The European Union's top regulatory official said the bloc will consider banning "purely speculative" credit-default swaps as German Chancellor Angela Merkel called for a crackdown on derivatives trading to prevent a rerun of the Greek financial crisis.
European Commission President Jose Barroso said Tuesday that the 27-nation region will "examine closely the relevance of banning purely speculative naked sales on credit-default swaps." Merkel, speaking before Greek Prime Minister George Papandreou met President Obama in Washington on Tuesday, said the EU must take the lead in curbing derivatives.
"We're of the opinion that a quick implementation of actions in the area of CDS has to happen," Merkel told reporters in Luxembourg. Citing "ongoing speculation against euro-region countries," she called for the "fastest possible" implementation of new rules.
European leaders are ratcheting up the pressure for global regulation of derivatives amid the Greek fiscal crisis. The commission, the EU's executive arm, will also propose creating a lender of last resort to aid cash-strapped members such as Greece, a proposal that has divided the region.
Papandreou said in a speech in Washington on Monday that "unprincipled speculators" threatened a new global financial crisis and said he would press Obama to support EU efforts to target speculation.
Germany's BaFin financial regulator said market data does not back up claims that swaps were used to speculate against Greek bonds. Data provided by the Depository Trust and Clearing Corp. of the U.S. did not show that new open positions were built up and also did not indicate "massive speculative action," BaFin said in a press release Monday.
Blaming derivatives for Greece's debt crisis "confuses cause and effect," and a ban could lead to "mispricing of financial risks," said Tim Brunne, a credit strategist at UniCredit SpA in Munich.
Barroso said he would press leaders of the Group of 20 nations to curb swaps at a meeting in June.
