EU authorities concerned about debt market regulation
The aftermath of the Greek economic fallout has already begun with the European Union set to meet next week to discuss tighter regulations for debt and currency markets. This comes at a time when attacks on currencies such as the euro, in the aftermath of the Greek economic downturn, have had a growing impact upon the rest of Europe and the worldwide economy.
There is concern that some hedge funds and investment managers are working together and openly discussing plans to target specific currencies and specific sovereign debt. While ultimately the transactions of two individual hedge funds can never dictate the direction of the market, they can place fear into other investor's minds which can lead to rumours, counter rumours and untruths in the marketplace.
The credit crunch, the worldwide economic decline and the financial problems in Greece have all highlighted the extent to which rumours and counter rumours can literally move markets. While there is no doubt that the Greek budget deficit came as a result of the economic downturn it is also becoming more and more apparent that many investors attempted to exaggerate these problems by opening short positions in investment markets.
It will be interesting to see whether the European Union regulators find evidence of collusion between fund managers and hedge funds and to what extent they may be able to control this in the future.
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