News 15.01.2014

EU: No strict regulation of financial speculation with agricultural commodities

The European Commission, the EU Parliament and the European Council have agreed upon a regulation of the financial markets. What is being celebrated as a breakthrough in the battle against excessive speculation reveals itself upon closer examination to be a phoney compromise: the betting on food prices can largely continuew unchecked. 

The EU states promise new regulations to curb future turbulence in the stock markets and the speculation with food. During the night of Tuesday to Wednesday, the negotiators from the EU Commission, the member states and the European Parliament agreed on a new version of the EU Markets in Financial Instruments Directive (MiFID). The compromise still needs to be formally accepted by the EU Parliament and the EU states in the coming weeks. The guidelines could then become effective by the end of 2016.

Position limits are not to be determined uniformly

So-called position limits are actually provided for in the new MiFID regulations. This is supposed to limit the number of speculative contracts – in principle the right instrument. But the way the position limits are to be set up, they will probably be ineffective, because the limits are not to be determined uniformly for the whole EU, but rather by each country for itself. This puts the EU member states in competition with each other, in which the financial centre is the country with the laxest regulations benefits. It thus creates a fatal incentive for EU states to set the loosest possible limits.

A phoney compromise prevents better regulation for years

The planned regulation will thus not prevent food speculation and its fatal consequences. According to foodwatch, this is a phoney compromise. Even no regulation at all would ultimately be better than this one: because now a bad regulation will probably be codified, causing a better regulation to be ruled out for years to come. 

picture: Elena Schweitzer -