EU Internal Market Commissioner Charlie McCreevy was yesterday accused of "monumental complacency" for his hands-off approach to hedge funds.
The European Trade Union Confederation (ETUC) criticised the European Commission and Mr McCreevy in particular, saying it took the financial markets turmoil of the last days for the issue to be put on the agenda in Brussels. "It has taken a crisis to awaken policymakers to the dangers involved in the recent stupendous growth of hedge funds and derivative markets," said the Brussels-based ETUC, which represents trade unions from 36 countries across Europe.
"Charlie McCreevy, the responsible commissioner, is on record as describing hedge funds as 'crucial' and as putting the 'fear of God' into company boards for the benefit of all. That statement looks like monumental complacency today."
Hedge funds were embroiled in the subprime mortgage sector in the US - where loans are given to home-buyers with poor credit histories.
This meant that when the home-owners defaulted on their loan repayments as an increasing number started to do, the ripple effect resulted in hedge funds not being able make payments due to banks, thus contributing to the panic in the global markets over much of last week. Critics have long said that hedge funds operate in too opaque a manner and that nobody knows the extent of their investments or how deeply they are involved in banks.
"We have allowed them to exercise a huge influence on the world economy . . . How many more risks like the subprime mortgages are undervalued? What is the real extent of liabilities of hedge funds and of the banks?," asked John Monks, head of the European trade union group.
Mr McCreevy, known for his dislike of regulation, recently ruled out introducing EU rules to manage the sector.
His spokesman yesterday said he did not think the commissioner would be changing his policy towards the issue.
However, Mr McCreevy's department last week indicated it would be making an inquiry into credit ratings agencies following concern over their slow response to the subprime mortgage crisis.
