May 27, 2010 (LPAC) — On May 25, German Finance Minister Wolfgang Schäuble presented a "discussion draft" on the prohibition of ALL naked short sales in Germany, which was sent out to banks and economic groups. This public pre-announcement is quite unusual, and seems to be designed to create a favorable public mood for government measures — in particular, since Geithner is descending on Germany now.

 

Thursday, there will be a hearing of experts, and the German cabinet will take up the matter on June 2nd. The aim of the new law is "to prohibit any transactions which could threaten the stability of the financial markets." The measure will forbid all naked short sales of state bonds and of all stocks and their derivatives traded in Germany, not just ten bank stocks as is the case now. Moreover, a two-tier "transparency system on short sales positions" will be introduced. In the first phase, Baffin (the German banking regulatory agency) must be informed, and in the second stage, higher volume short sales have to be made public. Also, the asset trading law (Wertpapierhandelsgesetz) will prohibit unsecured CDS on EU countries' debt, and currency derivatives on the euro, if they do not serve real deals, which have to be secured.

 

The text of the draft paper says: "It is forbidden to execute unsecured short sales in stocks or debt titles, which have been issued by central governments, regional governments and local governments of those EU member-states which use the euro as legal currency, and which have been admitted to national trade [in Germany] in the regulated market and introduced into trade."

This comes after German Economics Minister Bruederle, on Tuesday, rejected EU President's Van Rompuy's plans to issue joint eurobonds. Bruederle said this would set the wrong incentives; Germany would not support ideas for turning the Eurozone into a transfer union. Of course, this is what in fact happened last week when the Bundestag agreed to the euro rescue package, which the government had agreed upon after massive pressure from the EU level.

Very convenient in this respect is the public and institutional pressure building upon EU Commission President Jose Manuel Barroso, for his close personal ties to Spiros Latsis of Eurobank, who received probably the biggest single EU bailout for government bonds in the Greek "rescue package."

While still far from the Glass-Steagall reform needed for the whole system, the German steps go in the right direction, as Helga Zepp-LaRouche pointed out in her most recent statements, in which she also noted the growing press chorus (as in FAZ most particularly) for Germany quitting the euro and going back to the deutschmark, including blasting the "Political Euro Cartel."

The pace-setter for this change in Germany clearly has been the BueSo campaign for a return to the DM and to global Glass-Steagall measures, which in the last week of the recent N.R.W. state election campaign was pointedly escalated with a 100,000 leaflet distribution. Stay tuned.