Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

For The Record  

FTR #802 The Luxembourg Connection (What the Hell Does Dave Emory Mean by “Underground Reich?” Part 2)

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. (The flash drive includes the anti-fascist books avail­able on this site.)

Listen: MP3

Side 1  Side 2

Introduction: This broadcast illustrates the deep political relationships that are shaping Europe. Evolved from the Third Reich’s formal military occupation of Europe, these political and economic relationships are inextricably linked with the remarkable and deadly Bormann capital network that forms the basis of much of Mr. Emory’s analytical paradigm. Taken in concert, they help to illustrate what Mr. Emory means by “Underground Reich.”

They also illustrate Prussian military theoretician Carl von Clausewitz’s principles stressing the continuum between war and politics, with economics as a governing consideration.

(For detailed information on the selection process by which Merkel shoehorned in Jean-Claude Juncker, see Pterrafractyl’s offering on Merkel’s increasingly autocratic position within the EU.)

Angela Merkel’s selection of Jean-Claude Juncker as President of the European Union Commission will see a long-time German ally and son of a Wehrmacht combatant ascend to the pinnacle of EU governorship. Juncker is a staunch advocate of the very austerity that is already crushing much of the continent. (As noted in FTR #155, The Bormann network is composed to a significant extent of the descendants of Third Reich alumni.)

A protege of Helmut Kohl, Juncker continues a profound connection between Germany, Luxembourg and the Third Reich that will be discussed below. Germans also dominate many of the other key EU governing positions.

Juncker’s availability as EU Commission President derives from his forced resignation as Prime Minister of Luxembourg, in a scandal that derived from a series of bombings in Luxembourg linked to Operation Gladio/Stay Behind.

The Italian “Strategy of Tension”Gladio— was revealed as part of a NATO program called “Stay  Behind,” through which security services used fascist cadres to implement the terror. (The cadres were ostensibly designed to foster guerilla-style resistance in case of a successful Soviet invasion or communist takeover in those countries.)

In FTR #44, we analyzed Stay Behind/Gladio’s origins with Nazi/BND spy chief Reinhard Gehlen and the ODESSA postwar SS network.

Juncker was forced to resign, due to a scandal in which Marco Mille, that country’s intelligence chief, secretly recorded a conversation with Juncker about Stay Behind/Gladio. Implicating the Grand Ducal family of Luxembourg in the scandal, Mille was himself a participant in Gladio/Stay Behind. One wonders about the possibility of deliberate blackmail/manipulation in order to steer the Luxembourgers in the direction desired by German power structure.

The deep politics and economic connections dominating the background and character of the Germanophile Juncker track back to the Nazi occupation of Luxembourg during World War II and the cartel connections that facilitated the Third Reich’s amoeba-like absorption of the European economy.

Martin Bormann (right) with Himmler

During the Nazi occupation, Luxembourg’s economy was folded into “Europa Germanica,” with Gustav Koenigs, Chairman of the Bush-Family linked Hamburg-Amerika Line and Secretary of State of the Third Reich overseeing the steel cartel ARBED and much of Luxembourg’s other business.

After the war, Luxembourg became part of the remarkable and deadly Bormann capital organization, with the Grand Ducal family front and center in the continuation of the German-Luxembourg connection. Note, again, that the conversations secretly recorded by Marco Mille implicated the Grand Ducal family in the Gladio bombings.

Illustrating the deep political continuity that has enabled the perpetuation of the Underground Reich and its EU/EMU domination of the continent, the program concludes with an examination of the career of former French President Francois Mitterand, frequently credited with having “fathered the Euro.”

A follower of French fascist organizations like the Cagoule and the Croix de Feu, Mitterand “idolized” Marshall Petain, head of the Vichy collaborationist government. Evidence suggests that his he was an underground agent of the Third Reich and appears to have perpetuated that relationship into the postwar period.

For those who might dismiss all of this as statecraft and/or corporate maneuvering, we conclude the broadcast by noting that Udo Voigt of Germany’s NPD–its top neo-Nazi party–has been appointed to the European Parliament’s Civil Rights Committee!

Program Highlights Include: Former Luxembourg intelligence chief Marco Mille’s resignation to become head of security for Siemens; review of Gustav Koenigs’ advocacy of what was to become the European Monetary Union; the relationship of Bertelsmann AG veteran Martin Selmayr and his “puppet,” Luxembourg EU commissioner Viviane Reding; Selmayr’s projection as Juncker’s cabinet chief [he was Juncker’s campaign director during the latter’s bid to become EU Commission President]; the pivotal and decisive role of EU Commissioners’ cabinet chiefs in the formulation of policy; review of the EMU as the realization of the plans for European and world domination envisioned by Friedrich List in the 19th century; review of the Bush family’s links with the Hamburg-Amerika Line; Francois Mitterand’s relationship with French Gestapo collaborator and “Final Solution” participant Rene Bousquet; Bousquet’s postwar financing of the career of Mitterand and other key French politicians.

1. Angela Merkel’s selection of Jean-Claude Juncker as President of the European Union Commission will see a long-time German ally and son of a Wehrmacht combatant ascend to the pinnacle of EU governorship. Juncker is a staunch advocate of the very austerity that is already crushing much of the continent. (As noted in FTR #155, The Bormann network is composed to a significant extent of the descendants of Third Reich alumni.)

A protege of Helmut Kohl, Juncker continues a profound connection between Germany, Luxembourg and the Third Reich that will be discussed below.

Of great significance as well, is the controlling relationship of Bertelsmann AG veteran Martin Selmayr, the former cabinet chief for Luxembourg EU Commissioner Viviane Reding and Juncker’s campaign director during his run to become President of the EU Commission. The EU Commissioner of Justice, she appears to have been effectively controlled by Selmayr.

Selmayr is also projected to be the chief of Juncker’s cabinet. Noteworthy in this context, is the fact that EU Commissioners’ cabinet chiefs can exercise decisive and unimpeachable political influence in EU governance.

Germans also dominate many of the other key EU governing positions.

“Particularly Close to Germany”; german-foreign-policy.com; 6/30/2014.

With Jean-Claude Juncker, Germany will have a politician as President of the EU Commission, who has always been a close ally. Juncker says that “since his earliest youth,” he has “always felt particularly close” to Germany, an affinity that “grew even stronger” in later years. The former prime minister of Luxemburg is seen as former German Chancellor Helmut Kohl’s protégé and as the “mediator” in Germany’s interests, wherein he had also won France over to accept Germany’s standpoint on an economic and monetary union. The transition from the Barroso cabinet to that of Juncker will be coordinated by the German national, Martin Selmayr, who had previously been employed as cabinet director of the EU Commissioner for Justice, Viviane Reding, (Luxemburg) and was considered to “actually be the Commissioner of Justice.” He is also considered to become cabinet director of Juncker’s office as President of the Commission. Germans are at decisive posts on the Council of Ministers as well as in the European Parliament, for example as parliamentary group whips, and the German national, Martin Schulz is being considered for the next presidency of the parliament. An influential German journal commented on the concentration of Germans at the leadership level of the EU’s bureaucracy with “The EU speaks German.”

Kohl’s Protégé

According to both his own admissions and the views of his detractors, Jean-Claude Juncker has, from the very beginning, been – both personally as well as politically – Germany’s close ally. “I have always felt particularly close to Germany – since my earliest youth,” he said in November 2013. “That has remained so, and even, in fact, grown stronger.” Juncker traces this affinity back to the fact that his father, who served in the German Wehrmacht during the Second World War, had raised him to be “pro-German.” That had been “one of his life accomplishments.” “Not everyone could achieve that after the Second World War.”[1] Politically, the EU Commission’s president-elect is considered to have been former German Chancellor Helmut Kohl’s protégé. In the 1980s, the Prime Minister of Luxemburg, Jacques Santer, “introduced” his employee, Juncker, “to European politics,” according to a critical retrospection on his political biography. Kohl then transformed him “into a European political authority.” “I owe my influence in Europe to him,” Juncker admitted in October 2012.[2] Already in 1988 – at the unusually early age of 33 – Juncker was awarded Germany’s “Federal Cross of Merit”. “You have more than lived up to the hopes placed in you in 1988,” praised Chancellor Angela Merkel, November 8, 2013, as she awarded him the second highest national award – the “Grand Cross of the Order of Merit”.

