By Huw Jones and John O’Donnell
LONDON/BRUSSELS, May 19 (Reuters) – The European Union, struggling to calm volatile financial markets, intends to curb speculation in government debt but remains very unlikely to imitate harsh steps announced by Germany.
The difficulty of enforcing any prohibition on speculative trade, and concern that any ban might backfire by depriving investors of ways to hedge their risks, mean many governments are reluctant to try to introduce regional or global bans.
Instead, the EU is likely to focus on increasing transparency in the markets — forcing traders to disclose more information about their activities, so that regulators can see risks emerging — and on introducing limits to the size of derivatives positions which traders can hold.
“There are philosophical differences between banning and regulation and there are many underlying corporate uses of CDS makets for hedging purposes,” said Avinash Persaud, a member of the United Nations Commission of Experts on International Financial Reform.
“So I think there will be a couple of countries that will find it hard to ban it.”