Friday, 9 September 2011

Germany's top representative on the European Central Bank resigned in an apparent protest of the bank's recent interventions in euro-zone debt markets

20:17 |

Germany's top representative on the European Central Bank resigned in an apparent protest of the bank's recent interventions in euro-zone debt markets, dealing a severe blow to an institution struggling to retain its credibility amid the region's worsening debt crisis.

Jürgen Stark is stepping down "for personal reasons," the ECB said in a statement. ECB President Jean-Claude Trichet "wholeheartedly" thanked Mr. Stark for his tenure at the ECB, the bank said.


European Central Bank's Executive Board member Jürgen Stark.

Mr. Stark, one of the ECB's most outspoken anti-inflation "hawks," had opposed the ECB's decision last month to reactivate its government bond purchase program, as did the head of Germany's central bank, Jens Weidmann. The ECB has purchased €50 billion ($69 billion) in government bonds since reactivating the program.

Mr. Stark's departure comes as a surprise. His term doesn't expire for nearly three more years. As head of the ECB's economics division at the ECB's Frankfurt-based executive board, Mr. Stark holds considerable sway over the economic analysis behind the ECB's interest-rate decisions.

The news sent the euro tumbling to $1.3697, its lowest level since February, and ensured U.S. stocks got off to a weak start. The Dow Jones Industrial Average was down more than 300 points in interday trading, while Germany's DAX ended the day down 4% to 5189.93

Mr. Starks' resignation comes at a dicey time for the ECB. Mr. Trichet's eight-year term ends at the end of October. He will be succeeded by Mario Draghi, who currently heads the Bank of Italy.

Unless Mr. Stark is replaced by another German, his departure leaves the prospect of the ECB having three Italians on the 23-member governing council, and only one German.

Germany's government may nominate its deputy finance minister, Joerg Asmussen, to replace Mr. Stark on the ECB's executive board, according to one person familiar with the matter.

Mr. Stark is the second top German official at the ECB to step down this year. Former Bundesbank President Axel Weber resigned in April. Mr. Weber, who had been seen as a front-runner to succeed Mr. Trichet, later cited his opposition the the ECB's bond purchases as a factor in his decision to not seek the presidency.

German politicians have denounced the ECB's decision to purchase Italian and Spanish bonds during the past month, though the decision was praised in other parts of Europe, and in the financial markets, as having prevented a Lehman-like collapse in financial markets.

German President Christian Wulff, whose position is largely ceremonial, has called the ECB's bond purchases "politically and legally questionable." The head of German's center-left SPD party, Sigmar Gabriel, has also denounced the move.

At his monthly press conference Thursday, Mr. Trichet blasted his German critics, saying the ECB has kept inflation lower over its 12-plus years of existence than at any time in Germany over the past 50 years.

"I would very much like to hear the congratulations for an institution that has delivered price stability in Germany," Mr. Trichet said.

Germany's finance ministry declined to comment on who would succeed Mr. Stark. But it said Finance Minister Wolfgang Schaeuble will discuss Mr. Stark's resignation at a press conference in Marseille on Friday evening.

Mr. Stark's departure won't change the "fundamental direction" of the ECB, which is "clearly set in the EU treaty," Ewald Nowotny, an ECB Governing Council member and head of Austria's central bank, said in a statement Friday. Still, Austria's central bank regrets Stark's departure, the statement said.

Mr. Stark will leave once a successor is appointed, which will be by the end of the year, according to the bank's appointment procedure, the ECB said.

Mr. Asmussen, a member of Germany's opposition SPD party, became deputy finance minister in 2008 and was able to stay on in the post even after his party left government after the 2009 election.

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