What exactly have the Germans done?
They’ve banned, until the end of March next year, some types of speculation against European government bonds and also against some major banks and insurance companies. The Germans say they’re doing this in order to calm the markets. Analysts say it’s also designed to help the German government pass a very unpopular bill through parliament today authorizing their contribution to that $1 trillion EU-IMF bailout package. Cracking down on their speculators, as they see it, they hope will help the bill through.
Why has this affected markets around the world?
It’s rattled investors because it’s made them think maybe the crisis is worse than they imagined. Stephen Lewis, chief economist with from Monument Securities, says: “Many investors may have thought that the EU-IMF package had put to rest the problems in Europe, but clearly it hasn’t because governments see fit to take further measures to curb market activity.”
We’re debating bank reform here in the U.S. Is a similar movement in Europe?
Yes, only it’s even more severe you might say in Europe than in the U.S. There’s been a longstanding distrust here of financial markets, generally — especially in Germany and France — which has deepened since the financial crisis began. The trouble is European governments in particular need to borrow a lot of money from financial markets and this action by the German government seems to have only widened the mistrust between the politicians and investors.