France and Germany have insisted that the European Union speed up its scheduled financial reforms, noting that “strong volatility” in the markets necessitates a quick ban on speculative trading against “certain” stock and government bonds.
In a joint appeal, French president Nicolas Sarkozy and German chancellor Angela Merkel called on European Commission President José Barroso to propose European legislation by the middle of next month instead of this fall. A EU spokeswoman promised on Wednesday that the commission would make proposals to regulate short selling “during the summer.”
Germany startled markets last month when it abruptly banned naked short selling of eurozone government debt and financial stock, as well as naked credit default swaps involving eurozone debt which are blamed by some for deepening Europe’s ongoing debt crisis.
Merkel and Sarkozy wrote to Barroso on Tuesday that “the severe turbulence observed on financial markets over recent months has […] led to considerable concern among the member states of the European Union and all our fellow citizens.” They added that “the return of high market volatility raises some legitimate questions, specifically concerning certain financial techniques and the use of certain derivative products, as, for example, short selling and credit default swaps.”
The Commission should consider the possibility “of European harmonization of the time allowed for securities settlement and delivery relating to trading on European markets,” both leaders agreed.
Other EU member states have previously been reluctant to follow Germany’s lead, France among them. President Sarkozy has pushed for greater market regulation but prefers European measures over unilateral action. The government leaders of Europe’s two largest economies have now agreed to work more “closely together,” according to Chancellor Merkel’s office. They will prepare together for the upcoming EU summit of June 17 and subsequent G20 gathering in Canada. Europe’s sovereign debt crisis and the weakening of the common currency will likely dominate both meetings.
Last week, Commission President Barroso stressed that European governments ought to “deliver a strong and unified position” on financial reform before the upcoming G20 summit.