Reply #71: Decision to quit by Jürgen Stark seen as signal policymakers remain at loggerheads [View All]

[Ghost Dog]

The decision to quit by Jürgen Stark, a member of the European Central Bank's (ECB) rate-setting governing council, was quickly seen as a signal that policymakers remained at loggerheads.

Stark, a German hardliner and former member of the Bundesbank board, has lobbied for the ECB to impose stricter austerity measures on Greece and Portugal and to reject using its funds to purchase Italian and Spanish bonds until Rome and Madrid have made further efforts to reduce their debts and institute reforms.

At a press conference on Thursday ECB boss Jean-Claude Trichet appeared visibly rattled by questioning from German journalists who asked if the eurozone's largest economy should quit rather than keep subsidising indebted countries.

Trichet said, in a clear warning to colleagues, including Stark, that Germany had prospered from the euro and should maintain its commitment during the worst crisis since the second world war.

...

Stark has been a consistent critic of the ECB's programme of purchasing government bonds of debt-ridden European nations in the markets. He has said eurobonds, which many economists believe are the only way to save the euro, would create false incentives for indebted countries. The cost of borrowing for the German government has increased as investors price in the risk of it absorbing the debts of all eurozone members through the creation of eurobonds.

/... http://www.guardian.co.uk/business/2011/sep/09/stark-ecb-resignation-sends-markets-reeling