Crisis prompts calls for more EU rules

European leaders demand more stringent regulation in response to financial markets turmoil

German chancellor Angela Merkel and French president Nicolas Sarkozy have jointly called for more European regulation on hedge funds and rating agencies, echoing earlier calls from other ministers of the European parliament (MEPs) in reaction to instability in the financial market. European Union internal markets commissioner Charlie McCreevy warns against a knee-jerk reaction to the crisis, saying any rapid policy action is likely to be a “bad reaction”. Meanwhile, EU economic and monetary affairs commissioner Joaquín Almunia assured the EU parliament this week that the real economy is in good shape and “economic fundamentals are solid” despite the ongoing financial markets turmoil. However, Almunia also warned of the potential effects on investment confidence as the crisis spreads.

Socialist and Christian Democrat MEPs have made predictable calls for increased transparency, supervision and regulation. McCreevy has rebuffed these suggestions but agrees that the issue of credit rating agencies’ conflicts of interest should be looked at in more detail. Socialist MEP Poul Nyrup Rasmussen says that the crisis constitutes “a wake-up call for commissioner McCreevy and all of us”. Conservative MEP John Purvis supports McCreevy’s “light touch” and warns against subjecting hedge funds to a witch-hunt.