Reuters/Frankfurt
European Central Bank Executive Board member Juergen Stark is resigning his post in what sources say is a protest against its policy of buying bonds to help troubled eurozone debtor states.
Stark, one of the most experienced policymakers at the ECB
The news highlights the size of the split at the ECB over the bond-buy plan and the extreme tension between its policymakers, who have been at the centre of the policy response to the eurozone debt crisis.
Stark is one of the most experienced policymakers at the ECB, a young institution whose president, Jean-Claude Trichet, retires next month and hands over to Italian Mario Draghi, whose country is embroiled in the eurozone debt crisis.
Stark and Bundesbank chief Jens Weidmann both opposed the ECB’s decision last month to re-activate its bond plan following a 19-week pause. The bank decided to buy the bonds of Italy and Spain after they came closer to succumbing to the debt crisis.
The ECB has faced sharp criticism in Germany for buying bonds – a move many here see as taking the bank into the fiscal arena and threatening its core role of fighting inflation.
The ECB confirmed Stark would be the second German policymaker to leave the bank this year after Bundesbank chief Axel Weber quit in February – a move also spurred by his opposition to the bond programme.
“This is remarkable,” said Manfred Neumann, emeritus economics professor at Bonn University and former thesis adviser to Bundesbank President Jens Weidmann.
“Stark held the same view of the bond-buying as Axel Weber and the current Bundesbank president. It is a position that all the Germans have. This is a sign of huge problems within the central bank. The Germans clearly have a problem with the direction of the ECB.”
The ECB said Stark had resigned for personal reasons but sources said it was related to the bond-buying that has rescued Italy and Spain from crisis over the past month. The euro, European and US stock markets fell in response.
Bond yield spreads, though, for Europe’s struggling periphery were only slightly higher.
German Deputy Finance Minister Joerg Asmussen will replace Stark on the ECB’s six-member Executive Board, a source familiar with the plan said.
“Asmussen will be more pragmatic,” said Bert Ruerup, former head of the ‘wisemen’ council of economic advisers to the German government.
“I don’t think that he will fight as openly. This may calm down when the EFSF gets the power to buy bonds. I’m surprised at the timing, why Stark would step down now,” he added.
Asmussen has been a key figure in Germany’s policy response to the eurozone debt crisis.
News of Stark’s departure came just a day after Trichet delivered an impassioned defence of the ECB’s record and its handling of the euro zone debt crisis.
Trichet’s emotional response to a question about calls from some in Germany for a return to the Deutschmark suggested tempers were running high at the bank.
Austrian ECB policymaker Ewald Nowotny said yesterday that his country shared Stark’s commitment to combating inflation and that the resignation would not change the ECB’s mandate.
Nowotny, Austria’ National Bank Governor, called Stark a champion of price stability, “a stance that the Austrian National Bank always represents as well in the Eurosystem”.
German politicians immediately leapt on news of Stark’s resignation to press for a change of direction at the ECB.
The ECB has been concerned that by buying the sovereign bonds of Italy – the eurozone’s third largest economy – it is only encouraging the Italian government to slacken efforts to shore up its finances, and has been irritated by flip-flopping in Rome.
However, Trichet said after the bank’s policy meeting on Thursday that the latest decisions by the Italian government meant that “we have confirmation that there is implementation of what was said in terms of overall results. And that, of course, is of extreme importance.”
Stark, 63, has been a member of the ECB’s six-member Executive Board – whose members form the Governing Council along with the 17 eurozone national bank chiefs – since June 2006. His term was due to run until May 31, 2014.
In addition to Trichet and Stark, Lorenzo Bini Smaghi, another heavyweight ECB board member, is expected to leave the bank this year.