Opening Doors

Merkel must have also been thinking of Juncker’s significance for the – largely successful – efforts to impose German positions over those of France within the EU. “Not only are the Luxembourger accustomed to the languages, the perceptions, the cultures of both countries – France and Germany, they also know how to effectively reconcile one with the other,” observed Merkel in November 2013, in reference to Luxemburg’s historical experience of vacillating between the major powers, Germany and France. That facilitates “opening doors in Europe that were thought to have been locked.”[3] Critics explain this allusion to political policy with the example of a German-French dispute in 1996: “During negotiations on the essential criteria to be fulfilled by a country to join the economic and monetary union, Kohl sent the Luxembourger to sound out the French. Together with Germany’s Minister of Finance, Theo Waigel, Juncker was able to win the French government’s support for an independent European Central Bank, patterned upon the German model.”[4]

Balance No Longer Necessary

The fact that the German Chancellor has now imposed Junckers nomination, in particular against Great Britain’s strong resistance, is a reflection of Germany’s uncontested hegemonic power over the EU. In 2004, London withdrew Chris Patten, its – majority favored – candidate, because Paris was opposed to his candidature. Back in those days, a certain balance in the interests of the EU’s main powers was still seen as more or less indispensable. Today, this is no longer the case, in any case, as far as Berlin is concerned. In Great Britain, Juncker has been met with absolute rejection, regardless of party affiliation. Even the German press has had to admit that in Great Britain “almost no one” considers him “an appropriate choice.”[5] The idea of beginning to search for a more consensual compromise candidate – as had been routine procedure, in such cases in the past – was smugly dismissed in Berlin. “Since Prime Minister Cameron was unwilling to give in on the controversy over Juncker” he had to be outvoted according to the media. “The majority decision … had become inevitable.”[6]

Actually the Commissioner

Juncker owes his new post to not only the German Chancellor, but to the head of his election campaign team, the German national, Martin Selmayr. Selmayr, had headed – from 2001 to 2004 – Germany’s Bertelsmann AG’s EU Mission, to then begin work as speaker of the Luxembourger EU Commissioner, Viviane Reding, where, in 2010, he was promoted to become her cabinet director, when she began presiding over the commission’s justice department. Reding allowed him “so much leeway in the planning and elaboration of new proposals” that “some in Brussels began to see her as the doll, and Selmayr as the ventriloquist,” according to one report. More than a few people began to consider him “to actually be the commissioner.” Beginning this week, Selmayr will take charge of coordinating the transition from Barroso’s cabinet to Juncker’s.[7] Some observers are speculating that eventually, he may be called to head Juncker’s cabinet. The head of Commission President José Manuel Barroso’s cabinet – Juncker’s predecessor – was Johannes Laitenberger, also a German national. In Brussels, this post is seen as extremely important. The head of the cabinet directs the bureaucracy’s daily functioning and can, as is the case of state secretaries in German ministries, exercise a decisive influence over political priorities and their implementation – usually obscured from public attention and beyond any constraints of democratic legitimation.

General Secretaries

German officials hold top positions in other central EU institutions. For example, since mid-2011, the General Secretary of the Council of Ministers – with a staff of about 2,500 – is a German national. General Secretary Uwe Corsepius previously headed the Europe Section of the German Chancellery. The head of the European Stability Mechanism (ESM) is Klaus Regling, who already from 2001 to 2008 had been in a leading position in Brussels, as the Director General of the European Commission’s Economic and Financial Affairs directorate. Previous to his appointment in Brussels, Regling had served as Director-General for European and International Financial Relations in the German Ministry of Finance.[8] Klaus Welle, another German, is the General Secretary of the European Parliament – the parliament’s highest ranking official. Welle is accredited with the idea of having one of the top candidates of the European elections become President of the EU Commission. Juncker, who has benefitted from this, has promised to work more closely in the future with the parliament.

German Led

Aside from its German General Secretary, the parliament is, itself exposed to a predominating German influence. Of its 751 parliamentarians, 96 are from Germany – more than an eighth of the parliamentarians – one-fourth more than the second in line, France, with 74 parliamentarians. Since January 2012, the European Parliament’s president has been Martin Schulz, of the German SPD, who, June 18, was elected – provisionally – chair of the Social Democratic parliamentary group, but intends to assume this post, also in the future. The conservative European People’s Party (EPP) parliamentary group is presided over by Manfred Weber of the German CSU Party; one of the two co-Chairs of the Green Parliamentary Group is Rebecca Harms, also of the German Greens. The member of the German Left Party, Gabi Zimmer, was confirmed on June 19 as chair of the European United Left/Nordic Green Left (GUE/NGL). She had succeeded Lothar Bisky (German Left Party) in March 2012. Four of the seven EU parliamentary groups are under German leadership.

[1] Bundeskanzlerin Angela Merkel und Premierminister Jean-Claude Juncker zur Übergabe des Verdienstkreuzes an Juncker. Meseberg, 8. November 2013.
[2] Laurent Schmit, Jürgen Stoldt, Bernard Thomas: Der Mann ohne Eigenschaften. Jean-Claude Juncker zu seinem dreißigsten Regierungsjubiläum. forum 324 (2012).
[3] Bundeskanzlerin Angela Merkel und Premierminister Jean-Claude Juncker zur Übergabe des Verdienstkreuzes an Juncker. Meseberg, 8. November 2013.
[4] Laurent Schmit, Jürgen Stoldt, Bernard Thomas: Der Mann ohne Eigenschaften. Jean-Claude Juncker zu seinem dreißigsten Regierungsjubiläum. forum 324 (2012).
[5] Jochen Buchsteiner: Don Cameron. Frankfurter Allgemeine Zeitung 27.06.2014.
[6] Jean-Claude Juncker als EU-Kommissionspräsident nominiert. Frankfurter Allgemeine Zeitung 28.06.2014.
[7], [8] Hendrick Kafsack, Werner Mussler: Die EU spricht deutsch. www.faz.net 26.06.2014. See In Brüssel stark vertreten.

2. For decades, we’ve spoken of the “Strategy of Tension”–the program of terrorism designed to discredit and criminalize opposition political forces and justify the imposition of anti-democratic statutes.

Eventually, the Italian “Strategy of Tension”Gladio— was revealed as part of a NATO program called “Stay  Behind,” through which security services used fascist cadres to implement the terror. (The cadres were ostensibly designed to foster guerilla-style resistance in case of a successful Soviet invasion or communist takeover in those countries.)

In FTR #44, we analyzed Stay Behind/Gladio’s origins with Nazi/BND spy chief Reinhard Gehlen and the ODESSA postwar SS network.

Merkel’s choice to be President of the European Commission, Luxembourg’s former prime minister Jean-Claude Juncker, was forced to resign because of a scandal in which Marco Mille, that country’s intelligence chief, secretly recorded a conversation with Juncker about Stay Behind/Gladio. Mille was himself a participant in Gladio/Stay Behind.

We note several things in connection with this scandal:

  • After resigning as the head of Luxembourg’s intelligence service, Marco Mille became chief of security for Siemens, one of Germany’s core corporations and an entity inextricably linked with the BND and the Underground Reich. 
  • The conversation taped by Marco Mille apparently implicated the Grand Ducal family of Luxembourg, who have a long-standing relationship with Germany and the Bormann capital network, as will be examined below.
  • Having helped to implement the establishment of the Euro, Juncker is now a champion of the German-mandated austerity doctrine that is crushing much of Europe.
  • We wonder if the Marco Mille gambit may have been intended to maneuver Juncker into the position of European Commission President?

