Merkel pushes for new global financial rules

German Chancellor Angela Merkel on Thursday took up her campaign for greater financial market regulation and stricter EU budgetary rules at a meeting in Berlin with top officials from around the world.

Merkel pushes for new global financial rules
Photo: DPA

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.

“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.”

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.