Martin Vander Weyer Martin Vander Weyer

Any other business | 20 August 2011

Why Merkel and Sarkozy cannot deflect blame onto Anglo-Saxon speculators

Why Merkel and Sarkozy cannot deflect blame onto Anglo-Saxon speculators

Chemistry between the frumpy hausfrau Angela Merkel and the vain little egomaniac Nicolas Sarkozy never looks warm, but their summit in Paris on Tuesday must have been more than usually fraught. The French economy failed to grow in the second quarter, while Germany achieved just 0.1 per cent and the eurozone as a whole notched up only 0.2 per cent, the same as the UK. All of which means activity is too feeble to ease the euro debt crisis by generating higher tax revenues and lower welfare claims, and also means markets are not going to calm down any time soon, especially since Mrs Merkel’s colleagues at home will barely allow her to discuss the possibility of centralised issuance of ‘eurobonds’ under an implicit German guarantee.

So we can expect more mass dumpings of the bonds of whichever eurozone member is in traders’ sights at any given moment, along with assaults on shares such as those of Société Génerale, the French bank that took a pasting last week after being described as ‘on the brink of disaster’ by the Mail on Sunday — which later apologised, having admitted it could not substantiate the claim. That was a catalyst for a ban on short-selling of shares in France, Italy, Spain and Belgium, a footling gesture (European bank shares can still be sold short in London and New York) which will have the opposite of its desired effect if traders take it as an indication of worse news to come.

But still the short-selling ban and the curious SocGen episode raise interesting ethical questions. At the height of the banking crisis in 2008, rampant short-sellers of bank shares were accused of accelerating the collapse of confidence, thereby turning spurious or malicious rumours into self-fulfilling prophecies; but afterwards, the investors’ role was forgotten, while analysis focused on the genuine weaknesses of the banks.

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