore the aggregated productive capacity, with virtuous effects on long-term growth.”

The “old idea” should be resumed “of treating capital expenses different than current expenses in deficit accounting…. Current expenses should be reduced while capital expenses should be increased, subjected to a planned quality and to rigorous controls, and financed in an independent way with a close connection between immediate expenses and expected results.”

The target of government debt reduction can be more easily achieved “thanks to the increase of nominal GDP, which is the specific aim of the program. Many technical details of the program, and its conditional demands, can be adequately planned with the participation of the other European governments and institutions.”

Public investments should be increased, aiming at also attracting private investments, and to this purpose, “a temporary increase of the deficit in order to start such programs should be considered as acceptable.”

MEP Marco Zanni: If the EU Pushes Italy to the Wall, We Will Leave the Euro

June 7 (EIRNS)—Speaking with Harley Schlanger on the “Hanging with Harley” radio program on the Rogue Money online network, European Parliament Member Marco Zanni (independent, Italy) warned that if the EU adopts blackmail tactics against the new Italian government, it will have no choice but to leave the euro.

Zanni, who was introduced as being close to Lega leader, Deputy Prime Minister Matteo Salvini, explained that the so-called “populist” Italian government “will concentrate on what our Constitution mandates: jobs and growth.” Asked what they will do if the European Central Bank opposes that and stops supporting Italian sovereign debt, Zanni said that the new Italian government will not accept blackmail. “If the Italian government is forced by the European institutions to decide between exiting the euro or accepting the Troika [IMF, ECB, and European Commission], we will decide for exiting the euro, it is pretty clear. If they stop buying our Treasuries or if they stop liquidity flows from the ECB to our banking system, we will not accept the undemocratic approach the European institutions used with Greece. Italy is not Greece. We are a founding member of the EU, and after Brexit, we will be the third largest economy. We are too big to fail.

“So, if they push us out of the European Union, we will do it to protect our country, our system, and our people. We cannot accept the Troika and the ESM [European Stability Mechanism].

“Having said that, there is no point in our common program [for the coalition government] about exiting the euro. So, this government will not pursue policies for exiting the euro. We are asking for a new approach, a totally different one, for more space to foster and prop up growth, jobs and investments. If the European institutions try to blackmail us, threatening to shut down our banking system, we will react in the best interests of Italian citizens. If a decision has to be taken, of either exiting the euro or having the Troika in Rome, it is clear that this government will choose the first option.”

Zanni also commented on the promise to reintroduce bank separation (Glass-Steagall) announced by Prime Minister Giuseppe Conte in the Chamber of Deputies on June 6. Both parties, the Lega and the Five Star Movement (M5S), had bank separation in their own programs, so it was easy to transfer it into the government program, Zanni said.

He also reported on a recent trip he made to China, where he was able to see the tremendous development achieved by Chinese economy and society. He called for “a system of multilateral relations” of cooperation with China and European countries. In particular, Italy should work together with China in developing Africa, for many reasons, including “managing the migration flows.” Zanni raised the point that Salvini had promised his first trip abroad as a government official would be to China, and Zanni said he hopes that will occur soon.

Asked by Schlanger for a closing message for American listeners, Zanni replied: “My message is that change is possible. What happened in the world in the last two to three years, with the Trump victory, Brexit, and the Italian elections, is impressive in showing that people are pushing for a change in the social-economic model that has been in place since the 1980s. That model has impoverished 99% of the population in the world and has benefitted only the 1%. So, change is possible.”

Japan and China Agree To Cooperate in Infrastructure Exports

June 7 (EIRNS)—Today, the Japanese government decided to work with the Chinese government to enhance cooperation among companies of the two countries to increase infrastructure exports to emerging economies, Japan’s Jiji press reported. For a while now, Tokyo had been mooting infrastructure export strategies.

“The focus of this export strategy is to provide comprehensive support for urban development projects—from initial planning to regulatory development to fundraising,” Nikkei Asian Review had reported last month. Japanese industry is struggling to win overseas infrastructure development projects. “A Japanese bid for a high-speed rail project in Indonesia recently lost out to a Chinese bidder. Another Japanese bid, to build a suspension bridge in Turkey, was skipped over for a bid from South Korea.” The Nikkei Asian Review article had pointed these out as some of the reasons that Tokyo is so keen in cooperating with China on this issue.

