ONE OF THE European Central Bank’s top officials is to step down well before the end of his term – removing a key voice for higher interest rates, and raising questions about the bank’s course during Europe’s debt crisis.
The departure of Jürgen Stark, the bank’s chief ecconomist, comes amid controversy over the central bank’s programme to purchase government bonds in the open market, a risky practice that has provoked strong criticism in Stark’s native Germany.
The ECB said in a statement only that Stark, 63, was leaving “for personal reasons.” His term was not due to end until May 2014 – but analysts suggested his departure was linked to policy disagreements.
“Ongoing controversies on the ECB’s bond purchasing programme seem to have triggered Stark’s resignation,” said ING economist Carsten Brzeski.
European stock markets and the euro fell sharply on the news as investors worried about the leadership at the eurozone’s top monetary authority.
The ECB is playing a key and controversial role in fighting the market turmoil in Europe, which is generated by fears over too much government debt in some countries.
Last month the bank resumed its emergency programme to buy the government bonds of troubled states – and has slowly begun to increase its intervention in the markets in recent weeks.
That has pushed down the market borrowing rates in Spain and Italy, helping to keep them from financial disaster, but has also stirred opposition among some conservative German members of parliament and academic economists.
Critics say the practice means the bank is using its monetary powers to support, if only indirectly, financially shaky government budgets.
Stark, who sits on the six-member executive board of the ECB, was quoted earlier on Friday as saying that the bond purchases had to be temporary.
Brzeski noted Stark was the ECB’s “most hawkish” member — an advocate of higher interest rates to keep prices from rising — and that his departure could trigger further speculation about possible cuts in the ECB’s main interest rate.
The bank indicated on Thursday that its benchmark refinancing rate was likely on hold at 1.5 per cent for some time, after two increases in April and July, but some economists think a turn for the worse in the debt crisis could force a cut by the end of the year or early next year.
Responsible for economics and statistics, Stark has considerable influence over the forecasts that support ECB policy decisions. He was also formerly an official with Germany’s anti-inflation Bundesbank.
Stark’s departure is the second unexpected personnel change at the ECB this year, after governing council member and Bundesbank head Axel Weber – then regarded as front runner to succeed Jean-Claude Trichet, dropped out of the running and did not seek another term.
Instead, Bank of Italy head Mario Draghi was chosen by eurozone leaders to replace Trichet from November 1.
It’s not clear what Stark’s departure would mean for the bank’s course until his replacement is clear. As the biggest country in the eurozone, Germany would be in a strong position to demand a German replace him so as to keep at least one seat on the influential body.
Der Spiegel said on its website that a possible replacement was deputy finance minister Jörg Asmussen, who has played a key role in crafting agreement on bailouts for heavily indebted Greece, Ireland and Portugal.
The ECB said Stark would remain in his job until a successor is appointed by the end of the year.
Additional reporting by Gavan Reilly
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