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Germany

German lawmakers move to ban naked short-selling in the eurozone

Germany's lower house of parliament has approved a bill that would curb risky financial trading practices - including naked short-selling - in a bid to stabilize the euro.

The flag of the Deutsche Boerse and that of the European Union

Merkel wants to lead the way for the EU with the financial policy

Lawmakers in Germany's lower house approved Friday a ban on naked short-selling of eurozone government bonds. The measure is intended to prohibit some of the risky financial trading practices that have led to the euro's instability.

The bill, which the government said is aimed at speeding agreement on stronger European rules, passed with the votes of Chancellor Angela Merkel's center-right coalition.

A risk to the euro

"Naked short-selling leads to incalculable speculative risks," Leo Dautzenberg, parliamentary financial policy spokesman for Merkel's Christian Democrats, told the Bloomberg news agency.

"We've put up clear barriers to this uncertainty," he added.

Nicolas Sarkozy and Angela Merkel stand pointing their fingers out in front of them

Merkel and Sarkozy see naked short-selling as a major culprit in the euro's instability

Naked short-selling is the practice of selling financial instruments one does not own on the speculation that one can buy them back later at a lower price, thus turning a profit.

Germany's financial regulator BaFin in May banned so-called naked short-selling of eurozone government debt and major financial stocks, as well as naked credit default swaps involving eurozone debt.

Together with French President Nicolas Sarkozy, Merkel urged the EU in June to accelerate bans on risky trading, highlighting the eurozone's debt crisis as a principal reason to implement the measures.

The new legislation, which is set to go to the Bundesrat, parliament's upper house, on July 9, would extend the ban on naked short-selling to all stocks traded on German exchanges.

Not everyone agrees

The Green Party and the Left Party announced their abstention from the vote, explaining that they appreciate the move toward increased market transparency, but that the bill itself was flawed and incomplete.

Social Democrat Manfred Zoellmer, meanwhile, came out against the bill entirely. "This draft law is a placebo," said the opposition fiscal policy maker, adding that the policy would be "purely symbolic" and "ineffective."

The leader of France's central bank, Christian Noyer, also warned that single-country solutions could increase market fluctuations and be less effective than multilateral policies.

Chancellor Merkel's government, however, sees itself as paving the way for the rest Europe on the matter.

Author: Gabriel Borrud/ David Levitz (APE/dpa/Reuters)

Editor: Andreas Illmer

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