Germany urges European ban on naked short-selling

Germany will push for a European ban on naked short-selling of stocks, government bonds and credit default swaps, a Finance Ministry spokesman told Reuters on Friday.

The call comes on the same day a piecemeal ban on the practice came into effect in France, Italy, Spain and Belgium, focusing on financial stocks but differing in detail from country to country.

"We are advocating a wide-reaching ban on naked short-selling of stocks, sovereign bonds, and credit default swaps," spokesman Martin Kotthaus said. "Only this way can destructive speculation be countered convincingly."

A better organized approach to the bans enacted on Friday should please investors, who have said relief for bank stocks -- particularly hard hit in recent days as rumors rattled the markets -- would be temporary in the absence of co-ordinated action.

Naked short-selling -- already banned by Germany last year for the same financial instruments -- involves selling securities without having first borrowed or arranged to borrow the underlying assets in the hope of buying them back at a lower price.

Kotthaus said Germany supported the bans put in place by the four countries. German Chancellor Angela Merkel will meet French President Nicolas Sarkozy on Tuesday in Paris.

[Source: Reuters, Berlin, 12Aug11]

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