Econintersect: Juergen Stark, who resigned at the end of last year from his post as chief economist for the ECB (European Central Bank), has issued a strong indictment of the actions of the Eurozone's central bank. The comments came in an interview published by Die Presse, a daily newspaper in Vienna, Austria. Stark said that the ECB was acting "outside its mandate," engaged in "misguided" actions and increasing inflation potential "enormously."
Here is a quote from the interview from Die Presse:
Also ich will meine Person nicht überschätzen. Das Signal, das ich mit meinem Rücktritt an die Europäische Zentralbank und die Politik geben wollte, war: Ihr seid auf dem falschen Weg! Innerhalb weniger Stunden wurde eine wichtige Geschäftsgrundlage der Wirtschafts- und Währungsunion einfach auf die Seite geschoben: Die No-Bail-Out-Klausel (die Verpflichtung der Euroländer, keinen Partnerstaat rauszuboxen, Anm.). Jetzt kann man darüber diskutieren, ob Kredite an ein anderes Euroland ein Bail-Out sind. De jure wohl nicht, aber de facto kann es dazu kommen.
The Econintersect translation:
So I do not overestimate myself. The signal that I wanted to give to the European Central Bank and the policy with my resignation was: You're going the wrong way! Within hours, a significant business basis for the economic and monetary union was simply pushed aside: the no-bail-out clause (the obligation of the euro countries not to box out a partner state, Note). Now you can argue about whether loans to another euro country are a bail-out. Probably not de jure, but de facto it can happen.
An excerpt from an article in The Telegraph:
Mr Stark said the ECB's new plan to buy up unlimited amounts of eurozone states' bonds, announced on September 6, on the secondary market to bring down their borrowing rates was misguided.
"Together with other central banks, the ECB is flooding the market, posing the question not only about how the ECB will get its money back, but also how the excess liquidity created can be absorbed globally," Mr Stark said.
"It can't be solved by pressing a button. If the global economy stabilises, the potential for inflation has grown enormously."
Stark maintains that the only way for the crisis to be resolved is for member states to reduce their debt. He also says that there must be structural reforms for growth.
- Stark: "EZB bewegt sich außerhalb ihres Mandats" (Franz Schellhorn and Nicholas Jilch, Die Presse, 21 September 2012)
- ECB in 'panic, say former chief economist Juergen Stark (The Telegraph, 24 September 2012)