ECB's Stark objects govt's bond buying scheme, quits over euro crisis management

Frankfurt: A top European Central Bank official has publicly discussed the reasons for his surprise resignation, saying he is not satisfied with the direction Europe’s currency union has taken.

Juergen Stark said in an interview in today’s edition of Germany’s Wirtschaftswoche magazine that the ECB had done its job by keeping inflation under control across the eurozone, which it does through adjusting interest rates.

But he said some governments had tolerated excessive wage costs and unsustainable real estate booms that preceded today’s debt crisis.

Stark is leaving at the end of the year, two and a half years before the end of his eight-year term on the bank’s six-member executive board.

More from Economy

For second time in a week, Ukrainian strike cuts Russian oil supply to EU’s Hungary, Slovakia European postal services suspend US shipments ahead of new import tariffs

The council runs the bank day-to-day at its Frankfurt headquarters, while interest rate decisions are taken by the broader 23-member government council, on which Stark also sits Stark was quoted as saying that “there is a broad theme that serves as the reason for this: that I am not satisfied with the way this currency union has developed.”

Stark said the ECB had done its part by keeping inflation under control but could not be expected to clean up policy mistakes by individual governments that ran up too much debt or let their economies become uncompetitive through high laboUr costs.

“Don’t overburden the central bank,” he said. He said governments should have avoided financial trouble by reining in labour costs. Stark was quoted as saying governments also failed to rein in excessive real estate booms that collapsed and contributed to the eurozone debt crisis. He didn’t mention individual countries but wage costs rose in Greece, hampering the economy and state finances and Ireland and Spain had debt-fueled real estate booms that collapsed. The ECB earlier said Stark was leaving at year-end for personal reasons.

Analysts have said he appears to have left because of opposition to the European Central Bank’s program to buy government bonds. But Stark did not cite the program as his reason to quit, although he repeated the ECB’s position that the programme is “limited in duration and volume.”

The purchases lower the borrowing costs faced by indebted governments such as Italy and Spain. High borrowing costs are threatening to leave them unable to be able to borrow a new to pay off bonds that are maturing, resulting in a disastrous default that would shake the eurozone and global economy.

The bank and its President Mario Draghi have said the programme is limited and only aimed at steering interest rates, and that governments must reform their finances and not wait for a central bank bailout.

AP