Page last updated at 21:27 GMT, Tuesday, 9 March 2010

Greece welcomes Obama support on speculators

George Papandreou
Mr Papandreou blames speculators for worsening Greece's problems

President Barack Obama has "responded positively" to calls to clamp down on market speculators, the Greek PM said after talks in Washington.

George Papandreou said the US president had shown his support for Greece, and that the issue would be on the agenda of the next G20 meeting.

Greece has blamed market speculators for worsening its current economic troubles.

European politicians have already expressed their concern over the issue.

"We ourselves were in the last few months the victims of speculators," Mr Papandreou said, after meeting Mr Obama.

"Obama assured me that he considers the initiative useful, important, positive, and that the United States will contribute in this direction."

Betting on failure

Papandreou set out his position in Washington

US support follows German Chancellor Angela Merkel's call for "quick action" to tackle the problem of speculation, while European Union President Jose Manuel Barroso also spoke out.

They say speculators, such as hedge funds, are unfairly betting that Greece will default on its loans.

Such moves are making it more expensive for Greece to borrow funds.

The speculators are typically betting against Greece defaulting on its government bond payments - or having its credit rating lowered - by buying large quantities of a complex financial insurance instrument called a Credit Default Swap (CDS).

Angela Merkel
Angela Merkel among the European voices to express concerns

The way this works is that if Greece defaults on paying interest on its bonds, or has its credit rating lowered, then the owners of CDSs linked to the bonds will be eligible for penalty payments from the bond holders - typically banks.

The knock-on effect is that Greece is having to offer higher interest on its bonds to still make them attractive for banks to buy.

Mr Barroso told the European Parliament on Tuesday that the EU would look at banning "purely speculative" sales on credit default swaps of sovereign debt.

French President Nicolas Sarkozy has also called for new rules against financial speculators.



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FROM OTHER NEWS SITES
China Post EU urges U.S. to join in action against speculators - 1 hr ago
Yahoo! UK and Ireland Greek PM wins political praise, no market credit - 5 hrs ago
Times Online Europe should beware of Greeks bearing grudges - 8 hrs ago
SINA EU to tackle speculators amid Greek fiscal crisis - 15 hrs ago
Deutsche Welle Greece labels support-gathering meeting with Obama a success - 20 hrs ago


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