Germany’s Merkel says Europe should spearhead financial market reform
Posted by: admin in Industry NewsFiled under: International markets, Other issues, Industry, Politics, Housing
German Chancellor Angela Merkel stated continental Europe should take the lead in financial market reform because the “Anglo-Saxon” model of regulation had failed, The Financial Times reported Wednesday.
Merkel, talking before her meeting with U.S. President Bush and ahead of next month’s G-8 leading industrialized nations economic summit, called for a European credit ratings agency to counter-balance Moody’s and Standard & Poor’s (NYSE: MHP), adding that despite the progress Europe has made with the euro, the financial regulatory framework is still “a strongly Anglo-Saxon dominated system.”
Reforms sought by Berlin will include a ban on bureau ratings for products they helped to create, new capital adequacy ratios for banks, and the prevention of bank sale of products they don’t comprehend.
London-based economist Mark Chandler told BloggingStocks Wednesday he agrees with Merkel on the need for both financial market reform and a Europe-based counterweight to complement the largely U.S.-based regulatory framework, but is slightly surprised by Merkel’s rhetoric.
Surprised by Merkel’s rhetoric
“Wow, she used that term? Anglo-Saxon? I haven’t heard that term voiced in a while and I’m surprised she [Merkel] would use that phraseology. It might create a bit of a row [spat] here in the U.K., but if we can get past that, there’s a chance for legitimate reform here because there is a need for more credit rating sources,” Chandler said.
Chandler said Merkel’s point about Germany’s industrial sector being injured too much by the credit crunch is valid, but added that Germany is not the only nation to be hurt by U.S. / U.K. financial problems. “Germany is still primarily industrial-based. So here we have a German economy humming along, creating wonderful economic ripples for the rest of the euro-zone, and then a financial crunch hits, which didn’t originate in Germany. You can see why Merkel and Germany’s industrial sector would be upset,” Chandler stated. “They’ve lost access to credit or face tougher credit terms now through little fault of their own.”
Chandler said a Moody’s-equivalent in Europe for both credit and stock ratings, provided it had the resources to research companies comprehensively, would represent an improvement over the current framework, under the theory of multiple oversight organizations. He added that there’s even a slight chance the EU might establish a public organization to undertake those analysis takes.
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