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Merkel pushes for new global financial rules

AFP/DPA/The Local · 20 May 2010, 18:54

Published: 20 May 2010 11:17 GMT+02:00
Updated: 20 May 2010 18:54 GMT+02:00

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Having warned this week that the euro is in "crisis" after banning so-called naked short selling, Merkel and German Finance Minister Wolfgang Schäuble called the conference to build pressure ahead of a G20 meeting in Canada next month.

"Let us send a common signal," she said in Berlin, adding it would be "extremely frustrating" when some nations refused to join German efforts to reform the world's financial markets. "We need stricter rules."

Addressing ministers, central bankers and officials from bodies such as the International Monetary Fund, Merkel also backed an extra surcharge on the markets in the wake of the global financial crisis.

"We have now stated that we will campaign for a tax on the financial markets and we will campaign for that at our (G20) summit in Canada," she said.

The chancellor did not specify whether she was seeking a financial activity tax, which would cover profits and bonuses, or a financial transaction tax, an across-the-board levy on all market dealings.

Merkel has caused widespread consternation with her move to halt naked short selling - selling bonds or shares which are not owned or are borrowed. The measure concerns notably some German and Austrian government debt bonds.

Global financial markets reacted sharply to the German ban, with stocks in the United States, Asia and Europe posting losses and the euro hitting a fresh four-year low of less than $1.22.

French Finance Minister Christine Lagarde told RTL radio that France would not follow Germany's unilateral ban and distanced France from Merkel's warning that the euro was in danger.

Lagarde said the German decision "was a measure that should have been taken in concert" with other European nations and was in itself "open to debate."

She said Germany was merely following France in banning the short selling of certain stocks, but that France would not follow Germany in banning it for the sovereign bonds at the heart of Europe's current fiscal woes.

France feels that markets should remain free to trade in sovereign debt, she said, for "reasons of liquidity." Germany fears that short-selling could encourage a run on sovereign debt in debt-ridden states like Greece.

On Wednesday, Merkel had defended her short-selling ban in stark terms.

"This test is existential and it must be overcome ... if the euro fails, then Europe fails," she told German lawmakers. "The euro is in danger.

Story continues below…

"If we do not avert this danger then the consequences are incalculable and the consequences for the whole of Europe are also incalculable."

Lagarde insisted though that there is no threat to the euro.

"I absolutely do not believe that the euro is in danger," Lagarde told RTL radio. "The euro is a solid, credible currency that has assured the stability of the eurozone for more than 10 years."

But her German counterpart Schäuble said on Thursday that the Greek crisis had shown time was of the essence and governments must act now to revamp the world's financial markets.

"We cannot lose momentum," he said in Berlin. "The international community must once again take up reform efforts."

AFP/DPA/The Local (news@thelocal.de)

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Your comments about this article

21:01 May 20, 2010 by Prufrock2010
Nor will they. In the U.S., for example, the six largest banks control 63% of the GDP. It is the banks regulating government, not the other way around.

There's something fundamentally wrong with allowing speculators (or anyone) to sell something they don't own. Try selling a car you don't own and see what happens.

I agree that it is an existential threat, not only to the euro but to the global economy.
22:02 May 20, 2010 by derExDeutsche
its was the housing bubble guys, not the banking bubble.

The US Govt. owns over 95% of all Mortgages in the US. AND MAKES SURE BANKS HAND THEM OUT to people who for other reasons would not qualify for loans?


What Govt. Oversight do you propose that would Oversight the Damn Govt. from Creating Debt?
23:06 May 20, 2010 by smitherman
Chancellor Merkel is doing what others politicians will only talk about. The French are always quick to claim the world is following them, but they continually refuse to lead. Where Sarkozy and Obama talk up a good game, Merkel acts.
00:18 May 21, 2010 by derExDeutsche
What do you propose is going to help?

Telling Investors that it is no longer possible to speculate on the Bonds, Funds and Currencies a Govt. issues, that INVESTORS OWN?

