The French President Nicolas Sarkozy again called on leaders of the 20 most advanced economies to work together for comprehensive reform of the global monetary system. “We need to create a new framework for discussion of movements in exchange rates,” said Sarkozy, adding that China is not meaningless to talk about conversion rates. As a reason for it indicates the huge reserves of foreign currency available to the Asian country. Sarkozy said that the stabilization of moving large change currency markets and raw materials will be the main topic of the G-20 are in November. It will pass under the presidency of France, as the country holds the rotating presidency of the G-20 and G-8 November. Important topic will be the need to limit the dominance of the U.S. dollar as primary reserve currency. In this respect, Sarkozy calls for action towards increasing the role of alternative currencies. Improving the coordination of economic policies at the global level is also among the priorities of Sarkozy as he said so you can be battled volatile exchange rates. This is necessary as a prevention against the accumulation of significant reserves, particularly in developing countries.
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The decision of the authorities in Germany to limit speculation in certain financial instruments by banning the trade of short “with them cause strong movements in financial and currency markets in recent hours. As a result, the euro sank again, gold and oil retreated positions. By decision of regulatory authorities in Germany were banned short sales of shares of the ten leading banks in the country, government bonds and related swaps for protection against non-performing debt for the period ending March 31st, 2011. This decision was taken to the disapproval of the markets because it is alone and does not comply with Germany’s partners in the European Union. According to some estimates, such a unilateral act could have a more negative effect than is likely to calm the situation. Some experts indicate that action as a sign of desperation and a signal of major weakness in Germany, transmits Reuters. The explanation of the regulators in a country that action be taken “because of unusual volatility in the price of government bonds in the euro area. After Germany, similar measures can be introduced, and Austria, which, however, said it would seek discussions at EU level. “We intend to put this issue on the agenda of the meeting of finance ministers on Friday, the goal is a ban on short selling in the EU”, said yesterday the representative of the Austrian Finance Ministry for FT.
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Sovereign wealth fund Dubai World, which again is bound to lead to tensions in financial markets, will propose plans to restructure its debts. The intention of the Fund are to seek warrants for conversion of debt to 22 billion dollars. One option is for every dollar debt fund to return 60 cents, transmit Market Watch, citing sources from the country. This will happen after a period of seven years and within this period will be paid principal and interest. Only interest would be paid in the last year, and the government of Dubai will be the guarantor. The second option, which is expected to be proposed, provides for obligations to creditors to be made in full, but by assets and shares of the division of the Dubai World Nakheel. The company specializes in construction and is the creator of ambitious projects such as palm and The World. “We think that banks would probably accept the first proposal,” it said in a message of Credit Suisse. According to financial institution creditors are expecting such a development and recovery of 50-60% of their loans to the fund. While it seems unattractive for banks that option is better than bankruptcy, indicated by Credit Suisse. The reason for this is that bankruptcy financial institutions will have to classify 100% of its exposure to the fund as a bad loan, as it happens around 40% of the position. From an accounting point of view it is more profitable, think of the bank.
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