SPIEGEL spoke with German Finance Minister Peer Steinbrück about the roots of the US credit disaster, whether Germany is in grave danger and what the future has in store for world banking.

SPIEGEL: Mr. Steinbrück, Wall Street is imploding. The government of the United States wants to establish a $700 billion (€480 billion) bailout program for its banks and their bad loans. How serious is the situation for the rest of the world?

Steinbrück: We are experiencing the most severe financial crisis in decades, although one should be careful about historic comparisons with 1929. One thing is clear: After this crisis, the world will no longer be the same. The financial architecture will change globally.

German Finance Minister Peer Steinbrück says that it's time for more regulation. SPIEGEL: Could you be more specific, please.

Steinbrück: There will be shifts in terms of the importance and status of New York and London as the two main financial centers. State-owned banks and funds, as well as commercial banks from Europe, China, Russia and the Arab world will close the gaps, creating new centers of power in the financial world.

As Washington prepares to vote on its massive bailout plan, the European Central Bank gave the green light to a rapid nationalization of the Benelux financial group Fortis in a bid to save one of Europe's top 20 banks.

After emergency discussions with ECB President Jean-Claude Trichet on Sunday, Sept. 28, the Belgian, Dutch and Luxembourg governments agreed to inject 11.2 billion euros ($16.4 billion) into the banking and insurance company Fortis after a weekend of high drama.

The presence of Trichet, who as ECB head is responsible for safeguarding financial stability in the euro zone, was unprecedented in a commercial bank rescue and underlined the seriousness of concern for the integrity of the euro zone's financial system.

In the first major bank crisis to hit the euro zone in 13 months of global financial turmoil that began in the United States, Fortis looked to be in severe danger with some experts concerned that the tri-nation group could go under by Monday if nothing was done to save it.

With the Social Democrats and centrist People's Party hitting their most historic lows since 1945, Austrian elections on Sunday saw two far-right parties doubling and almost tripling their seats in parliament. The result could lead to a new coalition involving the right-wing extremists, despite EU sanctions having been applied to a similar government in 2000.

A bitter victory for Austria's Social-Democrats, as they won the elections with the lowest score since 1945

Hard bargaining lies ahead in attempts to form a governing coalition, as no party has scored over 30 percent, and a minority government would be a first in Austria.

The Social Democrats, who won the most votes - 29.7 percent, down from 35 percent in 2006 - are ruling out any alliance with the anti-immigrant Freedom Party (FPO) - up seven points to 18 percent - or the Alliance for Austria's Future (BZO), led by Nazi-fan Jorg Haider, which jumped from four to 11 percent.

According to Social Democratic leader Werner Faymann, the centrist People's Party (OVP) remains their preferred coalition partner, despite the fact that the same such coalition formula led to the current early elections. But the OVP, which also hit a historic low on Sunday - plummenting from 34 to 25.6 percent - has not ruled out talks with the far-right groups.

Russia has reiterated its call for a pan-European summit aimed at creating a "reliable collective security system" in Europe, arguing that existing structures "did not pass the strength test" during the conflict in South Caucasus last August.

Speaking at the UN General Assembly ministerial meeting on Saturday (27 September), Russian foreign minister Sergej Lavrov claimed such a new system was needed to guarantee "equal security for all states."

Moscow wants a bigger role in international diplomacy

"The solidarity of the international community fostered on the wave of struggle against terrorism turned out to be somehow privatised," he said in a reference to the post-9/11 "war on terror" and the United States, AP reports.

The minister added that it was "impossible or even disastrous to try to resolve the existing problems with the blindfolds of the unipolar world."

Chancellor Merkel says her governing conservatives must focus on the economy, jobs and education in the wake of a massive loss for her allies in Bavaria that could hurt her bid for re-election in polls next year.

A day after her Bavarian ally, the Christian Social Union (CSU) lost their absolute majority it had held in Bavaria's state assembly for nearly half a century, Chancellor Merkel said she would try harder to win back voters, stressing the economy, creating jobs, education and integrating minorities in her campaign.

 

"We'll offer Germans a vision of the future and steadiness amid globalization," the chancellor said in Berlin on Monday, Sept 29.

EUOBSERVER / FOCUS - The European Union wants to move more transport off the roads and onto the sea in an effort to fight growing congestion and greenhouse gas emissions in Europe.

