SHARE
COPY LINK

STOCKS

Germany and France look to rein in speculative trading

Germany and France are moving to curb or even ban the use of certain financial derivatives in the wake of the Greek debt crisis, daily Süddeutsche Zeitung reported Tuesday.

Germany and France look to rein in speculative trading
Photo: DPA

Government representatives in Berlin and Paris said that Chancellor Angela Merkel and French President Nicolas Sarkozy planned to write a letter to José Manuel Barroso calling for limits to speculative trading such as credit default swaps.

Jean-Claude Juncker, the head of the Eurogroup and Luxembourg Prime Minister, and the Greek Prime Minister Giorgos Papandreou, were also backing the call for common international rules on the issue, the paper reported.

The goal was to have a common line on financial instruments such as naked short selling, in which stock market traders sell products which they neither own or have borrowed security to cover.

Such instruments have been widely blamed for financial turmoil in recent years. Recently, traders were making speculations on Greece going bankrupt.

According to the paper, Merkel, Sarkozy, Juncker und Papandreou were prepared to pursue the issue alone even if important G-20 partners such as the United States and China were not willing to join them.

“We cannot keep waiting until the last ones are on board,” the paper quoted a source as saying.

Member comments

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

COVID-19

Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.

SHOW COMMENTS