Politics played a role in Stark’s exit from ECB

Political reasons played an important role in his decision to leave his job at the European Central Bank, outgoing ECB chief economist Jürgen Stark told the Wirtschaftswoche magazine.

Politics played a role in Stark's exit from ECB
Photo: DPA

This is the first time Stark has made such an admission, the magazine said. Previously he said he was leaving the bank for “personal reasons.” Stark will leave the bank at the end of the year.

Stark said a big reason behind his decision to leave the bank is that he “was not happy with the way the currency union had developed.” He said politicians did not realize the seriousness of the euro problems in time, saying they “didn’t see it as an acute problem” when it already was. He said in the early days of the troubles, eurozone countries possessed policy instruments to fix the problems, but the depth of the troubles was not recognized.

Stark defended his consistent opposition to allowing the ECB to buy up state bonds. “This is not a solution,” he said, “even though around 90 percent of the self-named or actual experts around the world are calling for this.”

Those who point to the Federal Reserve in the United States as an example of how a central bank can buy up government debt do not understand the institutional framework in place in Europe, he said.

“A fundamental principle of this currency union is that the monetary financing of state debt via the ECB is not allowed,” Stark told the magazine. “Without this rule, there would not have been an economic and currency union.” Since May, 2010, the ECB has purchased about €210 billion in state bonds. Such purchases are limited and cannot be expanded, Stark said.

Still, the chief economist is pleased with the ECB’s work. “The ECB has completely fulfilled its job of maintaining price stability,” he told the magazine. “It also out pointed out in a timely manner troubled developments within the eurozone,” he said.

But Stark is unhappy with the developments in Greece. He said since Greece made some efforts at getting its debt under control, its reform tempo has slowed and efforts have been whittled down. Things are not better under the new Greek government, he added.

“Greece is making it too easy when it says that the country is suffering from a systematic crisis in Europe. You can’t put the guilt on someone else when you haven’t done your own homework,” Stark said.

The Local/mw

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German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.