EU defends itself under Merkel, Sarkozy pressure
The EU's executive on Wednesday defended the pace of its work on planned curbs to certain high-risk market dealings, under pressure from the leaders of Germany and France.
The EU Commission also threw the ball back at German Chancellor Angela Merkel and French President Nicolas Sarkozy by urging European Union member states to speed up the adoption of existing proposals to close loopholes in the supervision of financial markets in general and hedge funds in particular.
"We are in the final phase of completing our proposals" on derivatives and short selling, said a spokeswoman for European Commission chief Jose Manuel Barroso, after Merkel and Sarkozy sent a joint letter urging accelerated regulation due to "turbulence" on markets.
"In the coming days we will proceed with focused consultations so as to finalise the texts of our proposals" in these areas, the spokeswoman said, adding that "divergent approaches" among EU member states underlined the "importance of a coordinated European approach."
Proposals will be announced "during the summer," she maintained. "We are moving very quickly on this so you will not have to wait very long."
A sudden, unilateral decision by Germany to ban some forms of "naked" short selling in government debt caused consternation among some traders, already piling pressure on governments amid a crisis that some analysts say threatens to tip the eurozone back into recession.
"We believe there is an urgent need for the commission to speed up its work concerning the strengthened framework of the market," Merkel and Sarkozy wrote.
"The commission's work should include a possible ban at European level on naked short selling of all or certain shares and bonds and of certain credit default swaps on sovereign securities," they added.
Naked short selling is effectively a bet that a certain stock or government bond will go down on the markets. But unlike conventional short selling, a trader does not borrow the stock or bond before it is traded.
The biggest market for such financial products in Europe is in London where the new Conservative-Liberal Democrat government faces regulatory moves considered a threat to London's financial centre.
"We trust that the political dynamic expressed in the letter translates into full support for swift adoption of our proposals" on broad supervision of banks, insurers and markets and in the specific areas of hedge funds and private equity, the commission stressed.
© 2010 AFP