EU's Michel Barnier Cracks Down On Debt Speculators
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Michel Barnier, the European commissioner in charge of financial market regulation, said he would propose controls to curb speculative trading in credit default swaps, (CDS) a form of debt insurance that has been blamed for worsening Greece's economic problems, Telegraph.co.uk reported. His measures will target so-called naked selling of CDS, where insurance contracts are sold to buyers who do not own the debt. The cost of CDS on Greece rocketed when fears grew that the country could default on its debt. But a spiral was created by the rising cost of the Greek CDS which increased fears of such a default. The Greek prime minister George Papandreou claimed some buyers of the CDS did not own Greek debt and were just speculating on a rise in the price. Mr Barnier's proposals may open another front in the financial regulation battle between the EU on one side and Britain and the United States on the other. While France and Germany have criticised naked selling of CDS, Britain and the US oppose an outright ban on the practice, but want better regulation of derivatives markets. Read more.