The EU’s ECOFIN council settled on watered-down controls on short-selling and credit default swap transactions. Hungary’s finance minister, György Matolcsy, chairing, claimed the compromise “strikes the right balance between the need to restrict abusive market practices and safeguard liquidity”. It would allow national authorities to suspend restrictions in the event of a liquidity crisis.
Naked short-selling (the speculative sale by traders of stocks they don’t own) of CDSs on government bonds by speculators has been blamed for deepening sovereign debt and undermining weaker European economies such as Greece. The proposed deal will not satisfy left and centre-right groups in the European Parliament, including the Socialists and Democrats.
“MEPs have already made their views very clear: naked short-selling should be banned”, said Arlene McCarthy, Labour’s vice-chair of the Economic and Monetary Affairs Committee. “The position adopted by the Council of Ministers simply doesn’t go far enough to address our concerns. Naked short-selling is part of the questionable culture in the financial system that got us into the economic crisis in the first place.”
The European Conservatives and Reformists group, which includes the Tories, opposes a ban.
Finance ministers also looked at options for taxing the financial sector, and asked the European Commission to prepare an
impact assessment by the summer. One of the proposals on the table is a financial transactions or Robin Hood tax, which has wide support in the EP but faces opposition from some governments, including the Conservative-led coalition in Britain.