The so-called Motorways of the Sea (MoS) are set to make fundamental changes to the European transport sector as a "real competitive alternative to land transport," according to the European Commission, which wants the Motorways of the Sea to be as simple to use within ten years time as the trucking of goods on land is today.

EU wants short-haul shipping to be as smooth as road freight within the next ten years

The EU executive wants to see set up regular maritime links between different EU seaports, to form a transportation system - for both goods and people - at sea, which will overcome road transport bottlenecks while at the same time reaching the 27-member bloc's outlying regions and islands more easily.

In its 2007, Report on the Motorways of the Sea, the EU executive states that "both energy consumption and emissions of greenhouse gases per tonne-kilometre are lower than for any other mode of land-based transport and the investment costs for Motorways of the Sea are only a fraction of the cost of new terrestrial motorways."

The OSCE verdict on the Belarus vote said it "ultimately fell short of OSCE commitments for democratic elections" but noted "minor improvements." "The significant progress we hoped for in the democratic development of Belarus did not materialize," OSCE envoy Anne-Marie Lizin said.

EU anti-terror police from six EU member states stormed a "hi-jacked" Finnish ferry in the Stockholm archipelago in an exercise on Sunday. The "Atlas," force comprising some 200 EU counter-terrorist specialists, was the largest Europol exercise of its kind so far.

A 1bn-euro (£800m; $1.45bn) bail-out of Italian airline Alitalia has won the support of the last two unions who had been opposing the deal.

The support for the rescue package could help clear the way for a relaunch of Italy's flag carrier.

The airline had appeared doomed to liquidation until the rescue emerged.

Last week, the Italian civil aviation authority, ENAC, agreed not to revoke Alitalia's licence to fly after a revised rescue plan was approved.

The SDL and AVIA unions, which represent cabin crew and ground staff had opposed the plan.

However, they have now followed the example of the airline's pilots and changed their minds.

A Conservative government would freeze council tax for two years, George Osborne pledged today, in a surprise move unveiled to cheers at the party's conference.

The Shadow Chancellor told delegates in Birmingham that it would be paid for by putting a cap on the spending by the Government on consultants and advertising.

Although central government cannot force councils to freeze tax rises, they will offer to help those who limit their spending increases.

The Tories said that Mr Osborne's pledge would save the typical Band D household over £200. It will be paid for by cutting government spending on advertising and consultants by £500m in the first year of government and £1 billion in subsequent years.

OSLO: Europe is warming faster than the world average and governments need to invest to adapt to a changing climate set to turn the Mediterranean region arid and the north ever wetter, a study released Monday said.

Europe's mountains, coasts, the Mediterranean and the Arctic were most at risk from global warming, according to the report by the European Environment Agency and branches of the World Health Organization and the European Commission.

"Global average temperature has increased almost 0.8 C (1.4 F) above pre-industrial levels, with even higher temperature increases in Europe and northern latitudes," it said.

Europe had warmed by 1 Celsius.

PARIS: In a time when world leadership appears in short supply, Nicolas Sarkozy is making a case that he can be leader of a Europe able to take a greater hand in global decision making.

It's an interesting idea, absent clear U.S. command for the moment and even, perhaps, extending beyond the arrival of a new president in January.

It depends on not focusing too hard on the details of a Europe whose divisions confront and usually overwhelm its ambitions.

It also means believing both in a multipolar vision of the world and in the long-shot notion Europe's former Soviet bloc countries might soften their conviction that only the United States can guarantee their freedom.

Tourists crossing a new bridge built across Venice's Grand Canal have stumbled across a possible flaw, which has landed 10 of them in casualty with twisted ankles and other minor injuries.

The 10 tourists were treated after taking a tumble on the 94-metre long Constitution Bridge, designed by the Spanish architect Santiago Calatrava, which opened on September 11.

Pedestrians who lost their footing have blamed the bridge's irregularly spaced steps, some of which act as viewing points, and the disorienting optical effect of the sectioned stone and glass flooring. "People miss a step and then they come and moan at us," a police guard on 24-hour security watch at the sleek steel and glass bridge told the Italian newspaper Corriere della Sera. But one of the city's doctors, Paolo Pennarelli, suggested the mishaps were partly due to tourists marvelling at the bridge's impressive views over the lagoon city rather than paying attention to their feet. "We have quite a lot of this type of accident every week. In Venice, falls like this are natural," he said.

