Spain calls for EU prosecutor to protect euro

Wed Mar 3, 2010 11:57pm IST

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* EU governments to map out plans for post in April

* Spanish concerned about euro's vulnerability

By Justyna Pawlak

BRUSSELS, March 3 (Reuters) - Spain wants the European Union to use a planned public prosecutor's office for the region to protect the euro currency against speculators, Spanish attorney general Candido Conde-Pumpido said on Wednesday.

The EU's Lisbon treaty, in force since December, provides for the creation of a European public prosecutor's office focusing on financial crime.

Spanish officials said the Greek debt crisis had highlighted the need for the EU to have a coordinated legal response against speculators attacking the euro, which has slumped to nine-month lows against the dollar.

"The existence of an area with a single currency requires a single institution to implement laws to protect its economic interests," Conde-Pumpido told a news briefing in Brussels.

"Doubtless if there were a public prosecutor and there was a combined attack against the single currency, the prosecutor could coordinate the legal response vis-a-vis that attack."

At the request of Spain, which holds the EU's rotating presidency until the end of June, EU governments will discuss plans for the post at a meeting of interior ministers in April.

Conde-Pumpido did not elaborate on what legal tools the prosecutor's office might use to prevent financial markets from selling the euro in response to concern about economic strains in the euro zone.

But his proposal came amid signs on both sides of the Atlantic that governments were keen to confront hedge funds and other institutions involved in volatile currency and debt trading over recent months.

INVESTIGATIONS

Officials working for EU financial markets chief Michel Barnier will meet industry experts and supervisors on Friday to discuss debt speculators, after Greece complained that traders were worsening its borrowing problems by pushing up yields. [ID:nLDE622244]

In the United States, the U.S. Justice Department has launched an investigation into whether hedge funds might have acted together betting against the euro, a source familiar with the situation said on Wednesday. [ID:nN03290445]

The Wall Street Journal, citing people familiar with the matter, said that the department had asked hedge funds including SAC Capital Advisors LP, Greenlight Capital Inc., Soros Fund Management LLC and Paulson & Co. to retain trading records and emails relating to the euro.

Some analysts believe Spain, its economy struggling, could be one of the next countries in line after Greece to have its debt dumped by speculators.

El Pais newspaper reported last month that Spain's intelligence services had been asked to investigate the role of speculators and the media in Spanish debt market turbulence.

"It's not that Europe is defenceless now," Spain's minister for European affairs, Diego Lopez Garrido, said in response to a question about whether Greece's woes made it more pressing to set up a pan-European prosecuting office to chase fraud.

"What this office would do is make the prosecution of any offences much more coordinated, much more effective."

Another area where the office will be vital, said Garrido, is the use of structural aid funds distributed by the EU to its members in order to reduce economic inbalances among the bloc's 27 nations.

The office would pass on its investigations to national courts. At a later stage, it could broaden its mandate beyond financial crimes to tackle other cross-border issues such terrorism and illegal trafficking, Spanish officials said. (Editing by Luke Baker and Andrew Torchia)

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