“Goodbye Mr. Euro? Jean-Claude Juncker May Be Back Soon” by Hans-Jürgen Schlamp; Der Spiegel; 7/11/2013.

Jean-Claude Juncker, prime minister of Luxembourg and Europe’s longest-serving leader, stepped down on Wednesday over his implication in a spying scandal. But both his friends and his adversaries believe a comeback is likely. . . .

. . . . He helped found the European Union and create the common European currency. He is sometimes known as “Mr. Euro.”

. . . . In the 1980s, Luxembourg spies were involved in a puzzling series of bombings, the circumstances of which remain unclear today. Together with military and intelligence agents from multiple European countries, they were part of Operation Gladio, a clandestine illegal paramilitary organization. They worked as a parallel police force within the country that did what they liked and spied on whomever they wanted, whenever they wanted. Even the prime minister, their constitutionally defined boss, could not rein them in.

According to the parliamentary report, intelligence chief Marco Mille reported to Juncker in January 2007 wearing a special high-tech wristwatch. It recorded the entire talk. The matter was extremely tricky because the conversation alluded to the possible involvement of the Grand Ducal family. But Juncker didn’t bring it to their attention until the end of 2008. Even then he didn’t take drastic measures. Mille remained in office until 2010, when he became head of security for Siemens. . . .

3. After the Third Reich’s conquest of Europe, Luxembourg’s economy was folded into “Europa Germanica,” with Gustav Koenigs, Chairman of the Bush-Family linked Hamburg-Amerika Line and Secretary of State of the Third Reich overseeing the steel cartel ARBED, as well as much of the rest of Luxembourg’s other business.

Martin Bormann: Nazi in Exile by Paul Manning; Copyright 1981 by Paul Manning; Lyle Stuart [HC]; ISBN 0-8184-0309-8; pp. 79-80.

. . . . A similar pattern was developed for Luxembourg, a country smaller than Rhode Island, whose principal industry is iron and steel. The Germans annexed Luxembourg, as they did Alsace-Lorraine, and it became an administered territory, like Poland, Belgium, and Holland, where local nationals did not serve as government. Gustav Koenigs, chairman of Hamburg-Amerika shipping line and a director of many companies, was appointed Reich trustee of ARBED, an important Luxembourg steel cartel, by the German Ministry of Economics. There were in ARBED 250,000 shares outstanding, the majority held by Luxembourgers, Belgians, and French, in that order. German shareholders, largely through their banks, accounted for 54,747 shares. Some were held by British and Americans through their secret accounts in Swiss banks. A shift in control was made when Gustav Koenigs, as Reich trustee, also became trustee of the Belgian- and French-held shares. On April 19, 1943, a shareholders’ meeting was held in Luxembourg city, and the capital of the company was converted from francs into Reichsmarks.

ARBED was recapitalized at 300 million Reichmarks ($120 million), and under German direction the cartel became the third largest iron and steel company in Europe, ranking behind only Germany’s Vereinigte Stahlwerke [later re-named Thyssen A.G., another Bush-family linked business–D.E.] and the Goering Steel Works. A sales company was then formed under the name of Luxembourg Iron & Steel Company to market all ARBED products throughout Europe. It was capitalized at RM 1.5 million. To further tighten German control over the iron and steel output of this small, mountainous country, all of the iron mines in Luxembourg were combined and amalgamated into one unified association under German direction. This association was named “Luetzellurg,” and its advisory board was appointed by the chief of the German civil administration. Gustav Koenigs, as Reich trustee of ARBED, served as president of Luetzellurg. The two principal German banks, Deutsche Bank and Dresdner Bank, had assumed 73 percent ownership of the Banque Générale de Luxembourg and the Banque International de Luxembourg in May 1940. They bought majority shares of the two Luxembourg banks from the Belgian and French banks, where they had increased their shareholdings to a controlling interest. Both Commerzbank and the Deutschen Arbeit banks established branches in Luxembourg. . . . .

4. After the war, Luxembourg was folded into the remarkable and deadly Bormann capital organization, with the Grand Ducal family front and center in the continuation of the German-Luxembourg connection. Note that the conversations secretly recorded by Marco Mille implicated the Grand Ducal family in the Gladio bombings.

The Underground Reich hand in the Luxembourg economic glove has its resonance in the relationships between Kohl, Merkel  and Martin Selmayr and Juncker and Viviane Reding

Martin Bormann: Nazi in Exile by Paul Manning; Copyright 1981 by Paul Manning; Lyle Stuart [HC]; ISBN 0-8184-0309-8; pp. 155-156.

. . . . Even Grand Duchess Charlotte of Luxembourg had her own ideas, and they didn’t jibe with those of the U.S. investigative team dispatched to her tiny country to set things right. Upon her return from exile in London and Montreal, she promptly dismissed the U.S. investigative mission, which had been attempting to uncover secrets of the German-Luxembourg steel cartel. Elbert D. Thomas of Utah, when he was chairman of the U.S. Senate subcommittee on military affairs, commented in Washington on June 26, 1945: “We had a mission in Luxembourg which was obtaining quite a bit of information on the steel cartel until the Grand Duchess returned. Information was then blocked off from us and the mission had to retire with what information they had already collected. There was much to learn about the way in which small states like Luxembourg had been used by the cartels. The episode suggests that some rulers, whom we have befriended, may be expected to assist the cartelists in their postwar efforts to regain dominance.”

What the grand duchess learned from her finance minister on her return to Luxembourg was simple: “Don’t tamper with the money machine. We made record profits during the German era, and there is every indication we will be going into an even greater period of prosperity, once Germany recovers. They will then continue to be our biggest customer. All that is required now is a readjustment in stock ownership to please Belgian, French, British, and American shareholders, which will be done.” Open German stock ownership was reduced to its former position of about 20 percent in Luxembourg industry and the German trustee was eliminated. But at board meetings, Belgian and French banks voted as blocs on behalf of stockholders in Germany. The German voice in the wings was still there, and as time went on in Luxembourg, increasingly the voice could be heard loud and clear-the customer speaking to the seller, the equalizer of the marketplace. Grand Duchess Charlotte, who was to retire during the sixties to be succeeded by her son, Grand Duke Jean, always believed that the new prosperity of Luxembourg after the war was testimony to her decision in 1945 not to permit interference with the German financial and industrial apparatus. The German banks, Deutsche and Dresdner, remained in position and the Luxembourg financial community continued to look to Frankfurt rather than to Zurich, London, and New York for financial guidance. ARBED (its sales organization in New York City is Amerlux Products) continues as a powerful and prosperous steel cartel closely tied to its German mentors.

By 1980 Luxembourg was to become a new center for gold buying in Europe, with West German banks selling the equivalent of $1.4 billion in gold to holders in Luxembourg. The chief attraction was the lack of a value-added tax, a form of sales tax. . . . .

5. In addition to his role as the head of the Hamburg-Amerika Line and the lynchpin of the Nazi/Luxembourg economic connection, Gustav Koenigs was Secretary of State of the Third Reich. He articulated the vision of what was to become the European Monetary Union at a 1942 conference about the European Economic Community.

Europaische Wirtschafts Gemeinschaft (European Economic Community–translation).

. . . At the moment the so-called “European Economic Community” is not yet fact; there is no pact, no organisation, no council and no General Secretary. However, it is not just a part of our imagination or some dream by a politician – it is very real. . . .

. . .  Its roots are in the economic co-operation of the European nations and it will develop after the war into a permanent European economic community. . . .

