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Eurogroup ministers to discuss hedge fund rules at Porto meeting

Sep 14, 2007, 9:50 GMT

Porto, Portugal - The finance ministers of the 13 states which have joined the euro were set to discuss calls for more transparent regulation of hedge funds following August's financial crisis at an informal meeting in Portugal on Friday. 'We'll have to discuss the situation in the financial markets, both as concerns the impact of the difficulties on economic growth and to see what we can do to arrive at transparent rules for hedge funds,' the president of the Eurogroup, Luxembourg's Prime Minister Jean-Claude Juncker, told journalists. But his colleagues sounded an optimistic note as they boarded a cruiser for a working breakfast on the Douro River in Porto, northern Portugal, despite the breaking news that a British mortgage lender had applied for emergency aid from the Bank of England. 'Europe is that strong that we are able to handle situations like this. The European economy is robust and stable,' Austria's Finance Minister Wilhelm Molterer said. 'The atmosphere is relatively optimistic,' added Spain's Minister of Economy and Finance, Pedro Solbes. Since the beginning of August, the world's financial markets have been rocked by the slump in the US market for poorly-secured housing loans known as subprime mortgages. Banks and hedge funds around the world had bought into that market. Its sudden collapse left traders uncertain as to how much their portfolios were worth, and banks unwilling to lend because they could no longer judge how credit-worthy their borrowers were. At the height of the crisis, the US Federal Reserve and the European Central Bank pumped billions of dollars' worth of short-term loans into their banking systems in an attempt to shore up confidence and keep global credit flows moving. But two German banks ran into financial crises and required bailing out soon afterwards because of their subprime exposure. And they were followed by the Britain's fifth-largest mortgage lender, Northern Rock, which was offered emergency funding by the Bank of England on Friday in order to keep its business stable. Eurogroup ministers were adamant that there is no need to fear a general financial crisis in Europe, however. The subprime crisis will have an impact on European markets, but it 'will not be a huge one,' Juncker said. 'In a few weeks, we will know more or less exactly what that impact will be,' he added. The 13 states to use the single European currency are Belgium, Germany, France, Spain, Ireland, Finland, Portugal, Slovenia, Finland, the Netherlands, Italy, Luxembourg and Greece. They are set to be joined by Cyprus and Malta in 2008. © 2007 dpa - Deutsche Presse-Agentur

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