Euro bailout just gains time: ECB economist

15th May 2010, Comments 0 comments

The 750-billion-euro rescue package to shore up weak eurozone economies has only bought time, the chief economist of the European Central Bank said Saturday.

The plan put together last weekend by the European Union and International Monetary Fund has "has only bought time, nothing more," Juergen Stark said in comments to appear in Sunday's edition of the Frankfurter Allgemeine Zeitung.

"When the markets go crazy, nobody can predict the consequences.... The politicians have to act as quickly as possible to prevent any possible adverse developments," he added.

While European stock markets and the euro rallied the day following the announcement of the rescue package, they resumed their slide for the rest of the week on concerns that European nations wouldn't be able to take the politically difficult decisions needed to cut their budget deficits.

Stark called for the eurozone's process to sanction nations that surpass the three percent deficit threshold in the Stability Pact to be depoliticised, recalling that Germany was able to escape punishment due to pressure from then-chancellor Gerhard Schroeder.

Stark said "no political pressure" was put on the ECB as eurozone leaders cobbled together the rescue package, and that "our independence wasn't affected."

The ECB announced that for the first time that it would begin to buy the public debt of the 16 nations which use the euro, a move that it fiercely resisted during the global financial crisis.

He called the move "temporary, legitimate only in the worst emergencies, and which should be constantly reevaluated."

© 2010 AFP

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