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Merkel bans naked short selling of euro bonds

Posted by seumasach on May 25, 2010

It is important to act in areas where you can act nationally, in anticipation of European efforts, Offer retorted, adding that other countries – including France – had taken similar steps.

New Europe

25th May, 2010

Germany defended its decision to introduce an immediate ban on naked short selling, as the country moved to stamp its authority on negotiations about regulating financialmarkets.

The German financial regulator, BaFin, banned the naked short selling of bonds issued by governments of countries in the eurozone from midnight on 18 May. We believe the timing of these bans was chosen correctly, as it became clear that previous measures did not sufficiently stabilize the financial markets, said Finance Ministry spokesman Michael Offer. The German government has blamed short selling for, among other things, allowing speculators to bet against the sovereign debt of countries like Greece, thereby worsening the euro crisis. Meanwhile Chancellor Angela Merkel said Europe needs a new culture of stability, as she defended in parliament the huge EU financial rescue system agreed in Brussels two weeks ago. Merkel justified the €750-billion rescue package, to which Germany would contribute the largest share, stressing that the euro and the EU faced an existential test. It is about nothing less than the defense of the European idea, she said. BaFin’s ruling prohibited Credit Default Swaps (CDS), as well as naked short selling of shares in 10 major German financial institutions, until 31 March 2011. EU Market Regulation CommissionerMichel Barnier expressed his support for the ban, but said he expected more success from a concerted EU-wide ruling. It is crucial that the member states work together, Barnier said in Brussels. It is important to act in areas where you can act nationally, in anticipation of European efforts, Offer retorted, adding that other countries – including France – had taken similar steps.     The move reinforces Germany’s position within the 16-member eurozone, as it fights for much stricter regulation of world financial markets, beginning with a two-day conference in Berlin which started on 19 May. Merkel and Finance Minister Wolfgang Schaeuble hosted high-ranking officials including Barnier, French Finance Minister Christine Lagarde, OECD General Secretary Angel Gurria, as well as Canadian Deputy Finance Minister Tiff Macklem. The aim of the conference was to begin to forge a common position on financial regulation ahead of G20 and G8 summits in Canada in June, a Finance Ministry statement said. Germany and France are leading a European charge for a full, global, financial transaction tax, as well as much tougher rules on hedge funds and derivatives trading.

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