EU Commissioner Slams Hedge Funds

Sep 18 2007 | 1:00pm ET

We get the point: German politicians do not like hedge funds. This week, another prominent Social Democrat laid into hedge funds, saying they “worry” him “much more” than even the takeover of German companies by state-owned enterprises.

“Let me be very clear: I am no friend of hedge funds,” warns Günther Verheugen, the European Commissioner for Enterprise and Industry. In an interview with the German news magazine Der Spiegel, Verheugen argues that “takeovers by hedge funds regularly lead to the break-up of companies, ending with the sale or closure of company divisions, all in the name of an even higher return. Later it turns out once competitive companies were ruined and jobs wantonly destroyed.”

Verheugen rejects the argument that anti-hedge fund measures make Europe less competitive, and said the federal government would have to “intervene” if Germany’s “strategic interests” were endangered by hedge fund or private equity firm actions.

Meanwhile, U.S. Treasury Secretary Henry Paulson sought to assuage European fears about the collapse of the U.S. subprime mortgage market and its effects on the global economy. The subprime slide, and its attendant troubles for hedge funds, have given European foes of alternative investments new ammunition in their battle for international oversight of the sector.

Paulson met in Paris with French President Nicolas Sarkozy, a noted hedge fund opponent. He also sought to quiet the clamor surrounding hedge funds on the continent, defending them and their role in the world economy, and cautioning against a “rush to judgment” on new regulations.

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