Keep cool

EU/shorting ban/regulation: It’s not too late to stop and think - however intense the pressure to do something stupid. Germany's surprise ban on bets against German financials and European government debt has taken its European Union partners by surprise. The risk is that other member states feel politically pressured to imitate Berlin, behind the fig leaf of needed European “coordination”.

Michel Barnier, the EU’s internal market commissioner who is steering efforts to regulate financial markets, has in recent months resisted the populist measures advocated by France and Germany to fight “speculation”. He must continue to block the path of the all-banning juggernaut.

Regulating credit default swaps has been a hot topic among EU governments since the beginning of the sovereign debt crisis. Initially, cooler heads prevailed and the consensus was that any reform should be carefully thought out, with any subsequent regulation being implemented globally after consideration within the G20 forum.

There was broad agreement that the CDS market needed more transparency, and clearing mechanisms. But when Europe’s leaders felt they could do with some scapegoats, calls for the fight against speculators went along with suggestions to ban some of their supposedly evil tools. The pressure to “do something” — if not a ban, then at least the threat of one — had become particularly intense by March, when EU leaders were struggling to respond convincingly to the intensifying Greek crisis.

Barnier’s reaction to Germany’s unilateral action has been cautious. He has warned that any measure would be more “efficient” if coordinated at the EU level, and called for finance ministers to discuss the matter at a meeting scheduled this week. But however polite his public pronouncements, the hope must be that he sticks firmly to his existing agenda, which was to take all the time he needs to consult, consider and devise sensible regulation — if regulation is needed at all. His plan has always been to report back with proposals in October.

He should make sure Germany’s partners wait till then before they do anything. There is no need to accelerate the timetable just because Angela Merkel wants to play Terminatrix on the financial world.