Market Transparency

"In the case of hedge funds, we need to know where the capital comes from and how high the credit risks are," Merkel said in an interview for Bild am Sonntag, which was published on Sunday.

Merkel stressed that the world's top rating agencies should also be more open about the way they calculate their ratings.

"In the future it should be clear what the basis of their ratings of companies is," Merkel said. "There can't be some black box from which something comes out and which no one understands."

During the annual summit of the Group of Eight (G8) leading industrialized nation in June, Germany -- the current G8 president -- pushed for an international agreement that would require more openness from hedge funds, but without success. The United States, in particular, has resisted any such moves.

"It's unsatisfactory that that it takes so long to agree on the appropriate international measures," Merkel said.

After the storm

Merkel's criticism of the financial markets came only days after central banks around the world started pumping tens of billions of dollars into the global financial system aimed at calming continued liquidity fears in the wake of a significant crisis in the US home loan sector.

Merkel said the developments in recent weeks showed "how urgent it is that we have greater transparency on international financial markets."

Earlier on Saturday, publicly-owned regional German bank SachsenLB said it had to be bailed out to the tune of 17.3 billion euros ($23.3 billion) by the country's savings banks because of exposure to the US subprime loan crisis.

Another German bank, IKB, was rescued earlier in the week with an $8.1 billion liquidity line extended by state-owned development bank KfW, its main shareholder.

Global economy, global problems

The international financial crisis was sparked by concerns that US homeowners would not be able to make repayments on so-called subprime mortgages.

Subprime mortgage loans involve greater risk, as they are granted to borrowers with limited or tarnished credit histories. Falling housing prices in the United States have made it more difficult for borrowers to meet their long-term payments. This led to a strong rise in mortgage foreclosures and the subsequent bankruptcy of several major subprime mortgage lenders.

With losses from risky US home loans to borrowers with poor credit histories being felt across the Atlantic,

"At the end of the day, we all risk paying the price of the opaqueness often associated with the selling on of loans," Merkel said.