Germany and France in new call for short selling ban

GERMANY and France have written a joint letter to the European Commission urging it to ban short selling of shares and sovereign bonds.

Chancellor Angela Merkel and French President Nicolas Sarkozy told European Commission President Jose Manuel Barroso the EU executive needed to accelerate the pace of financial reform.

Brussels ought to accelerate efforts to impose tougher controls for credit default swaps on sovereign bonds and short selling, and present measures in the next few weeks, they said.

"In particular we think it's imperative to improve the transparency of short-selling positions on shares and bonds, particularly sovereign bonds," the letter said.

"The work of the European Commission should also extend to the possibility of an EU-wide ban of naked short selling of all or certain shares and sovereign bonds as well as all or certain naked CDS on sovereign bonds."

Germany moved unilaterally last month to ban naked short selling -- in which the seller does not hold the underlying asset – of shares in its biggest banks, euro government bonds and related credit default swaps.

The announcement followed talk of strains in relations between the euro zone's two biggest economies, sparked by a decision to postpone a scheduled summit between the two leaders.