EU takes an important step to stop banks betting on hunger

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EU takes an important step to stop banks betting on hunger

by Miriam Ross


AndreasPoike under a Creative Commons Licence

People from the European Union (EU) agreed last night to bring in laws to stop banks (and hedge funds – group investment companies) betting on hunger. This makes food more expensive and makes more people hungry in the world. The new controls limit the number of food contracts that banks and other finance companies can have, and will make it easier to see what bank traders are doing.

The World Development Movement (who fight against poverty) said this is a very good decision. But they also said that there are gaps in the laws because the British government does not support strict controls. One example of this is that limits will be set at national, not EU level. The campaigners say different countries could compete to set lower and lower limits.

The group says that the European regulator ESMA should make sure that the new rules are followed well. They must not let people from industry make the rules weaker.

Goldman Sachs, Barclays, Deutsche Bank, JP Morgan and Morgan Stanley made about $3.6 billion between 2010 and 2012 from speculating (betting) on food: wheat, maize and soy. Speculation makes the prices go up and down, and is one of the main reasons why food prices around the world have gone up and down so quickly in the last six years.

‘Many people are very angry about food speculation. The EU listened to that anger, and this is a victory for public pressure’ says Nick Dearden (director of the World Development Movement). ‘But it is terrible that the UK has made the rules weaker. The Treasury has shown that they think the profits of banks like Goldman Sachs are more important than the basic human need for food. This means that the new rules could be too weak and not effective. Yesterday’s agreement is good, but now we need to make sure the limits are set at the right level, so bankers will not be able to speculate too much.’

The new rules on food speculation are part of changes in European finance, the "Markets in Financial Instruments Directive" (MiFID). After the MEPs and EU finance ministers give their official approval, it must be written into national law in all the 28 EU member states.

Miriam Ross is Media Officer for the World Development Movement.