Sarkozy and Merkel tell Brussels to speed up reforms

French President Nicolas Sarkozy and German Chancellor Angela Merkel have urged Brussels to speed up proposals for tougher regulation of certain financial products and trading practices.

In a two-page letter to European Commission President Jose Manuel Barroso, dated 8 June, the two leaders ask the EU executive to come forward with plans to clamp down on naked short-selling and Credit Default Swaps (CDSs) by the middle of next month, rather than October as originally planned.

Presenting a united front after months of squabbling on how to solve the eurozone's debt crisis, the two leaders say "recent market developments" mean there is now an "urgent need" for the commission to accelerate the pace of its work.

At a regular press briefing in Brussels, a commission spokeswoman said the institution would announce proposals "during the summer" but declined to give an exact date.

"We consider it [the letter] an expression of support for our general approach, a European approach for the issue of short-selling," said spokeswoman Pia Ahrenkilde-Hansen. "I don't see this as a complaint."

Germany surprised many last month when it announced a unilateral move to curb naked short-selling of certain financial stocks, sovereign debt and sovereign CDSs. Naked short-selling involves trading in assets that are borrowed rather than owned, while CDSs are insurance-like products that have received criticism for exacerbating Greece's debt crisis.

Although Mr Sarkozy has been vocal on the need for greater market regulation in the wake of the financial crisis, Paris has not followed Berlin's unilateral move, with French finance minister Christine Lagarde saying she was concerned the ban could reduce liquidity in bond markets.

Wednesday's letter appears to be an effort by the two sides to bury their recent differences as EU leaders prepare to sit down for a summit in Brussels next week, with the two also scheduled to attend a G20 leaders' meeting later this month.


In other news related to the financial crisis, the commission has raised a question mark over the validity of data being provided to the EU's statistics office, Eurostat, by Bulgaria.

"The commission lacks information on why Bulgaria has revised its planned 2010 budget from a balanced budget to a deficit budget ... even though the macroeconomic scenario has remained unchanged or even improved," said the institution's economy spokesman Amadeu Altafaj Tardio on Wednesday.

As a result, the institution plans to send a team of officials to Sofia to check the public finance figures being provided by the centre-right government of Prime Minister Boiko Borissov, elected less than a year ago.

The commission says it is too early to judge whether the latest changes have been caused by problems of methodology or active political manipulation.

In April, Mr Borissov announced that a slew of previously unaccounted-for "hidden contracts" relating to the previous administration had forced the Bulgarian government to adjust its 2009 budget deficit figure and delay its timetable for joining the European single currency.

Bulgaria joined the EU in 2007, only to see a total of 825 million in pre-accession aid frozen by the commission in 2008 amid corruption concerns. Roughly 220 million of the aid was ultimately cut.

[Source: By Andrew Willis, Euobserver, Brussels, 09Jun10]

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