6. “Mr. Euro”–Jean-Claude Juncker was not the only champion of the Euro among European heads of state.

As the Eurozone debt crisis continues, it may be useful to ponder a little known aspect of the background of former French president Francois Mitterand, the man who [officially] insisted on the formation of the common European currency.

As discussed in Miscellaneous Archive Show M61Mitterand had a history of participation in, and collaboration with, the French fascists who destabilized French democracy in the years before World War II and actively subverted the French military resistance to the German invasion of 1940. (The information about Mitterand is on side 1c.)

Mitterand idolized Marechal Petain, the head of the Vichy collaborationist government in France.

Mitterand was associated with the Cagoule and Croix de Feu, French fascist organizations that attempted to overthrow the French government in 1938, much as U.S. fascists attempted to eliminate Roosevelt in 1934. Undermining the French defenses, these same elements realized their goal when the invading Germans created the collaborationist Vichy government.

Mitterand’s association with French fascist Rene Bousquet extended decades into the postwar period. Bousquet helped finance Mitterand’s postwar political career. Details of Bousquet’s political career and Mitterand’s association with him are covered in detail below.

A number of considerations suggest themselves in this regard:

  • Was Mitterand actually a double for the Axis during the war?
  • Was Mitterand’s “escape” from a POW camp during the war a cover for his subsequent infiltration of the French Resistance on behalf of the Germans and Vichy?
  • Was Mitterand a deep-cover operative for the Underground Reich in the postwar period?
  • Was he a willing, conscious fascist throughout, or [perhaps] subject to political blackmail, manipulated by the threat of revealing his prewar and wartime activities?
  • Was Mitterand’s insistence on a common European currency because of his fear of a re-unified Germany or because he was actually aiding in the realization of the stratagem of Friedrich List, as envisaged by the Third Reich? (For more detailed discussion of this, see–among other programs–FTR #746.)
  • In light of the continued postwar German domination of the  French economy, we might see Mitterand’s behavior as fulfillment of policy embraced by the French power elite–junior partners with their business associates in the Federal Republic. (This is discussed at some length in sections 28 through 31 in FTR #305. There is an excellent presentation of the interlocking of French and German corporate interests in the steel industry and the position they mutually occupied in the International Steel Cartel on pages 34-37 of James Stewart Martin’s All Honorable Men.)
  • In addition to reflecting on Mitterand’s past, we will also highlight the endeavors of Robert Zoellick in the context of German reunification. Zoellick recently confirmed that Mitterand insisted on the establishment of a common currency as pre-condition for German  reunification. Zoellick was a principal architect of that reunification, as well as a probable operative on behalf of the Underground Reich.
  • We should not lose sight of the fact that it is largely the advent of the euro itself that has brought about the financial crisis  in Greece, Italy, Portugal and Spain.

“A Euro Power Play that Backfired” by Oliver Mark Hartwich; Business Spectator; 8/17/2011.

To fully appreciate the subtle ironies of the euro crisis it takes a sense for history. Europe’s common currency has practically achieved the very opposite of what its creators originally intended. Instead of framing the Germans in Europe, the crisis has elevated Germany to the continent’s new, albeit reluctant, hegemon. Former French President François Mitterrand must be spinning in his grave.

Last Sunday, the Asia Society hosted a dinner for World Bank President Robert Zoellick in Sydney. His warnings about a further escalation of the debt crisis were widely reported, and the high-calibre audience certainly appreciated his views on the state of emerging markets. However, Zoellick also gave a fascinating insight into the early history of European monetary union.

After the fall of the Berlin Wall in November 1989, Zoellick was the lead US official in the ‘two-plus-four’ negotiations that prepared Germany’s re-unification in October 1990 (so named after the two German states and the four allied forces – Britain, France, the Soviet Union and the US). He was thus intimately involved in the diplomatic balancing act of unifying Germany while reassuring the British and the French that they had nothing to fear from this new and bigger country in the heart of Europe. For his achievements, Zoellick was even made a Knight Commander of the German order of merit, a very high award for a foreign national[Italics are mine–D.E.]

British Prime Minister Margaret Thatcher was horrified about the prospect of a united Germany. “We beat the Germans twice, and now they’re back,” she allegedly told a meeting of European leaders at the time. Thatcher even invited historians to a seminar at Chequers to discuss the question of how dangerous the Germans really were. Her trade minister, Nicholas Ridley, was forced to resign after he had compared German chancellor Helmut Kohl to Adolf Hitler in an interview with The Spectator. . . .

. . . There had always been rumours that in the two-plus-four negotiations the French had demanded Germany to give up its beloved Deutschmark in return for a French ‘oui’ on unification. More than once the dominance of the über-solid Deutschmark had caused the French and other European nations pain. Forcing the Germans to abandon their currency would surely be an appropriate way to weaken them so they could not become a threat to other nations, the French probably thought.

The only problem with this account of history is that there is no solid evidence for it. When Der Spiegel news magazine reported these rumours once again last year, representatives of the old Kohl government were quick to dispute that there had been any secret deals at the time. “There never was an agreement,” German treasurer Wolfgang Schäuble (who was home secretary at the time) boldly claimed. His predecessor Theo Waigel flatly denied any link between unification and the euro.

Such previous denials made Robert Zoellick’s remarks at the Sydney dinner all the more remarkable. Almost in passing, and as if it was the most obvious thing in the world, he explained his understanding of how Europe got its common currency. And his account confirmed the rumours that it had a lot to do with German unification.

As Zoellick told his audience (that was probably unaware of how controversial these issues still are in Europe) it was very clear that European monetary union resulted from French-German tensions before unification and was meant to calm Mitterrand’s fears of an all-too-powerful Germany. According to Zoellick, the euro currency is a by-product of German unification. As one of the key insiders in the two-plus-four negotiations, trusted and highly decorated by the Germans, nobody would be better qualified to know the real story behind European Monetary Union. Despite all official denials coming from the German government until the present day, there are no good reasons not to believe Zoellick’s account of the events.

The great historical irony of this story is, of course, that if the French had really planned to weaken the powers of newly reunited Germany through monetary union, this attempt has now completely backfired. Sure, the Germans will pay massively for the sake of keeping the euro project alive (if they don’t pull out of monetary union once they realise this). But in strategic terms, Germany’s influence has never been greater. As the continent wants to bank on Germany’s AAA rating, Berlin can now effectively dictate fiscal policy to Athens, Lisbon and Rome – perhaps in the future to Paris, too. . .

. . . As it turns out, the euro is not only an unworkable currency. It actually started as a French insurance policy against German power. But even as an insurance policy it has failed. Against their will, it has turned the Germans into the new rulers of Europe. And it has consigned France to be the weaker partner in the Franco-German relationship.

If Mitterrand had known all this in advance, he would have insisted on Germany keeping the Deutschmark as the price for German unification. . . .

7. In addition to information presented in Miscellaneous Archive Show M61, Mitterand’s relationship with Rene Bousquet is of great importance in appreciating “the real Mitterand.” Note that Gestapo collaborator and Final Solution participant Rene Bosquet helped finance much of France’s political left, including Mitterand, in the postwar period.

“Mitterand and the Far Right”; Wikipedia.

