Snow Contradicts German Calls For Hedge Fund Regulation

by Carla Johnson, Investors Offshore.com

17 June 2005

After German calls for greater regulation of hedge funds, US Treasury Secretary John Snow said on Wednesday that hedge funds helped to make markets more efficient and that regulators should think hard before applying stiffer regulation to the sector to avoid stifling innovation and creating a false sense of security in financial markets.

German Chancellor Helmut Schroeder said on Monday that foreign investors remain extremely welcome in Germany, but that the government would try to have hedge funds included in a new EU-wide directive on investment funds. On Wednesday he reiterated that he would push for the definition and establishment of a unified set of minimum international standards for hedge funds at the G8 meeting in Scotland on July 6-7, and that he will address the issues of hedge funds with US President George Bush in a meeting set for June 27.

In a series of speeches in Brussels, Mr Snow called on Europe to forge ahead with difficult economic overhauls to promote growth. "We need integrated, open, competitive financial markets," Mr. Snow said, and said that European leaders should stop using anti-capitalist rhetoric or risk losing US investment.

Breaking down barriers to financial services transactions between the US and the EU would help both economies, said Mr Snow after a meeting with EU Economic and Monetary Affairs Commissioner Joaquin Almunia. "EU leaders acknowledged the EU is doing below its potential," Mr. Snow said in a speech at the Centre for European Policy Studies, quoting an estimate by the OECD that deregulation would raise Europe's gross domestic product per person by 2.8%.

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