STRATEGIC WAR DANGER

India Expresses Uneasiness on Joining Geopolitical Bloc with Japan, Australia, U.S.

June 7 (EIRNS)—According to India’s Economic Times today, India, Australia, Japan and the U.S. just held their second Quadrilateral meeting since November 2017, “with Delhi harping on an inclusive and multipolar approach for Indo-Pacific region, rather than bloc-based security architecture.” The June 7 article said, “Foreign Ministry officials from India, Australia, Japan and the U.S. met in Singapore on the margins of the ASEAN-centered Senior Officials Meeting, for consultations on issues of common interest in the Indo-Pacific region,” wrote Economic Times, citing a ministry statement.

India’s unwillingness to become a part of a bloc, such as the Quad, had been reflected earlier. Indian Prime Minister Narendra Modi, during his keynote speech at the Shangri-La Dialogue security conference in Singapore last week, had referred to ASEAN’s centrality, and an inclusive Indo-Pacific region. What is to important is that India is not simply asking only for China’s participation in maintaining the common interests in the Indo-Pacific region, but also wants the Southeast Asian nations, which are very much in the region, to be a part in order to make the much-used waterways fully safe.

Southeast Asia’s concerns about the safety of these waters were also expressed by the Malaysian Defense Minister Mohamad Sabu, who told reporters today that “Malaysia has great economic interest in the national waters (Malaysia’s territorial waters) of the South China Sea, namely fisheries and oil, (and) because of that, we want the sea to be safe at all times,” Bernama reported.

NATO and U.S. Officials React to Italian Call To Lift Russia Sanctions

June 7 (EIRNS)—The new Italian government led by Giuseppe Conte won a confidence vote in the Chamber of Deputies with a large majority yesterday (350, yes; 236, no; and 35 abstaining), after having won a confidence vote in the Senate on June 5. During his response in the Chamber debate, Conte mentioned bank separation as part of the government program, as we reported in yesterday’s EIR Daily Alert.

The previous day, he had called for lifting sanctions against Russia during his speech in the Senate. Today, NATO and U.S. officials responded to Conte, asserting that sanctions cannot be lifted.

NATO Secretary General Jens Stoltenberg, who often forgets he is a secretary and not a general, said: “We must maintain a political dialogue with Russia, but economic sanctions are important.” Stoltenberg said that “Moscow must change behavior” before sanctions are lifted.

U.S. NATO Ambassador Kay Bailey Hutchison stated: “Italy is one of our strongest allies” in NATO, but “on Russia we believe that sanctions should be kept until Moscow changes its behavior: It is important that our allies be firm on this position.”

Kurt Volker, Washington envoy to Ukraine, told La Stampa that “sanctions are decided and implemented as EU policy, not just as member states. Therefore, even if Italy can possibly call for lifting them in a European context, as long as there is a EU decision in favor of the measures, Rome will be obliged as member state to implement them. There would be consequences if it does not do it.”  As if this were any of his business in the first place!

Today the new Italian Defense Minister Elisabetta Trenta, will participate in a NATO defense ministers meeting.

Mattis: NATO Will Never ‘Turn Off’ Dialogue with Russia

June 7 (EIRNS)—U.S. Secretary of Defense James Mattis told reporters en route to NATO headquarters in Brussels, that “NATO will never turn off dialogue with Russia,” according to Sputnik yesterday. “NATO will never turn its back on trying to make better relations with Russia.”

Mattis said that that improving relations between Russia and NATO are hindered by the Kremlin’s alleged interference in U.S. and European elections and its “changing borders in Europe through the force of arms.”

While he said Russia, from NATO’s perspective, has more in common with the Alliance in terms of its future, he insisted it has been extremely difficult to find a common cause with Russia.

In a related development, the U.S. Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford will meet June 8 in Helsinki with Russian Chief of Staff Gen. Valery Gerasimov.  The two have had several such meetings since Obama, who prohibited contact, left office.

