Brussels, 17/08/2007
It has taken a crisis to awaken policy makers to the dangers involved in the recent stupendous growth of hedge funds and derivative markets. Trade unions have been warning now for over a year about the risks of hedge fund operations and how no-one can be sure about who is responsible for what, or what the true liabilities are in today’s casino economy.
But those warnings fell on deaf ears in the European Commission and elsewhere. Charlie McCreevy the responsible Commissioner, is on record as describing hedge funds as “crucial” and as putting the “fear of God” into company boards for the benefit of all. That statement looks like monumental complacency today.
Complacency should by now have been comprehensively shattered. The European Central Bank rightly acted quickly to try to prevent the crisis unfolding. More will need to be done. But the Commission too must join in the efforts led originally by the German Government to investigate:
- the role played by credit rating agencies;
- bank involvement in hedge funds and credit markets;
- the lack of transparency in the derivative markets; and
- the lack of effective regulation.
John Monks, General Secretary of the ETUC said today:
“Europe – and the world – has been caught out by the speculators. We have allowed them to exercise a huge influence on the world economy. Financial markets today are a crucial part of the real economy, responsible for providing mortgages, pensions and for providing credit for investment in innovation, R+D, and new equipment. But they have become more interested in gambling on shaky deals. How many more risks like the sub-prime mortgages are undervalued? What is the real extent of liabilities of hedge funds and of the banks? The European Commission and other institutions need to find out quickly, if confidence is to return swiftly and long-term damage averted.”