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German Finance Chief: Markets Are Out of Control

Thursday, 20 May 2010 02:32 PM

Effective regulation is needed if financial markets are to be kept under control, German Finance Minister Wolfgang Schaeuble told the Financial Times in an interview published on Thursday.

"I'm convinced the markets are really out of control. That is why we need really effective regulation, in the sense of creating a properly functioning market mechanism," Schaeuble told the paper.

"A market does not function properly if the risks and rewards are completely unbalanced," he said.

"We need transparency. Given the complexity of modern technology, the individual needs a chance to judge what he is doing. That's why we need standardization of products. And we need transparency for all market participants."

Germany blames much of the euro zone's debt crisis on financial speculation and announced a ban on naked short-selling of German bank shares and the bonds of euro zone governments on Tuesday.

Schaeuble said there was a disconnect between financial transactions and economic reality: "Minimum profits of 25 percent are simply unimaginable in the real economy. It isn't healthy."

Schaeuble admitted the chances of government leaders reaching a global decision on whether to introduce a financial transaction tax at the G-20 summit in Canada in June were slim, but said there should be a push for an agreement, if only among European countries.

"If we get a Yes, that is good. If we get a No, then we will once again work intensively to see if we cannot have a transaction tax at a European level."

Germany has faced calls from France's Economy Minister Christine Lagarde to boost its domestic demand, saying the country's large trade surplus threatens the competitiveness of other euro zone economies.

But Schaeuble said increasing the size of Germany's deficit would not help to stimulate growth.

"I respect the reproach ... that Germany must do more for growth. We have a role as a locomotive. But then I must ask: what should we do to grow faster? It cannot be by building up bigger deficits," he said.

Instead, he told the FT, Germany must boost its rate of employment by facilitating the integration of immigrants and removing barriers to the job market by reforming its system of long-term unemployment benefits.

Equally, other euro zone members, such as Spain and Italy should look to reform their labor markets, Schaeuble said.

"I am not giving advice for other countries, but I am just saying that everyone has a specific problem, and everyone also has specific budgetary room for maneuver to boost growth," he added.

© 2017 Thomson/Reuters. All rights reserved.

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Effective regulation is needed if financial markets are to be kept under control, German Finance Minister Wolfgang Schaeuble told the Financial Times in an interview published on Thursday. I'm convinced the markets are really out of control. That is why we need really...
SHORT SELLING,BAN,NAKED SHORT SELLING,GERMANY,INVESTORS,STOCKS,CDS,BONDS,WOLFGANG SCHAEUBLE
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2010-32-20
 

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