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Merkel blasts ‘treacherous’ banks in Greek crisis

Posted by seumasach on May 8, 2010

6th May, 2010

BERLIN (AFP) – German Chancellor Angela Merkel on Thursday slammed “treacherous” practices by banks during the Greek crisis and said governments must crack down on speculators hunting profits in the turmoil.

Merkel, whose Christian Democrats face a tough re-election battle inGermany’s most populous state Sunday, railed against gamblers on the financial markets who she said were exacerbating an already volatile situation.

“First the banks failed, forcing states to carry out rescue operations. They plunged the global economy over the precipice and we had to initiate recovery packages. Because of these packages, we have become indebted and now, they are speculating against these debts — that is really very treacherous,” she said.

“Governments must regain their supremacy over the markets, which they no longer have, and for that we need much stricter global rules,” she added, at a debate on Europeorganised by a public broadcaster.

Merkel said it was now up to the European Union member states to reassert their authority and shore up the financial rules governing the bloc.

“We must clearly demonstrate that in Europe we have the political power, each in his own country, of getting back on the track of the Stability and Growth Pact,” she said.

“It is a fight of policy against the markets. That is how I see it personally but I am determined — as are my colleagues, I am certain — to win this fight and we will be victorious, I am sure.”

Greece has seen its cost of borrowing soar as investors, fearing a default, have demanded greater risk premiums for their loans, which in turn has pushed the country’s debt even higher.

Greece’s cost of borrowing has also risen as traders made “short” bets that Greek bond prices would slide and bought complex financial instruments that rise in value in tandem with the default risk.

The German parliament is to vote Friday on unblocking some 22.4 billion euros (28.7 billion dollars) over three years in loans to Athens as part of a 110-billion-euro bail-out orchestrated by the European Union and the International Monetary Fund.

The rescue is deeply unpopular in Germany and Sunday’s election in the western region of North Rhine-Westphalia could see voters punish Merkel’s conservatives, who are fighting to maintain power there.

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