. . . The most damming of all charges against Mitterrand and his right wing connections is probably his long lasting friendship with René Bousquet, ex secrétaire général of the Vichy police. Charles de Gaulle said of Mitterrand and Bousquet “they are ghosts who come from the deepest depths of the collaboration.”[24] Georges-Marc Benamou quotes Mitterrand as saying of Bousquet “his career shattered at the age of 35, it was dreadful… Bousquet suffered badly. Imagine the break, the career shot to pieces”[25] which shows Mitterrand felt that Bousquet was undeservedly badly treated. In 1974, René Bousquet gave financial help to François Mitterrand for his presidential campaign against Valéry Giscard d’Estaing. In an interview with Pierre Favier et Michel Martin-Roland Mitterrand claimed that he was not the only left wing politician to benefit from Bousquet’s money, as René Bousquet helped finance all the principal left wing politicians from the 1950s to the beginning of the 1970s, including Pierre Mendès France. Worse still after Mitterrand’s 1981 win René Bousquet was received at the Élysée palace “to talk politics”. In an interview with Pascale Froment (René Bousquet’s biographer) Mitterrand declared “I listened to him as a political commentator. He saw me as a continuation of his halted career.”[26] Only in 1986, when media criticism of Bousquet began to gain in volume, did Mitterrand stop seeing him and he did not comment on the matter until the 1994 interview with Jean-Pierre Elkabach.[27] Lionel Jospin commented that he was little impressed by the President’s explanation saying “One would have liked a simpler and more transparent rise to power for the leader of the French left during the 70s and 80s. What I can’t understand is the continuing relationship into the 80’s with the likes of Bousquet who organized the mass arrests of Jews”[28] and Charles Fiterman also felt let down: “these revelations leave the uncomfortable impression of having been deceived by the man. 50 years later we see no trace of regret nor critical analysis, but a continuation of a compromising relationship which casts new light on events such as putting flowers on Pétain’s tomb. This seems to show a continuity in the choices of a leader calling in favors from a network of friends.”[29] Pierre Moscovici, commenting on Pierre Péan’s book said ” What shocked me is his rubbing shoulders with someone who was instrumental in state antisemitism and the ‘final solution’. We can’t tolerate such tolerance of evil, and for me René Bousquet was absolute evil”[30] and the historian Pierre Miquel commenting on the TV interview said “the comments… of the President of the Republic are part of a discourse from the right… on the subject of the occupation”[31] . . .

8. In light of Mitterand’s long-standing, profound relationship with Bousquet, more detail about Bousquet’s wartime activities is instructive.

“Rene Bousquet”; Wikipedia.

. . . . On 2 July 1942, Bousquet and Carl Oberg prepared the arrests known as the Vel’ d’Hiv Roundup (Rafle du Vel’ d’Hiv). Bousquet personally canceled orders protecting some categories of people from arrests, notably children under 18 and parents with children under 5. After the arrests, some bishops and cardinals protested; Bousquet threatened to cancel tax privileges for Catholic schools.

Under the pretext of not separating families, Pierre Laval ordered that Jewish children under 16 be included in deportation convoys, thus surpassing the requirements of the Nazis. Bousquet obliged, personally settling that children under 2 years also be included. Children were actually deported separately from their parents.

In January 1943, he organised with Carl Oberg a massive raid in Marseille, known as the Battle of Marseille. During this repressive operation, the French police assisted the German police, in particular in the expulsion of 30,000 people from the Old Port, and the subsequent destruction of this neighborhood, considered as too dangerous and as a “terrorist nest” by the German police, because of its winding, small streets. Bousquet eagerly offered his services during this operation. The French police controlled the identity of 40,000 people, and the operation succeeded in sending 2,000 Marseillese to the extermination camps. The operation also encompassed the expulsion of an entire neighborhood (30,000 persons) before its destruction. For this occasion, SS Carl Oberg, in charge of the German Police in France, made the trip from Paris, and transmitted to Bousquet orders directly received from Himmler. It is a notable case of the French police’s willing collaboration with the Nazis.[1]

In April 1943, Bousquet met with Heinrich Himmler. Himmler declared himself “impressed by Bousquet’s personality”, mentioning him as a “precious collaborator in the framework of police collaboration”. . . .

9. Udo Voigt of Germany’s NPD (the Federal Republic’s largest neo-Nazi party) was appointed to the European Parliament’s Civil Rights Committee. In FTR #674, we noted that Voigt, the head of the NPD and a Bundeswehr reservist, was dismissed from the German Military Association for racist comments about a member of Germany’s World Cup soccer team.

“Neo-Nazi Holo­caust Denier Joins EU Par­lia­ment Civil Rights Committee” by Caitlin Mac­Neal; TPM Livewire; 7/8/2014.

 A neo-Nazi from Germany’s ultra-conservative National Demo­c­ra­tic Party joined the Euro­pean Union’s par­lia­ment in May and on Mon­day took a seat on the body’s Civil Rights Com­mit­tee, accord­ing to Jew­ish World News.

Udo Voigt has praised Adolf Hitler as “a great Ger­man states­man” and once claimed that “no more than 340,000″ Jews died in the Holo­caust, as opposed to the 6 mil­lion fig­ure agreed on by his­to­ri­ans, accord­ing to the Guardian.

Voigt led the NDP from 1996 to 2011, and dur­ing that time he led the party in an increas­ingly nation­al­ist direc­tion. In 2009, he was con­victed of glo­ri­fy­ing the Waf­fen SS. The Ger­man court unsuc­cess­fully attempted to out­law the party in 2006, and another attempt is cur­rently underway.

Voigt in 2007 con­sid­ered nom­i­nat­ing Rudolf Hess, Hitler’s deputy, for a Nobel Peace Prize. The Guardian has an exten­sive account of his incred­i­bly con­tro­ver­sial actions and state­ments here.

Fol­low­ing out­rage over Voigt’s assign­ment to the Civil Rights Com­mit­tee, EU Pres­i­dent Mar­tin Schulz denounced Voigt’s beliefs.

A spokesman for the Euro­pean Jew­ish Con­gress called for mem­bers of the EU par­lia­ment to keep Voigt from gain­ing pub­lic­ity for his views.

“It does the Euro­pean Par­lia­ment no credit to have peo­ple sit­ting on its civil lib­er­ties com­mit­tee who have obvi­ously not only shown no com­mit­ment to civil lib­er­ties, but have sought to under­mine them and to pur­vey a racist and intol­er­ant agenda through­out their polit­i­cal career,” a spokesman told EurAc­tiv.

 

Discussion

3 comments for “FTR #802 The Luxembourg Connection (What the Hell Does Dave Emory Mean by “Underground Reich?” Part 2)”

  1. Here’s an article about “Mr. Euro” Jean-Claude Juncker that’s a reminder that his pro-austerity stances don’t just include endorsing the EU’s overt austerity policies of budget cuts and tax hikes. There’s also the soft, unofficial austerity imposed on national budgets that results from turning Luxembourg into an international tax-haven:

    The Guardian
    The Observer
    Jean-Claude Juncker’s real scandal is his tax-haven homeland of Luxembourg
    The favoured candidate for the presidency of the European Commission has dedicated himself to making society less fair

    Nick Cohen
    The Observer, Saturday 12 July 2014 13.30 EDT

    Comrades! Allow me to introduce to you the Progressive Alliance of Socialists and Democrats at the European parliament’s favoured candidate in this week’s election for the next president of the European Commission. Fraternal greetings please for Jean-Claude Juncker.

    I admit that Jean-Claude does not appear at first glance to be the man most likely to promote the European socialists’ goal of “ensuring that our societies become fairer”. Nor at a second, third or fourth glance either. Juncker has dedicated his career to ensuring that society becomes less fair; that wealthy institutions and individuals can avoid the taxes little people and small businesses must pay. “Everywhere do I perceive a certain conspiracy of rich men seeking their own advantage,” wrote Sir Thomas More in 1516. He might have been describing Mr Juncker.

    The Grand Duchy of Luxembourg’s Ruritanian title carries a whiff of archaic glamour. But it is nothing more than a piratical state. The only difference between pirates old and new is that instead of using muskets and cannons to seize other people’s money, Luxembourg uses accountants.

    We don’t see it because the EU turns the British upside down. Conservatives deplore Europe because it threatens national sovereignty, even though the euro is bringing cuts to welfare states and wages conservatives approve of in other circumstances. The liberal-left thinks of itself as internationalist and therefore bites its tongue and mumbles its words when the EU promotes policies it would condemn if they came from Westminster.

