Tuesday, December 20, 2011

Divisions in eurozone over ECB bond-buying: Buying would indicate "end of Euro"

The eurozone was facing fresh splits today after one of the European Central Bank’s most senior figures said the bank should not be used to fund national debts and that if it was forced to, it would mean the end of the single currency.

Executive board member Juergen Stark, who announced his surprise resignation from the ECB earlier this year, said disagreements over the central bank’s bond-buying programme was behind his decision.

In an interview with German weekly WirtschaftsWoche to be published on Tuesday, Mr Stark said he did not agree with the way the euro crisis has been handled. He particularly criticised the use of monetary measures, or the wholesale purchase of sovereign bonds by the bank, to contain the crisis.

The statement is in contrast to what the Bank said in September to explain his surprise resignation, which was put down to “personal reasons”.

In the interview he said: “It is the fundamental arrangement of this currency union that it does not allow the monetary funding of sovereign debt by the ECB. Without these rules, there would be no economic and currency union.” Read More