"Some of which act as viewing points", and some which don't. This sort of even-handed journalism can sometimes be quite funny. To help you make up your own mind, here's a picture of these steps (notice the one at the bottom of the image)

I don't think I need to state my own opinion. The fact that I bothered to take this picture should speak for itself.

In an unusually sharp statement, a spokesman for the European Union executive said the EU was disappointed at the U.S. House of Representatives' rejection of a $700 billion rescue package for distressed banks and financial institutions.

"The U.S. must take its responsibility in this situation," spokesman Johannes Laitenberger told a news conference, adding that Europe expected Congress to act fast.

Rescue measures agreed by European governments for three troubled banks showed that public authorities in Europe can "live up to the task of providing financial stability", he said.

The bright cafeteria of St. Mauront Catholic School is conspicuously quiet: It is Ramadan, and 80 percent of the students are Muslim. When the lunch bell rings, girls and boys stream out past the crucifixes and the large wooden cross in the corridor, heading for Muslim midday prayer.

"There is respect for our religion here," said Nadia Oualane, 14, a student of Algerian descent who wears her hair hidden under a black head scarf. "In the public school," she added, gesturing at nearby buildings, "I would not be allowed to wear a veil."

In France, which has only four Muslim schools, some of the country's 8,847 Roman Catholic schools have become refuges for Muslims seeking what an overburdened, secularist public sector often lacks: spirituality, an environment in which good manners count alongside mathematics, and higher academic standards.

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"Laïcité has become the state's religion, and the republican school is its temple," said Imam Soheib Bencheikh, a former grand mufti in Marseille and founder of its Higher Institute of Islamic Studies. Imam Bencheikh's oldest daughter attends Catholic school.

"It's ironic," he said, "but today the Catholic Church is more tolerant of -- and knowledgeable about -- Islam than the French state."

France will host a meeting of European officials to prepare a summit "in the coming weeks to establish the basis of a new international financial system," said Sarkozy, whose country holds the presidency of the European Union.

Officials from Britain, France, Germany and Italy -- the EU members of the G8 -- will meet in Paris in the coming days to lay the groundwork, he said on the sidelines of an EU-India summit in the southern city of Marseille.

On Tuesday, the president is to meet at the Elysee presidential palace with banking and insurance company chiefs to take a close look at the health of French banks and review the credit level of French households and businesses

"The meeting, due to be held in the crucial moment in the development of the international situation, will make it possible for the two parties to discuss both bilateral relations and a wide range of international problems, including those connected with the settlement of the situation in the Caucasus," Moratinos said. He stressed in this connection that Spain continued to uphold the territorial integrity of Georgia, which he is going to visit soon. At the same time, he is the supporter of "special relations with Russia, based on an intensive dialogue with that country, which continues to be one of the key personages in the world political arena."

All 19 European tourists and Egyptians who were taken hostage by bandits in a remote Egyptian desert region 10 days ago have reportedly been freed and are in good health, Egyptian state television said Monday.

Egyptian security officials said the freed hostages were being transported by military aircraft to al Maza military airport, next to Cairo's international airport.

The reported release followed a deal struck by Egyptian security officials with the kidnappers to let the hostages go, Egyptian state television reported.

The kidnappers had demanded a six-million-euro ransom for the hostages -- to be paid by Germany -- but it is still unclear whether that ransom was indeed paid to secure Monday's release.

The most prominent female police officer in Afghanistan has been murdered by the Taliban, the latest victim in a vicious campaign against women in public life by Muslim fundamentalists.

Malalai Kakar, who specialised in rescuing abused women, was shot dead outside her home in Kandahar in an attack which also left her 15-year-old son, one of her six children, critically injured.

"We killed Malalai Kakar," said a Taliban spokesman, Yousuf Ahmadi "She was our target, and we successfully eliminated our target." The Islamist group had previously carried out several unsuccessful attacks on her life, and those of her female colleagues, before yesterday's lethal ambush.

Ms Kakar, 41, carried a pistol underneath her burqa, which she wore on the way to report for duty at Kandahar's central police station in an attempt not to be recognised by the enemy. However, she had no chance to defend herself or her son when gunmen opened fire as she was leaving for work at around 7.30am, security officials said.

WASHINGTON: In a moment of historic drama in the U.S. Capitol and on Wall Street, the House of Representatives voted Monday to reject a $700 billion rescue of the financial industry.

The vote against the measure was 228 to 205. With just five weeks to go before presidential and congressional elections, supporters vowed to try to bring the rescue package up for consideration again as soon as possible.

