Monday, November 29, 1999

ECB bond purchases only temporary measure - Stark

News posted by

The European Central Bank's purchases of government bonds are only a temporary measure which must be constantly reviewed, ECB Executive Board member Juergen Stark was quoted on Saturday as saying.Stark also told the Frankfurter Allgemeine Sonntagszeitung that the European Union's budget discipline process had to be depoliticised, with countries which break the Stability Pact facing automatic and early sanctions.In remarks released by the newspaper before publication in Sunday's edition, Stark said the EU's $1 trillion rescue package had only bought time, and the situation would calm down only when euro zone governments reformed their economies and made budget savings.The ECB began buying euro zone government bonds last Monday, reversing its long-standing opposition to propping up the debt market. Stark's fellow German ECB policymaker Axel Weber has already expressed reservations about the decision.Stark said the new policy was a product of exceptional times. "These are temporary measures that at most have legitimacy in exceptional situations, and must be constantly kept under review," he told the newspaper.ECB policymakers have noted exceptional market conditions last week, when fears grew that the Greek debt crisis might spread to other euro zone nations and even hit the global economy."If the markets go crazy, no one can foresee the consequences. We know from economic history that things can gain a momentum that spirals out of control," said Stark.He also repeated ECB promises that extra liquidity injected into the euro zone economy by the bond purchases would be mopped up again in the short term.Stark stressed that the EU rescue package, of which the bond buying is the ECB's contribution, was no long term solution. "We have bought time, nothing more," he said.Stark joined calls for much tougher implementation of EU budget rules laid down in the Stability and Growth Pact."A procedure should be launched automatically against countries that violate the Stability Pact, providing for very early penalties. The process must be de-politicised," he said.Stark accused former German Chancellor Gerhard Schroeder of indirect complicity in the destruction of financial discipline in the EU. In 2003 his government prevented an excessive deficit procedure against Germany and had therefore politically opened the floodgates for other countries, Stark added.(Writing by David Stamp; Editing by Ruth Pitchford)
News posted by
Click here to read more news from
Please follow our blogs



No comments:

Post a Comment