    Please put your prejudices aside, if you can, and concentrate instead on why Luxembourg matters.

    What heavy industry the duchy had was vanishing by the early 1990s. During Juncker’s reign as Luxembourg’s prime minister from 1995 to 2013, the duchy reinvented itself as Europe’s largest tax haven: a land fit for Bernie Madoff to trade through. It allowed conglomerates to avoid tax through intermediate holding companies solely.

    BBC’s Panorama uncovered documents that neatly illustrated how the companies redistribute wealth. The UK headquarters of GlaxoSmithKline established a Luxembourg branch in 2009. The subsidiary lent £6.34bn to GSK in the UK. The UK company paid nearly £124m in interest back to the Luxembourg subsidiary. The revenue could not tax the interest at the then UK level of 28% and collect £34m. Instead, the Luxembourg tax authorities levied a tax of 0.5%, or £300,000. The deal was pin money by Luxembourg’s standards.

    Virtually every large British company has moved capital through Luxembourg including, it appears, my managers here at the Guardian and Observer, though they say such a structure was not about saving the group “any UK corporation tax when compared with an onshore structure“.

    The revenue endured the greatest scandal in its history when it allowed Vodafone to pay just £1.25bn of an alleged £6bn tax bill from a takeover organised in Luxembourg. The Financial Times estimates that Luxembourg’s financial sector has grown from virtually nothing in the 1980s to €3tn today.

    Richard Brooks,, the author of The Great Tax Robbery, tells me Luxembourg is a far greater menace than the Caribbean laundromats. It benefits from the European Union’s free movement of capital, while the Cayman Islands, say, cannot. More dangerously, it inspires the Netherlands, Ireland and other EU states following beggar-thy-neighbour tax policies to join it in a race to the bottom.

    If your services are being cut or taxes are going up, if you run a small business that cannot compete with Amazon or another large entity, the odds are that Jean-Claude Juncker’s Luxembourg has made your life harder.

    The basic standards of honest government ought to disbar him from the presidency. The European Commission he presumes to lead is investigating the Luxembourg he created. It wants to know how Amazon could put £11bn through its Luxembourg-based subsidiary in 2013, while paying only £4m in UK corporation tax on goods sold to British customers, packaged in British warehouses and moved on British roads. Ireland and the Netherlands are co-operating with the inquiry into illicit tax advantages. Luxembourg, however, has compelled the commission to go to court to secure the relevant documents.

    Juncker is asking to be put in charge of a European Commission that is engaged in legal action against his tax regime. He will be supervising an investigation into deals he insisted as prime minister of Luxembourg should remain hidden. I do not see how he can be trusted with such power, not least because the EU’s lax rules place no obligation on Juncker to declare a conflict of interest.

    Posted by Pterrafractyl | July 14, 2014, 5:26 pm
  2. “A spokesman for the European Commission, Margaritis Schinas, said Mr. Juncker was “determined to enforce the rules” of the European Union in each of the bloc’s 28 member states. But he added that Mr. Juncker would not recuse himself from any eventual decisions to be taken by the commission in cases involving Luxembourg’s tax affairs. Mr. Juncker “cannot abstain” because he presides over the commission, Mr. Schinas said”. This seems like it’s going to be a problem:

    The New York Times
    Jean-Claude Juncker, Head of European Commission, Under Pressure Over Luxembourg Tax Revelations

    By JAMES KANTER and ANDREW HIGGINSNOV. 6, 2014

    BRUSSELS — Less than a week after taking over as head of the European Union’s executive arm, Jean-Claude Juncker, the former longtime leader of Luxembourg, was buffeted Thursday by a flood of leaked documents detailing his home country’s role as a haven for hundreds of companies seeking to drastically reduce their tax bills.

    While Luxembourg’s finance minister denounced as illegal the unauthorized release of the embarrassing tax documents, pressure mounted on Mr. Juncker, who was Luxembourg’s prime minister from 1995 until last year, to clarify his involvement in tax avoidance schemes.

    “It is ridiculous to claim this was going on unbeknownst to Juncker — he was in charge,” Egide Thein, a former director of the Luxembourg Economic Development Bureau, a government body, said in a telephone interview. “Tax evasion was a willful policy of the Luxembourg government, which always justified this by saying it was not its job to act as a tax man for foreign countries.”

    The documents also raised questions about whether Mr. Juncker’s tenure in Luxembourg, a country that the Tax Justice Network, a research group in London, once branded the “death star” of financial secrecy in Europe, now conflicted with his current duties, which include enforcing fair competition between European Union countries.

    Tax avoidance, as legal ways of slashing or even eliminating tax bills are known, has become a highly sensitive political issue across Europe. The public has little patience for corporate welfare at a time when governments, struggling with low economic growth and high unemployment, have trimmed their budgets, often under pressure from the European Commission.

    The resentment has fed growing disenchantment with the European Union — a malaise that Mr. Juncker has said he hoped to cure — and, on occasion, violent protests. In Brussels, the headquarters of the bloc’s administrative apparatus, riot police clashed with protesters on Thursday during a large demonstration against spending cuts proposed by the new Belgian government.

    The leaked tax documents, released Wednesday by the International Consortium of Investigative Journalists, relate to the tax affairs of global companies like PepsiCo, Ikea and FedEx, and shined a bright light on practices in Luxembourg, a tiny country with less than 550,000 people that allowed hundreds of big companies to pay little tax in the countries where they do much of their business.

    Mr. Juncker, who took over as the head of the European Commission last weekend after divisive jockeying among member states, did not answer questions on Thursday and canceled a scheduled public appearance at an event in Brussels.

    Sven Giegold, the spokesman on economic and financial policy for the Green group in the European Parliament, voiced outrage over Luxembourg’s policies and questioned Mr. Juncker’s ability to act as evenhanded arbiter.

    “These revelations are a major blow to the credibility of new commission president Juncker and his capacity to act for the public interest,” Mr. Giegold said in a statement. “The fact that E.U. commission president Juncker served as Luxembourg’s finance and prime minister throughout this period makes him directly complicit in this mass corporate tax avoidance.”

    Mr. Juncker dominated Luxembourg’s economic policy for more than two decades, a time when the country was transformed into one of the world’s leading banking centers and a low-tax hub. But he also took some steps to change his country’s ways.

    After years of fiercely defending banking secrecy as a necessary pillar of Luxembourg’s prosperity, Mr. Juncker last year bowed to pressure from bigger European countries and began a slow retreat that culminated recently in a new policy allowing banks to share information about foreigners holding accounts with their home countries.

    But Luxembourg, both under Mr. Juncker and under Xavier Bettel, his successor as prime minister, left in place tax avoidance schemes for corporations that operate there, often out of small offices staffed with accountants and lawyers but doing little real business.

    The European Commission, now led by Mr. Juncker, does not have the authority to determine the tax laws of member states, which zealously guard their sovereignty over such matters. But it has begun far-reaching investigations of whether countries have given illegal “state aid” to companies by offering them sweetheart tax deals that created unfair competition. Mr. Juncker’s suitability to oversee such investigations fairly is now a central issue.

    A spokesman for the European Commission, Margaritis Schinas, said Mr. Juncker was “determined to enforce the rules” of the European Union in each of the bloc’s 28 member states. But he added that Mr. Juncker would not recuse himself from any eventual decisions to be taken by the commission in cases involving Luxembourg’s tax affairs. Mr. Juncker “cannot abstain” because he presides over the commission, Mr. Schinas said.

    The comments suggested that Mr. Juncker would fight hard to avoid any curbs on his authority at such an early stage in his five-year mandate.

    As head of the commission, Mr. Juncker presides over so-called commissioners, each with a specific policy area, including ones responsible for tax policy and for leading investigations into possible violations of competition rules.

