Spain threatens legal action against speculators

7th May 2010, Comments 0 comments

The Spanish government warned on Friday it would use a new law to prosecute "attacks" from speculators after the Madrid stock market plunged this week during rumour-fuelled trading.

"This week worrying situations emerged based on information without any objective base, which hurt us and negatively affected out economy. Speculative attacks are unacceptable," Deputy Prime Minister Maria Teresa de la Vega said.

"Spain will not allow its prestige to be toyed with and that its financial market is put in danger by punishable anti-social behaviour," she told a news conference.

The minister said that a reform to Spain's penal code expected to be passed soon in the Senate "will punish the dissemination of information or rumours with the aim of affecting stock market valuations."

She added: "This is a clear message to speculators."

Earlier this week both the International Monetary Fund and Spanish Prime Minister Jose Luis Rodriguez Zapatero firmly dismissed speculation that Spain was seeking a massive loan from the lending institution, a rumour that had caused strong losses to stocks in Madrid.

The market rumours began swirling after eurozone finance ministers and the IMF approved a three-year 110-billion-euro bailout for Greece, fuelling fears that other struggling eurozone nations may need assistance.

Ratings agency Standard & Poor's last week lowered Spain's long-term sovereign credit rating to AA from AA+ on prospects that its recession could further weaken public finances.

De la Vega said speculative attacks needed to be fought at the "European scale".

She called for the quick establishment of the European public prosecutor's office, as stipulated in the European Union's Lisbon Treaty.

The office's "key goal will be the protection of the financial interests of the European community and the euro," she said.

"We should establish at the European level the best level of protection and security to put an end to these speculative practices."

In Paris, France's market regulator said it too would probe speculative attacks on the Spanish and Italian economies.

"Whether it is French banks or foreign banks operating in Paris, whether it is funds in Paris, Berlin or London, is not important," declared Jean-Pierre Jouyet, head of the AMF financial market authority.

"When I hear of speculation, when I see abnormal market movements, there will be inquiries and punishments."

French President Nicolas Sarkozy and German Chancellor Angela Merkel on Thursday urged EU leaders to crack down on the speculative financial trading blamed for worsening certain countries' sovereign debt, and to examine the role of credit rating agencies.

© 2010 AFP

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