It will not end there! Investors will STOP buying Stocks in Businesses in these debt laden countries, knowing the cost of debt, doing business, taxes, pensions, etc., they are saddled with. It amounts to the same thing. A Stock bought in India, is a bet against Germany. Like it or not.

So how do they fix that Problem? We aren't allowed to invest in countries that don't overburden their populace, anymore?lol Or just tax those investments into the ground? lol like Prufrock might suggest.

That we should all be looking straight ahead, and wait for the Govt. to tell us how much their currency, bonds, National Businesses etc. are worth? A la Hugo Chavez? Say anything different, and face fines/jail?

If the Govt. weren't running up an impossible amount of debt, they wouldn't have to worry about the devaluation of currency and speculators.

Unfortunately, for the Govt., the speculators know what is under foot.

Europe has too much unpaid debt. The Euro has a terrible Credit Score. No matter how much they try and blame the creditors, it does not change the facts. They Over Spend YOUR Money. Yeah, Prufrock, OUR MONEY, not THEIRS!

Banks go Bankrupt! Duh! Yeah, Thats thats what happens when Politicians set out to tell Bankers how to Run a Bank.

I am not wrong, My profits in the Markets in the last 2 years are all the proof I need. And No, Sorry Germany, you can't tax them!
01:21 May 21, 2010 by Prufrock2010
Yes, the non-regulation of banks and banking institutions, hedge funds and other speculators has worked out brilliantly. Our memories don't extend back to 2008.

Certainly there is nothing inherently wrong with investment banks using the proprietary information they have obtained from their clients to use that information to hedge against their clients. No conflict of interest there.

Certainly there is nothing inherently wrong with creating CDOs that are designed to fail, selling them aggressively to your clients as sound investments, and then shorting them to make a killing.

And what in the world could be wrong will naked short selling of bonds or equities that are neither owned nor borrowed? There is no skin in the game for the short seller. It's just another roll of the dice on somebody else's dime. If they win, they keep the money. If they lose, the taxpayer owns the debt.

In the last 10 years we have witnessed the greatest redistribution of wealth in the history of mankind, all to the richest 1 percent of the population. What could be wrong with that?

You ask me for a solution. You won't like my answer. Strict regulation.
01:30 May 21, 2010 by derExDeutsche
Oh Yes, you mean, Goldman Sachs...

Goldman Sachs... Goldman Sachs... hmmm? Now what do they have to do with the Obama administration? Oh, I forget... lol No, NO BIG DEMOCRATS over there, no.lol

Housing Debt brought on my US Policy, being marked as a safe investments and hedged across the globe are not a problem, right prufrock?
01:31 May 21, 2010 by Logic Guy
Well, the wonderful thing about being independent is that the individual gets to express their own opinion. Everyone should have at least a few. The truth itself is however independent of all humans. And the fact is, the world as a whole is in a financial crisis.

The world's largest economy is up to it's eyebrows in debdt and the second largest, Japan, is struggling too. Many of them are now committing suicide. And look at how people in Greece are resorting to killing and violence.

And here today, the US stock lost 361 points, which is the biggest one-day lost in almost 1 and 1/2 years. Experts are saying it was a "Correction" due to an exaggerated market.

Albert Einstein once said "Only a fool expects a different answer from the same equation." I therefore say "Let's walk away from the unprdictable, inconsistent, rollercoaster economies and create a system that is based upon REAL NUMBERS.
01:56 May 21, 2010 by Prufrock2010
ExDeutsche --

Goldman Sachs was the big dog on Wall Street long before Obama came along. They hedged their bet by investing in both parties, and Obama was a recipient of their largess along with the Republicans. As I recall, Hank Paulson was the CEO of Goldman Sachs before he became Bush's Secretary of Treasury. As I recall, Goldman Sachs engineered the Greek CDSs that helped Greece conceal its actual debt from Eurostat.. As I recall, Goldman Sachs demanded and received 100 cents on the dollar from AIG, causing its meltdown, then took $14 billion from the taxpayers in TARP money on top of that. As I recall, Goldman Sachs aggressively sold Washington Mutual's toxic mortgages (90% liar loans) as sound CDOs while at the same time shorting WaMu. As I recall, Goldman Sachs was instrumental in the destruction of Bear Sterns, thus eliminating a competitor on the street. Goldman Sachs, in my opinion, is a criminal enterprise.

