Transantlantic Bailout Buddys Agree To Disagree

Thursday’s talks in Berlin between U.S. Treasury Secretary Tim Geithner and his German peer, finance minister Wolfgang Schäuble, did not go particularly well, according to European media. At an extremely short press conference, Mr. Geithner praised the latest European bailout efforts, but refused to comment on Germany‘s ban on short selling.

“The U.S. and Europe are in broad agreement on the importance of putting in place more conservative constraints on risk-taking.”

Timothy Geithner


According to The Financial Times Deutschland, German officials describes the talks as “frank and intensive” – a Brussels euphemism for a disagreement. The paper also points out that it was the guest, Mr. Geithner, who ended the extremely short press conference, something that is regarded as bad manners in Berlin.

Geithner pointedly refused to comment on the German government’s decision to ban short sales, and to lobby for a financial transactions tax.

The top U.S. finance official and his German counterpart, Wolfgang Schäuble, agreed to disagree on the detail of finance market reform, The Irish Times writes.

“The US and Europe are in broad agreement on the importance of putting in place more conservative constraints on risk-taking and more conservative capital requirement,” Mr Geithner said. Adding that for regulators to do their job properly it is essential to bring “more transparency and disclosure to derivatives markets”.

“These are global markets; you need common standards,” the U.S Treasury Secretary highlighted.

“You don’t want to just let risk move outside the scope of regulation.”

This remark was seen as a discreet, critical nod towards Germany’s national ban on speculative trades last week, including naked short selling.

Germany’s finance minister, Mr Schäuble, on the other hand, defended the national ban, saying Germany had been unable to wait until a European agreement in the autumn.

“We’ve done our national homework on this and have to keep moving forward,” Schäuble said.

Plays Down Reform Rifts

Timothy Geithner did the best he could to play down comments of transatlantic tensions ahead of next month’s G20 summit, saying the US and Europe were in “broad agreement” over financial market reform.

Mr Geithner ended his trip to Europe with praise for the euro zone rescue fund: it contained the “right elements” that required decisive action to put it to work.

But other than a pledge to provide the financial markets with up to 750 billion euros, there are very few other “elements” in the European bailout package.

The Euro Collapse: Good, Bad or Just Ugly?

The Berlin meeting followed a stopover in Frankfurt where Mr Geithner met European Central Bank (ECB) president Jean-Claude Trichet as well as his likely successor, Bundesbank president Axel Weber.

The euro staged a rebound yesterday – after days of unyielding pressure – as the Chinese authorities denied a report that Beijing was reviewing its holdings of European sovereign debt.

Although European and US equity markets continued to rise, there were conflicting signals from the ECB about the implications of the turmoil sparked by the Greek debt emergency.

ECB executive board member José Manuel Gonzalez-Paramo said the euro zone could not afford another country to repeat Greece’s deception over the scale of its deficit.

However, the chiefs of the French and Austrian central banks adopted a positive stance on the currency’s decline, saying it was benefiting exporters.

(And they think derivatives is complicated!?)

Market Snap Shots

Anyway – here’s the situation in the European currency market at noon local time.

The euro is continuing to strengthen against most other currencies Friday after yesterday’s reassurance by Chinese authorities that they’re not considering selling off their enormous euro positions to re-balance their foreign exchange reserves.

In reality there’s nothing else they can say, (regardless of true or false), but the investors seem to be buying it.

EUR/USD:

EUR/GBP:

EUR/JPY:

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Stock Market Guru: Sell Everything!

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