"In order to counter the risks that short selling presents to the stability of the financial market, naked short selling will be outlawed in the future," Schäuble told the Frankfurter Allgemeine Sonntagszeitung.
"This is an important and necessary extension of our attempts to regulate the financial market," he said. Naked short selling is when stock market traders sell financial instruments which they neither own or have borrowed security to cover.
The new proposal was sparked by recent stock market speculations on Greece going bankrupt. "These speculations were poison. Gamblers should not be allowed to speculate against states," said the financial policy spokesman for the ruling Christian Democratic Union Leo Dautzenberg.
Dautzenberg also presented the government's intention to create a central supervisory body for controversial trading in continental Europe.
The CDU's coalition partners the Free Democratic Party supported the measure. "We need a common European course of action against speculators who are making the crisis worse, said Silvana Koch-Mehrin, head of the FDP in the European parliament.