They are abetted, of course, by the credit rating agencies they bribe, but that's another opera. And yes, they sold bogus securitizations across the world, helping to facilitate the global financial catastrophe.

You see, that's why strict regulation needs to make a comeback. Otherwise, even you with all your sweet investments will ultimately be at the mercy of Goldman Sachs, and Goldman Sachs takes no prisoners in its mission of greed. Do governments regulate, or does Goldman Sachs?
04:21 May 21, 2010 by derExDeutsche

'In the last 10 years we have witnessed the greatest redistribution of wealth in the history of mankind, all to the richest 1 percent of the population. What could be wrong with that?'

Really? LOL. from Wikipedia.

'For the decade, the Dow saw a rather substantial pullback for a negative return from the 11,497 level to 10,428, a loss of a little over 9%.'

so we stole -9% for ourselves? Some statistical Mastermind you are to figure that out!!

Goldman Sachs is all up in the US Govt., my friend! Who is Regulating who?
05:27 May 21, 2010 by wetdawg~
I agree...let's conduct all worlwide financial transactions in $$$ Dollars!
11:56 May 21, 2010 by Prufrock2010
ExDeutsche --

Apparently you don't understand the difference between a stock market decline and redistribution of wealth. When the market declines, somebody loses (the average investor) and somebody wins (the investment banks, hedgers and other gamers of the system). Millions of people saw their investments and pensions wiped out in 2008 (I lost 30% of my portfolio in 24 hours), but the investment banks made record profits in 2008 and 2009, helped along by the taxpayers in the form of TARP (thanks to Bush, by the way).

None of this would have happened but for the repeal of Glass-Steagall, which was engineer by Phil Gramm, former Republican Senator from Texas, now on the board of UBS -- one of the most corrupt banks in the world. And by corrupt Swiss banking standards, that's saying quite a bit.

I've maintained all along that the investment banks have been regulating the government, not the other way around. Today's news that a banking reform bill has passed the U.S. Senate is a welcome development, even though the bill doesn't go far enough. At least it's a first step on the road back to some form of sanity. I hope it will be tougher when it's reconciled with the House bill.

What the world is facing is indeed an existential threat from the financial sector. If governments don't go back to regulating their financial institutions, we can all expect economic anarchy under the rule of people like Bernie Madoff, Lloyd Blankfein, John Paulson and "Fabulous Fab." Warren Buffett, who knows something about finance, has called CDOs "weapons of mas destruction." He is right. The regulations of Glass-Steagall worked just fine for 50 years, even through the S&L fiasco. America prospered and so did Europe. It's time to return to sound, regulated banking practices. Germany's got it right this time. America needs to catch up.
15:27 May 21, 2010 by munchau
German and French banks are loaded with debt of PIIGS. Further German unfunded liabilities are in excess of 500 pct of gdp. Pal German banks are the speculators who mistook thought a Greek bond was a Bund with an extra 100 bpd of free yield. If the PIIGS default the German so called conservative banks equity will go with it. For all you moan about gs - check deutshe piigs exposure and then later check exposures to E Europe and the Baltics. The German welfare state model is at risk and that is what markets are rioting about and lets be clear the banks who bough the toxic euro debt are the speculators.
12:25 May 22, 2010 by William Thirteen
@Prufrock though i suspect you are once again arguing with a stone your comments are nonetheless welcome reading.

we'll see what's contained in the final bill that ends up on the president's desk. my hope for europe is that our merkel will be able to help create meaningful regulatory reform rather than the desperate stabs in the dark which seem to have become her pattern of late. while not against exotic derivatives in principle i do believe that ensuring transparency, accountability & consumer protection is the proper role of regulatory bodies.

of course here in the comments section we'll count ourselves lucky once spelling is finally mastered!
19:29 May 22, 2010 by derExDeutsche

Don't worry, You Gemans will be living under the Prufrock recommended means soon enough! Wealth HAS been redistributed.

