European Central Bank top official lashes out at euro bailout moves

Dec 23, 2011, 12:22 GMT

Berlin - The European Central Bank's chief economist fired a parting shot Friday at the bank's controversial efforts to shore up the crisis-hit eurozone and warned against Europe's using the International Monetary Fund (IMF) to help finance the region's cash-strapped states.

In an interview with Germany's daily Die Welt, Juergen Stark confirmed that one reason for his surprise decision in September to step down from his post was the ECB's government-bond program to help prop up cash-strapped members of the 17-state eurozone.

'I resigned because I felt my personal credibility was at risk,' Stark told the newspaper. 'I wanted to shake the governments awake.'

Stark, who is a member of the ECB's 23-member governing council, is to leave his post at the end of the year. His contract was not due to expire until May 2014.

The Frankfurt-based ECB has been under pressure from European political leaders to boost its government debt purchases as a way of stemming the rise of borrowing costs of euro members and helping to contain the debt crisis, which has dragged on for more than two years.

But Stark told the newspaper that the ECB bond purchases, which were reactivated in August, 'misled politicians into thinking they can lean back and not get their budgets in order.'

Germany has emerged as a major critic of accelerating the bond-buying program, warning that it risked blurring the ECB's monetary policy responsibilities with new fiscal duties. This, in turn, could threaten the bank's independence.

In particular, critics have said that boosting the bond-buying program was contrary to the ECB's charter, which rules out the bank financing states.

In his interview, Stark also criticized the move by European leaders to offer the IMF additional money, which could be used to help stabilize the euro by shoring up heavily indebted eurozone states.

'It's an attempt to get around the ban on direct monetary financing in Europe,' Stark told the newspaper.

'In theory, it does not constitute monetary financing because the money goes into the IMF's general account,' he said. 'But in practice, I don't see any countries other than the euro countries who want to get their hands on the cash.'