NATO’s defense ministers will meet on June 7-8 to prepare for the July summit which is focussed on approving a new command structure that may boost personnel by 1,200.

U.S. POLITICAL AND ECONOMIC

Justice Department To Share ‘New Details’ with Lawmakers on FBI Plant in Trump Campaign

June 7 (EIRNS)—Early next week, the Department of Justice will hold a special briefing for the bipartisan “Group of Eight”—leaders of the House and Senate as well as leading members of Congressional intelligence committees—on the FBI’s decision to deploy an informant into Donald Trump’s 2016 presidential campaign to query officials on ties with Russia.

This will be a follow-up to the May 24 meeting that included the same individuals, but a DOJ official who spoke with Politico, said that now, the Department will be able to “provide the documents that were available for review, but not inspected by the members at the previous briefing along with some additional material.” In a lame attempt to cover for its stonewalling, the DOJ said yesterday that, of course, it would have liked to provide information on the informant sooner, but it had to take “a little additional time to provide the most fulsome answers to the members’ questions as possible.”

Relevant also is the June 6 letter to Deputy Attorney General Rod Rosenstein from Sen. Chuck Grassley (R-IA), chairman of the Senate Judiciary Committee. In it, Grassley slammed Rosenstein for his “insufficient” reply to Grassley’s May 11, 2018 letter seeking information about the circumstances surrounding Lt. Gen. Michael Flynn’s reported conversations with the Russian ambassador, and FBI documents related to those conversations. Rosenstein, Senator Grassley said, has engaged in obfuscation and doubletalk, to prevent his committee from performing its Constitutional oversight of the Justice Department.

House Speaker Paul Ryan, meanwhile, has provoked the ire of several House Republicans, for stating yesterday that he agrees with Rep. Trey Gowdy (R-SC)—the two are reportedly close—who said last week that the FBI acted appropriately in using an informant to follow leads about suspected contact between Trump campaign associates and Russia. Ryan argued he saw “no evidence” to back up the President’s claim an informant had been deployed to spy on his campaign for political reasons. According to the Washington Examinertoday, Rep. Matt Gaetz (R-FL) warned that Ryan’s remarks had sparked a “revolt” against him among conservatives.

OTHER

New Spanish Cabinet To Be Officially Presented

June 7 (EIRNS)—Spain’s new Socialist Prime Minister Pedro Sánchez announced his new cabinet today, which at first glance appears to be EU friendly. The media play up that fact that the cabinet is comprised of 11 women and 6 men.

Some of the highlights:

A former Andalusia councilor, María Jesús Montero is Finance Minister. She will have to set the public sector spending ceiling for 2019, a necessary first step for Spain’s local and regional governments to make their own budgets.

Sánchez has already said he will adhere to the budget of the previous government, which commits him to reducing the public deficit to a Brussels target of 2.2% of economic output from 3.1% in 2017.

Nadia Calvino is Economy Minister. She has been in Brussels since 2006, where she was director general for the EU budget for the European Commission. Her boss was notorious Budget Commissioner Günther Oettinger. If that is not bad enough, she got full endorsement from a representative of Banco Santander. She presumably helped draft the EU’s long-term budget, the Multiannual Financial Framework (MFF), to run from 2021-2027, which is coming up for discussion among member states, many of which will want changes. Spain has been concerned with the proposed cuts to the Common Agricultural Policy.

Josep Borrell, a former President of the European Parliament, will be the new Foreign Minister, and is an outspoken opponent of Catalan independence.

Dolores Delgado, a prosecutor specializing in human rights and terrorism cases, will become Justice Minister.

Meritxell Batet will be tasked with handling the Catalan independence crisis in her new role as Territorial Minister.

The bright spot in the government is Pedro Duque, a former astronaut with two space missions, one on the Discovery in 1998 and a second on the International Space Station in 2003. Duque will be Minister for Science, Innovation and Universities. Duque is a vocal supporter of science, and in 2013 said, “If we keep not investing in our future, this country will sink forever,” during protests against cuts to science effected by the government of Mariano Rajoy. In a letter published in El País in 2012, Duque also defended education as a fundamental investment.

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