German Chancellor Angela Merkel has gone on a populist attack against speculators by proposing a ban on naked short selling and CDS trading on a select set of securities.
That ban would impact European government bonds and 10 select German financial institutions within the eurozone.
The ban is being proposed by Finance Minister Wolfgang Schaeuble.
This move comes in the context of a German public severely displeased with the decision to bailout the fringe eurozone states at their own expense. Domestically, West Germans already support the eastern half of their country, which was reunified in 1990. Under the European Union, German taxes also subsidise development projects in other European countries.
The burden of the Greek bailout seems a step too far for many, particularly a centre-right government under Chancellor Angela Merkel.
Now her government has decided naked short selling and CDS speculation will end on European government debt and German financials.
How Germany intends to ban these activities has not yet been revealed, and it seems unlikely Germany will be able to ban speculation on all European sovereign bonds, which are not only traded in Germany.
What this does, in the short term, is increase market distrust in the eurozone. If Merkel wants to ban naked short selling, clearly she lacks confidence in European financial stability German financial companies.
This could lead to investors seeking alternative means to make these moves.
Now the euro is falling on the news: