Obama fails to back Greek CDS proposals

Steve Dinneen
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GREEK proposals to impose strict curbs on credit default swaps failed to gain solid support from the US yesterday.

Prime Minister George Papandreou flew into Washington for crunch talks with President Obama in the hope of convincing him to back his controversial plans.

Greece insists speculators betting against Greece by trading credit default swaps (CDS) dragged it further into the financial mire.

However, the Obama administration said the President had his own ideas for making the system fairer.

Discussions have now been deferred until the next G20 meeting. Papandreou attempted to put a positive spin on the talks, saying: “We have found a positive response from President Obama. He assured me that he considers the initiative useful, important, positive and that the United States will contribute in this direction.”

But the Obama administration offered a lukewarm response. An official said: “We commend them for the bold steps they’ve already taken and have confidence that their European partners will support them on this difficult road. The president’s plan would require more transparent trading and central clearing for standardised derivatives.”

Greece had hoped to gain backing to ban outright some trading activities, such as short selling by investors of securities they do not own.

The European Commission also waded into the debate yesterday, saying it will consider banning the naked selling of derivatives

Meanwhile Axel Weber, president of Germany’s central bank, criticised proposals to set up an emergency monetary fund (EMF) to protect countries in the eurozone from suffering a financial crisis similar to Greece’s.