And stop spending so much time chatting it up in here! Go to work! There are Greeks starving, Pensioners waiting for cheques! Chop Chop, buddy!
20:29 May 22, 2010 by Prufrock2010
ExDeutsche said --

"Wealth HAS been redistributed."

I already said that. Read post no. 6, above.
20:44 May 22, 2010 by derExDeutsche
Yeah, I know, only it has been redistributed to Greece and other Euro members. NOT to the Richest 1% as you say.

The people who worked and made the money are giving to the Govt of the people that didn't work for it. NICE!!!

Now you can be happy, no?

Bernie Madoff ; 65 Billion in losses.

Angela Merkel ; 1 Trillion in the last 3 weeks alone.
23:22 May 22, 2010 by Prufrock2010
There's a slight difference. Madoff stole it.

And no, I'm not happy about the Greek bailout.
00:20 May 23, 2010 by derExDeutsche
a mid Prufrock nights dream

by derExDeutsche

The Players;

Herr Goldklotz - played by the German Citizens

Commissar Stahleier - Played By the German Govt.

Herr Maddoff - Himself

Herr Eichman - Himself

Herr Goerbels - Himself

Scene 1

Walking past the local Casino, Commissar Stahleier hears a commotion heading his direction. Its Herr Goldklotz, a clean cut aging gentleman.

Herr Goldklotz -

'Commissar Stahleier!!! Thank God I found you!! I was just robbed! I was in that Casino playing BlackJack and I lost 100 Euro! Those thieves!!!! I want my money back!! and I want that Casino owner arrested. They told me gambling was dangerous, but this is ridiculous!

Commissar Stahleier-

'Yes, I agree completely, Herr Goldklotz!!! Eichman, Goerbels!! SEIZE Herr Maddoff the Casino owner IMMEDIATELY. He is going to ROT in Jail for Life!! Those evil evil Casino owners, we're going to Rip their throats out!

Herr Goldklotz-

' Oh Thank you, thank you, thank you, Commissar Stahleier!! Aber echt, we Towns people are soooo very very smart to elect a wonderful Commissar like you. ok, See you later, Commissar!!

Commissar Stahleier -

'Ho-ho-Hold'on 1 minute there, Herr Goldklotz! how much did you say you lost at the casino? 100 Euro? Well, we're going to need 1000 Euro from you. You know, to cover court costs, the station is disarray and Herr Eichman's daughter in Greece recently got braces...

Herr Goldklotz-

'B-B-b-But, Commissar Stahleier, I don't HAVE 1000 Euro!

Commissar Stahleier -

'HAHAHAHA! Don't worry, Herr Goldklotz, we will be seeing your employer tomorrow and we will make sure that you will be paying this for decades to come, and with interest, we should all be VERY Satisfied. You DO want Herr Maddoff OFF the streets don't you? I if it wasn't for him, you wouldn't be out 1100 Euro, now would you? Now, ease your mind, go home, and say 'Gruuusss'di' to your Wife and MY kids.

Herr Goldklotz -

'You're the BEST Commissar Stahleier, ::swoons::

Close curtain.
09:57 May 23, 2010 by Talonx
@ derExDeutsche

I don't know what's sadder, your systematic and fundamental misunderstanding of the major players in everything that has played out; your insertion of nationalist players in your crazy little opera who somewho are for internationalist solutions; or your misspelling of Joseph Goebbels (There is no 'R' in this mans name, the 'R' is an insertion by people that don't understand the German pronunciation of 'ö').
17:20 May 23, 2010 by derExDeutsche
@ Talonx

German is my first Language, idiot.

are you ever on base with any of your thinking?
20:31 May 26, 2010 by Prufrock2010
ExDeutsche --

Some friendly advice from a professional: don't give up your day gig. A writer you ain't.
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