    In a statement on Thursday, Margrethe Vestager, the bloc’s competition commissioner, who is leading investigations into tax breaks for Apple, Starbucks and Amazon, avoided any criticism of Mr. Juncker, her boss. She said she had not had time to assess the leaked documents, which include so-called comfort letters — effectively private tax rulings — provided to more than 300 companies in Luxembourg.

    The commission’s spokesman, Mr. Schinas, announced Mr. Juncker‘s canceling of his participation in a conference on Thursday, implying it had nothing to do with the furor over tax avoidance. He said Mr. Juncker had dropped out of “Good Morning Europe,” an event organized by French and Belgian news media, because another panelist, Jacques Delors, a former head of the European Commission, was too ill to attend.

    Posted by Pterrafractyl | November 7, 2014, 8:26 am
  3. So it turns out one of the EU’s top tax-dodging enablers is now the head of the EU Commission during a time when budget cuts and austerity rule the day and ruin lives. That’s not going to awkward or anything…

    The New York Times
    Jean-Claude Juncker Breaks Silence Over Luxembourg Tax Issues

    By JAMES KANTERNOV. 12, 2014

    BRUSSELS — Jean-Claude Juncker, head of the European Union’s executive arm, took responsibility on Wednesday for the way Luxembourg was run during his time in charge, breaking his silence after a flood of embarrassing revelations about his home country’s role as a global tax haven.

    Mr. Juncker, who was variously or simultaneously finance minister, treasury minister and prime minister of Luxembourg from 1989 to 2013, also criticized practices in other European countries that allowed companies to benefit from unfairly low tax rates.

    But there was nothing in his past to suggest that his “ambition was to organize tax evasion in Europe,” Mr. Juncker said at an unscheduled appearance at a daily news conference at the headquarters of the European Commission, which he now leads.

    Mr. Juncker has faced a growing furor since Nov. 5, when the International Consortium of Investigative Journalists published its findings after reviewing nearly 28,000 pages of confidential documents. The consortium’s report accused more than 300 companies, including the Pepsi Bottling Group, Ikea and FedEx, of benefiting from preferential tax deals with the government of Luxembourg.

    The leaked documents reviewed by the consortium, which have led to calls for Mr. Juncker’s resignation, included 548 private tax rulings — sometimes known as “comfort letters” — that the consortium said Luxembourg had provided to corporations seeking favorable tax treatment.

    On Wednesday, Mr. Juncker accepted that he was “politically responsible for what happened in each and every corner and quarter of that country” when he was running Luxembourg.

    But Mr. Juncker also said, apparently referring to the tax system in his home country, that he was “not the architect of what you could call the Luxembourgish model, because this Luxembourgish model doesn’t exist in a full-fledged way.”

    He also said that companies that benefited from rulings offering very low or no taxes were taking advantage of “the interaction between divergent national” laws, which was not the fault of Luxembourg or its administration.

    If those differences in tax regimes between countries were “leading to a situation of nontaxation, then I would regret that,” he said. He also acknowledged making “a mistake” by taking a week to respond to the revelations.

    Later on Wednesday Mr. Juncker addressed the European Parliament, where some lawmakers underscored that the revelations would further stoke the anger of ordinary citizens who are reeling from the effects of austerity measures.

    “My first feeling, reading about the clever tricks played by multinationals — even when one is aware of the fact that these things are being done — is indignation,” said Gianni Pittella, the leader of the Socialists and Democrats group in the Parliament.

    “Some states, including Greece, are being put through the mill in the name of austerity” Mr. Pittella said. “In other parts of Europe, multinationals that should be paying millions of euros, or billions of euros, into public coffers aren’t paying their taxes.”

    Even so, Mr. Pittella said that asking Mr. Juncker to step down would only strengthen the hand of groups seeking to weaken European Union institutions like the commission.

    In his earlier news conference, Mr. Juncker pointed out that European governments had so far failed to create a so-called common consolidated corporate tax base — a single set of rules that companies operating in the European Union could use to calculate taxable income — as proposed by the European Commission in 2011.

    Mr. Juncker also announced his backing for a legislative initiative that would require the 28 member states of the European Union to commit to automatically exchanging information on the kinds of tax rulings that have drawn criticism in the past week. That legislation was “an idea I have been toying with for some time,” he said.

    Solving corporate tax avoidance “can’t be a Luxembourgish answer — it has to be a European answer,” he said.

    Some have also voiced concern that Mr. Juncker has conflicts of interest. As president of the European Commission, he now oversees the officials investigating the tax incentives Luxembourg offered to Amazon and to a unit of Fiat. Those investigations, concerning so-called state aid, also focus on Apple in Ireland and Starbucks in the Netherlands.

    On Wednesday, Mr. Juncker flatly refused to recuse himself from taking part in the final decision in those investigations but pledged to allow them to proceed unimpeded.

    “If I were to be seen as exerting undue influence, the result of that would be a massive loss of my authority as president of the commission,” he said.

    Asked what would happen if he were to become the subject of the tax inquiries and if he faced questioning about his personal role in tax rulings in Luxembourg, Mr. Juncker responded that he would make himself answerable to Margrethe Vestager, the European Union’s competition commissioner.

    Mr. Juncker also pledged that his deputy, Frans Timmermans, a former foreign minister of the Netherlands, would not interfere in Ms. Vestager’s investigation of the tax affairs of Starbucks in that country.

    It looks like a defiant Juncker is what’s in store for the EU as the austerity regime continues to grind away at the populace. And that means lots of cute responses like this are in store for the EU too:


    On Wednesday, Mr. Juncker accepted that he was “politically responsible for what happened in each and every corner and quarter of that country” when he was running Luxembourg.

    But Mr. Juncker also said, apparently referring to the tax system in his home country, that he was “not the architect of what you could call the Luxembourgish model, because this Luxembourgish model doesn’t exist in a full-fledged way.”

    He also said that companies that benefited from rulings offering very low or no taxes were taking advantage of “the interaction between divergent national” laws, which was not the fault of Luxembourg or its administration.

    So, yes, Juncker was “politically responsible for what happened in each and every corner and quarter of that country” when he was running Luxembourg, but it wasn’t a true “Luxembourgish model” system of tax sheltering so everything is ok. Europe is going to love Juncker.

    And let’s hope Juncker wasn’t joking when he pledge that his deputy, Frans Timmermans of the Netherlands, would not be interfering with the investigations of Starbucks’s use of the country as a tax shelter. That would be the kind of move that runs the risk of creating a rather unsavory theme for the Juncker administration:

    The New York Times
    Europe Takes Aim at Deals Created to Escape Taxes
    The Tax Attraction Between Starbucks and the Netherlands

    By DANNY HAKIMNOV. 14, 2014

    LONDON — American companies have plowed more money into the Netherlands than any other country in the world — for five years running.

    This does not reflect a new fascination with pot or pancakes. It is about the taxes, or lack of them.

    The laws in Netherlands shield a variety of profits from taxation, making it attractive for big multinational companies like Starbucks, Google and IBM to set up offices. Even rock stars like the Rolling Stones and U2 have taken advantage of Dutch tax shelters.

    The same goes for Luxembourg, Bermuda, Ireland and the British Caribbean countries like the Cayman Islands. Along with the Netherlands, those places rank among the top destinations for foreign direct investment from the United States, according to a review of data collected by the Bureau of Economic Analysis that shows how entrenched tax avoidance strategies have become.

    Global authorities are now aiming to close the loopholes that have let such locales flourish and have allowed multinational corporations to legally avoid paying billions of dollars in taxes. On Friday, European Union authorities publicly accused the Netherlands of making a special deal with Starbucks that helped the coffee company lower its taxes, seeing it as potentially illegal state aid.

