By Andrew Barber
On March 10 French President Nicolas Sarkozy,
Luxembourg’s Prime Minister Jean-Claude Juncker,
German Chancellor Angela Merkel and Greek Prime Minister George
Papandreou signed a letter addressed to the European Commission
demanding an investigation into the use of credit default swaps
in sovereign debt and the role they have played in raising
yields for bonds issued by more vulnerable Union members such
as Greece and Spain. "We must prevent speculative actions from
causing so much uncertainty on the market that prices no longer
provide accurate information and state financing reaches a
fundamentally unjustifiable high level," they wrote.
This rush to blame bank and hedge fund traders for rising
yields on sovereign debt is one-half scapegoating, one-half
wishful thinking. EU politicians have found a convenient
narrative that lets them gloss over both the lax...