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Greek minister calls on global leaders to tighten financial regulation

06-23-2010 11:33 BJT

by Ming Jinwei, Yu Maofeng

BEIJING, June 22 (Xinhua) -- Greek Economy Minister Louka Katseli called on global leaders Tuesday to learn from Athens' "mistakes" and tighten financial regulation.

"You have the possibilities of liquid funds looking for quick wins. Then you have products such as CDS (Credit Default Swap) and other derivatives, and so on, to bet against open positions," Katseli said in an interview with Xinhua.

CDS is essentially an insurance policy on a financial product, but it has been used more frequently for pure speculative purposes in the Greek debt crisis.

"It's quite easy for someone to pursue some kind of profiteering activities against currencies, against bonds, against countries," said Katseli, who is on a visit to China.

The minister called on global leaders to tighten financial regulation to stop speculators from creating financial turbulence again.

"That's why in my view there has to be stricter regulation at a global level on short-term capital movements," she said.

The Greek minister noted Hong Kong faced a similar situation in 1998 in the Asian financial crisis.

"It's extremely important to learn from the past, from our mistakes, for world leaders to move ahead with a healthy regulatory framework for financial services at the global level," she said.

Financial regulation is expected to top the agenda at the summit of the G20 leaders when they meet this weekend in the Canadian capital Toronto.

Katseli said she did not expect any decision on dealing with market speculators at the G20 meeting, but said discussions "will be reopened."

Some financial observers blame credit rating agencies for escalating the Greek debt crisis by downgrading Athens' credit ratings when panicking investors were already starting to lose confidence in the country's ability to repay its debts, effectively shutting Greece out of the bond markets and leaving it with no choice but to turn to outside rescue.

But Katseli made a distinction between the roles of speculators and credit rating agencies.

"The two are separate. Credit rating agencies have an important function to play, but in my view, there should be very strict rules about their operations," she said.

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