    It is the latest case to focus on favorable and often secretive tax arrangements between big multinationals and tax authorities — deals struck between Apple and Ireland, and Amazon and Fiat with Luxembourg. European authorities have also asked countries about arrangements made with a number of other companies, including Microsoft.

    But regulators, if they even make a truly determined effort, face an uphill battle in changing the system.

    Companies, for one, are doing their best to minimize the fallout.

    Starbucks hired RLM Finsbury, a crisis communications firm, as opposition to the company’s tax practices began building in Britain, its largest European market. This year, Starbucks decided to move its regional headquarters to London from Amsterdam as protests grew.

    Apple recently tapped Fipra, a prominent lobbying firm with expertise in competition policy and an affiliate of RLM Finsbury, to bolster its defenses in Europe. Apple also hired a top lawyer from the branch of the European Commission investigating it in the tax case.

    The financial bite from the European investigations may be limited. American corporations could potentially get credit on their tax bills back home even if they lose their cases, experts said, because the companies are likely to pay back taxes rather than face a fine.

    Peter Cussons, a partner at PricewaterhouseCoopers in London, said any funds “in principle should be eligible for U.S. foreign tax credit relief, subject to the usual rules.”

    In some ways, authorities are performing a futile task: As officials move to close certain loopholes, others are likely to pop up in their place.

    Last month, Ireland said it would phase out a loophole that Apple helped pioneer and is currently used by many other companies, known as the Double Irish. The maneuver allows companies to pay royalties from one Irish subsidiary to a second subsidiary incorporated in Ireland and domiciled in another country with low or no corporate tax. The strategy is often paired with a Netherlands subsidiary and known as Double Irish with a Dutch Sandwich.

    But Ireland’s move seems intended to cushion the blow for multinationals. Not only will there be a long phase-out period, but the country is setting up a so-called patent box.

    A similar mechanism in Britain allows a company to pay lower taxes for “its patented inventions and certain other innovations.” Here too, European regulators are taking a closer look, viewing it as a potentially unfair trade practice.

    Foreign investment figures offer something of a road map to tax sheltering.

    Consider that 15.5 percent of American foreign direct investment goes to the Netherlands, and four-fifths of that goes into Dutch holding companies. Companies like Starbucks often have a number of subsidiaries with varying structures in the Netherlands, in Starbucks’s case with names like Rain City and Emerald City.

    Luxembourg’s practices have drawn particular scrutiny, putting its former prime minister, Jean-Claude Juncker, the new head of the European Commission, on the defensive. The country had inward foreign direct investment of $2.4 trillion in 2012, exceeding the combined intake of Germany and France, the eurozone’s two largest economies, according to International Monetary Fund data.

    To put that in perspective, Luxembourg has a population of just over 500,000 people. Germany and France have a combined population of 146 million people.

    About 91 percent of the foreign direct investment coming into Luxembourg is through special-purpose entities. Such vehicles are often set up by multinational corporations for accounting purposes, according to the Organization for Economic Cooperation and Development, a club of developed countries.

    Ireland has become particularly popular as a way station for managing taxes. A United States Senate report last year found that from 2009 to 2012, Apple transferred “$74 billion in worldwide sales income away from the United States to Ireland where Apple has negotiated a tax rate of less than 2 percent.” Another Senate report found that Microsoft transferred “rights to the intellectual property developed by American engineers” to a small Dublin office with less than 400 employees, then reported an annual profit of $4.3 billion, which was taxed at 7.2 percent.

    Companies defend their tax practices.

    Apple has said, “Our success in Europe and around the world is the result of hard work and innovation by our employees, not any special arrangements with the government.”

    Amazon has said that it received no special treatment. Fiat said it stood by the “legitimacy” of its tax practices. Starbucks said that it had never “sought unfair tax incentives” and complied with all relevant rules.

    Will other countries take any steps on their own?

    Not the Netherlands. “Unilateral measures may actually increase mismatches and other differences between systems, instead of removing them,” the finance ministry said in a statement. The Luxembourg government recently submitted legislation to make its tax rulings more transparent. Mr. Juncker said last week that addressing corporate tax avoidance “can’t be a Luxembourgish answer — it has to be a European answer.”

    Yeah, Juncker had really better figure out soon how to avoid looking like the EU’s tax-dodger-in-chief. And yet it’s very unclear how he’ll do so given the central role tax-sheltering plays in Luxembourg’s economy. And, ironically, having a flagrant tax-dodger-in-chief as the head of the EU just might be one of the best things that could happen to Europe at this point because if there’s one thing that is dooming Europe right now it’s an irrational adherence to pro-austerity economic theories. When Europe’s tax shelters are still open for business and the heads of state of those tax shelters are leading the pro-austerity charge, collective reflections on the fairness of austerity policies are far more likely. Especially since Juncker’s big plan for turning around the EU economies center around a public-private infrastructure investment package but the EU governments apparently can’t find the public funds to finance Juncker’s plan at the moment. Instead, the public-side of the stimulus package is to be financed by taking funds from elsewhere in the budget (a deficit-neutral stimulus). And the EU is also now forced to entice private investments even more in order to make up for the limited public funds. Who knows, maybe those incentives could even involve some tax cuts on those private investments. It would certainly be in keeping with the emerging theme:

    The $375 billion Europe wants to invest but doesn’t have

    By Jan Strupczewski

    BRUSSELS Sun Nov 16, 2014 9:07am EST

    (Reuters) – New European Commission President Jean-Claude Juncker is preparing a 300 billion euro ($375 billion) investment plan he will present as a cornerstone of efforts to revive an ailing economy.

    But history suggests the program risks becoming an exercise in financial engineering rather than a conduit for the new money the region needs to help boost output and create jobs.

    A flagship project of the new European Union executive, the investment scheme is due to be unveiled before Christmas. It is still being finalised and few details have been made public.

    If all the money it promises is raised and spent, it could provide the 28-nation EU with roughly an additional 0.7 percent of GDP in investment per year over three years.

    “It is significant,” said Carsten Brzeski, economist at ING bank in Frankfurt. “You would expect some kind of a multiplier effect from investment on jobs and purchasing power and it would increase the growth potential. The downside is that public investment can take years before it gets started.”

    But even more than “when?”, the big question hanging over the plan is “how much?”.

    The 300 billion euros is an overall target for both the public and private money that the Commission hopes to mobilize.

    The Commission itself does not have any money and is funded through annual EU budgets that must be balanced.

    Of the region’s 28 governments, only Germany seems to have public finances strong enough to significantly increase investment. But in its drive to have a balanced budget, Berlin is not keen to spend more.

    So the Commission plans to use what little public money is available to lure bigger private funds into projects that would otherwise seem too risky or with too low a rate of return.

    “Our aim is to ‘crowd in’ private money for big infrastructure projects in the energy sector, transport, broadband or research and development. The private sector cannot take all the risks,” Commission Vice President Jyrki Katainen told Reuters.

    SHOW US THE MONEY

    Potential investors will want to know how much the EU will provide, and whether it will be new funds or re-labeled money already accounted for in various EU spending schemes.

    “If it is additional money, it would be OK, but I fear that it will be funds taken from other places in the EU budget,” said Christoph Weil, economist at Commerzbank.

    Very little new money ended up in the 120 billion euro “growth and jobs” compact that EU leaders approved at the start of 2012, which failed to prevent a recession and was followed by two years of falling investment.

    It was made up of existing EU structural funds and a 10 billion euros capital boost for the European Investment Bank so that it could potentially lend 60 billion more over three years.

    The new scheme looks likely to utilize similar ideas.

    Yes, more austerity somewhere in the EU budget is going to be required to finance Jean-Claude Juncker’s big, bold stimulus package. Because the EU governments can’t find the money themselves.

    Posted by Pterrafractyl | November 16, 2014, 7:54 pm

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