The European Commission backs a Germany ban on certain speculative trading practices and believes other EU regulators should look into similar action, EU commission chief Jose Manuel Barroso said today.
'We are in agreement with Germany on the need to halt the abusive use of naked short selling,' he said.
Germany's securities market regulator imposed the ban overnight as it tried to stamp down market volatility in trading in government bonds of the 16 euro zone members which has pressured the euro to four-year lows.
Naked short selling is when an investor sells on the market a security they do not own and have not even borrowed, hoping to be able to buy it later, often on the same day, at a lower price, thereby earning a profit.
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'The European Commission today called on the Committee of European Securities Regulators to rapidly evaluate if the conditions which led the German authorities to this conclusion are found in other parts of Europe,' Barroso said.
'Actions taken by other national authorities, coordinated at a European level, reinforce the actions of each nation and add value and weight to the message given to the markets,' he added.
Ireland has a ban on short selling the shares of the three Irish listed banks. The ban was imposed in September 2008, and also applied to Anglo irish Bank before it was nationalised and delisted.
The Irish ban on short selling does not apply to other shares, government debt or credit default swaps.
Meanwhile, Chancellor Angela Merkel today called for a radical overhaul of Europe's fiscal rules along German lines, warning of 'incalculable consequences' for the European Union if the euro were to fail.
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Defending Germany's part in a €750 billion package to prevent the troubles of debt-ridden Greece spreading to the rest of Europe, she said the single currency was facing an 'existential test' as it plunges on the markets.
'The euro is in danger. If we do not avert this danger, then the consequences are incalculable and the consequences for the whole of Europe are also incalculable,' she cautioned.
To overcome the turmoil that has battered the euro, the German chancellor proposed a 'new stability culture' in Europe. She said was is needed is 'a comprehensive overhaul of the Stability and Growth Pact'.
The rules under t his pact state that EU countries should keep budget deficits below 3% of gross domestic product (GDP) and debt below 60% of GDP.
German Finance Minister Wolfgang Schaeuble will on Friday propose a raft of measures to tighten the rules at a meeting with EU president Herman Van Rompuy.
Merkel said that European funds could be withheld from fiscal 'sinners' and voting rights withdrawn. She also said that an 'ordered sovereign insolvency procedure'' needed to be established in Europe.
Merkel said the ban on naked short selling would be in place until Europe-wide regulations were agreed.
She also reiterated that she would campaign at the Group of 20 leading industrial powers for an international tax on the financial markets.
