Juncker 'surprised' by German trading curbs

20th May 2010, Comments 0 comments

Eurogroup chairman Jean-Claude Juncker said on Thursday he was surprised by what he called Germany's "unilateral" move to ban certain market trades without first consulting other eurozone members.

"The German decision surprised me because it was not previously discussed with other members of the Eurogroup," he told AFP during a visit to Tokyo.

"We have been discussing for months the possibility of this kind of action, but I wish we had finished that debate before Germany took a unilateral decision."

The euro hit a new four-year low against the dollar Wednesday after Germany's move to ban certain market trades triggered turmoil in global markets.

Analysts said the attempt to reduce volatility by issuing new restrictions on speculative short selling had backfired, as the surprise and uncertainty generated sent the single currency plummeting.

Germany's securities market regulator slapped a ban Tuesday on so-called naked short-selling in the shares of 10 financial institutions and eurozone government bonds, a move aimed at ending severe fluctuations.

Naked short-selling occurs when investors sell securities they do not own and have not even borrowed, hoping to be able to buy them back later at a lower price, thereby earning a profit. In regular short-selling a trader borrows the security before selling it.

"I am not criticising Germany's intentions but I wanted the decision to be taken in a coordinated way," Juncker said, adding the issue "will no doubt be on the agenda" when EU finance ministers meet in Brussels on Friday.

Earlier, German Chancellor Angela Merkel warned of "incalculable consequences" for the European Union if the euro were to fail.

But Juncker said he did not see a need for European policy-makers to act immediately to arrest the euro's recent declines, blaming "irrational" markets for the falls.

"I'm really concerned about the rapid (pace) of the fall of the exchange rate," he told reporters at the Japanese Ministry of Finance after a meeting with Finance Minister Naoto Kan, Dow Jones Newswires said.

But Juncker added: "I don't think that this is a matter (requiring) immediate action."

Markets remain concerned despite a near trillion-dollar package aimed at preventing Greece's debt troubles from spreading to the rest of Europe.

The euro hit a four-year low of 1.2144 dollars Wednesday after the German move, fuelling fears that officials were increasingly concerned for the health of financial institutions in Europe.

The single currency has since recovered ground and was quoted at 1.2327 dollars in Tokyo afternoon trade Thursday.

© 2010 AFP

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