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...