UPDATE 1-EU's Barnier says will tackle short-selling

Wed Mar 17, 2010 9:50am GMT

* Financial markets chief promises new rules on speculators

* Politicians have blamed Greek problems on short selling

* Barnier draft rules could come in June

(Adds background)

BRUSSELS, March 17 (Reuters) - The European Commission will crack down on "naked" selling and speculation in the market for credit default swaps with proposed controls as soon as June, the EU's financial markets chief said on Wednesday.

Politicians have said speculation by hedge funds in credit default swaps or government debt insurance compounded the borrowing problems of Greece, the euro zone's most troubled economy, and they have called for stricter controls.

In particular, France and Germany have criticised so-called naked selling in which a buyer does not own the government bonds related to the credit default insurance. They see it as a punt on the price of the bond falling that destablises the market.

On Wednesday, Barnier met European parliamentarians and said he would propose rules to curb naked selling.

Speaking to a group of influential parliamentary committee members who will play a key role in passing such proposals into law, he said: "We will be proposing on naked selling and credit default swaps."

He said that the draft law would come as soon as June.

((Reporting by John O'Donnell, +32 2 287 6817 or +32 473 92 48 90; john.odonnell@thomsonreuters.com)) Keywords: EU SHORTSELLING/

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