Stock indexes plunged sharply on Wall Street as it appeared that the measure was going down.

House leaders pushing for the package kept the voting period open for some 40 minutes past the allotted time, trying to convert No votes by pointing to damage being done to the markets, but to no avail.

The American military commander Gen David Petraeus stepped up the pressure for extra troops to fight in Afghanistan after British commanders ruled out reinforcements.

Speaking after talks with the Prime Minister, the American military chief bluntly called on Nato countries to contribute more to the Afghan campaign at a time when the Taliban are resurgent.

Gen Petraeus said it was up to Nato member states to reinforce Afghanistan. "Now it is up to national capitals and the alliance to determine how to generate the additional force," he said. "I think it is up to the coalition how to source the forces."

Standing next to the head of the Armed Forces Air Chief Marshal Sir Jock Stirrup, he said Britain had "responded with a very good contribution" by doubling its force in the last two years to 8,000.

It appears the Americans have accepted that efforts by the Pentagon to strong-arm the Ministry of Defence into sending an extra brigade into Helmand province have failed.

There has been much moaning, air-sucking and outrage about the US$700 billion that the US government is throwing away on rich New York bankers who have been ripping us off for the past few years and then letting greed drive their businesses into a variety of ditches. In fact, we dole out similar amounts of money every year in the form of payoffs to the armed services, the military-industrial complex, and powerful senators and representatives allied with the Pentagon.

On Wednesday, September 24, right in the middle of the fight over billions of taxpayer dollars slated to bail out Wall Street, the House of Representatives passed a $612 billion defense authorization bill for 2009 without a murmur of public protest or any meaningful press comment at all. (The New York Times gave the matter only three short paragraphs buried in a story about another appropriations measure.) and Afghanistan, which is only a down payment on the full yearly cost of these wars. (The rest will be raised through future supplementary bills.) It also included a 3.9% pay raise for military personnel, and $5 billion in pork-barrel projects not even requested by the administration or Secretary of Defense Robert Gates.

It also fully funds the Pentagon's request for a radar site in the Czech republic, a hare-brained scheme sure to infuriate the Russians just as much as a Russian missile base in Cuba once infuriated us. The whole bill passed by a vote of 392-39 and will fly through the senate, where a similar bill has already been approved. And no one will even think to mention it in the same breath with the discussion of bailout funds for dying investment banks and the like.

VENEZUELAN President Hugo Chavez said today that he was interested in accepting Russia's offer of help in developing a civilian nuclear power program.

"We certainly are interested in developing nuclear energy, for peaceful ends of course - for medical purposes and to generate electricity,'' he said.

"Brazil has various nuclear reactors, as does Argentina,'' he added. "We will have ours as well,'' he said upon his return from a tour in China and Russia.

His remarks followed comments from Prime Minister Vladimir Putin in Moscow Thursday that Russia was "ready to consider the possibility'' of nuclear energy co-operation with Caracas.

Moscow and Caracas have boosted ties in recent weeks following sharp US criticism of Russia's incursion into Georgia, with Moscow dispatching long-range bombers and warships to Venezuela for exercises near US waters.

During his global tour, Chavez forged key military and energy co-operation deals which analysts said seemed likely to put him on dangerous footing with the United States.

MARIA BARTIROMO: Mr. President, in 1999 you signed a bill essentially rolling back Glass-Steagall and deregulating banking. In light of what has gone on, do you regret that decision?

FORMER PRESIDENT BILL CLINTON: No, because it wasn't a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure. I thought at the time that it might lead to more stable investments and a reduced pressure on Wall Street to produce quarterly profits that were always bigger than the previous quarter. But I have really thought about this a lot. I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch (MER) by Bank of America (BAC), which was much smoother than it would have been if I hadn't signed that bill.

Phil Gramm, who was then the head of the Senate Banking Committee and until recently a close economic adviser of Senator McCain, was a fierce proponent of banking deregulation. Did he sell you a bill of goods?

Not on this bill I don't think he did. You know, Phil Gramm and I disagreed on a lot of things, but he can't possibly be wrong about everything. On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence. But I can't blame [the Republicans]. This wasn't something they forced me into. I really believed that given the level of oversight of banks and their ability to have more patient capital, if you made it possible for [commercial banks] to go into the investment banking business as Continental European investment banks could always do, that it might give us a more stable source of long-term investment.