In These New Times

A new paradigm for a post-imperial world

Germany urges European ban on naked short-selling

Posted by seumasach on August 12, 2011

This move is on the mark as will be revealed by the reaction of Wall Street/City circles. Belatedly and reluctantly Europe is taken action to defend itself against its NATO allies

Aug 12 (Reuters) – Germany will push for a European ban on naked short-selling of stocks, government bonds and credit default swaps, a Finance Ministry spokesman told Reuters on Friday.

The call comes on the same day a piecemeal ban on the practice came into effect in France, Italy, Spain and Belgium, focusing on financial stocks but differing in detail from country to country.

“We are advocating a wide-reaching ban on naked short-selling of stocks, sovereign bonds, and credit default swaps,” spokesman Martin Kotthaus said. “Only this way can destructive speculation be countered convincingly.”

A better organised approach to the bans enacted on Friday should please investors, who have said relief for bank stocks — particularly hard hit in recent days as rumours rattled the markets – would be temporary in the absence of co-ordinated action.

Naked short-selling — already banned by Germany last year for the same financial instruments — involves selling securities without having first borrowed or arranged to borrow the underlying assets in the hope of buying them back at a lower price.

Kotthaus said Germany supported the bans put in place by the four countries. German Chancellor Angela Merkel will meet French President Nicolas Sarkozy on Tuesday in Paris. (Reporting by Gernot Heller, writing by Brian Rohan and Will Waterman)

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