German Chancellor Angela Merkel keeps on spooking investors. Speaking in the Bundestag Wednesday she says the euro is in danger, urging speedy action to stop market “extortion” and says the E.U. need a process for “orderly” insolvency of members.
“In those areas where unilateral action by Germany won’t cause any harm, we will also act on our own.”
The German leader told the parliament in Berlin that she will recommend tough moves against “notorious deficit sinners” in the euro zone, such as withdrawing voting rights. “Above all, what’s necessary is to develop a process for an orderly state insolvency,” she says.
“With that we would create an important incentive for euro zone member states to keep their budgets in order,” Merkel says.
Germany shocked financial markets on Tuesday by taking an apparently unilateral initiative involving an immediate ban on naked short-selling of euro government bonds and on related transactions in credit default swaps (CDS).
The country’s financial regulator also banned naked short sales of shares in Germany’s 10 leading financial institutions.
European shares fell in response and German bunds soared as rattled investors sought refuge in safe-haven assets.
Short selling is a trade that bets the price of an asset will fall, while the naked variant of the practice involves a trader selling a financial instrument without first borrowing the asset or ensuring that it can be borrowed, as would be done in a conventional short sale.
“In those areas where unilateral action by Germany won’t cause any harm, we will also act on our own,” the German leader says.
This video report was released by Bloomberg Television about 45 minutes ago.
Jay Bryson, global economist at Wells Fargo Securities LLC, talks with Bloomberg’s Francine Lacqua about the outlook for the euro zone economies, saying both the German and French economies are on a “knifes edge”:
The euro is fighting back at the moment, and have rebound from its four-year low earlier today.
If the move is caused by investors (speculators) or by central banks is anybody’s guess…
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