ECB Statement: Jürgen Stark resigns from his position

The statement is here.

Update: from Reuters, German Deputy Finance Minister Joerg Asmussen will replace Juergen Stark on the executive board of the European Central Bank, a source familiar with the plan said Friday.

(Asmussen was heavily featured in the recent VF article on Germany by Michael Lewis.)

55 replies on “ECB Statement: Jürgen Stark resigns from his position”

Another hawk gone. Perhaps reason is winning out over ideaology. Or perhaps Dragi was not prepared to with hawks.

I have just read the Stark was the chief economist at the ECB.
On its own, that should have been enough to get him fired. Of course it is now being dressed up as opposing the bond purchase program.

The ECB got two critical economic phases completely wrong
2008 and again in 2011. On both occasions the ECB had to reverse course.

Hopefully he will be replaced by an economist that has a better handle on reality. One that does not need to get wet through and through before he notices that the weather is ‘dampening’.

Stark would be sitting on an executive board comprising of 4 members from struggling countries from 6 in October. This should signal a board less favoable to monetary tightening. I think he didn’t see himself getting his way for the next while and is throwing his rattle out of the pram. The fact that he has to be replaced by another German is a disgrace, the appiontment should be made on merit.

Fiscal spending is coming – but there is little point in spending the money on the wrong things , it will just result in more monetory mass crossing the financial event horizon.
You just can’t spend money / energy tokens into a economy with no capacity to absorb due to decapitalisation.
Despite what some broken glass Keynesians think……. – the Obama experiment in tax cuts rather then investment should be a interesting example.
What needs to happen on the ground is fairly simple – utilities are not there to make a profit !!!!! shock horror for some I know – the privatisation and decapitalisation of European utilities should be reversed Pronto before further damage is done to the already degraded & decapitalized Physical economy.
This will provide the fiscal vessel for major Industrial projects to begin – must like the post war reconstruction phase.( this is some major failure of industrial policey since we have not even had a small war In Europe for nearly 20 years)
This European effort to save debt by saving is farcical – you cannot just store debt , you either make it more productive or efficient – if it stays put it rots from the inside out.

.. from the Reuters linked by Seamus Coffey


“This is remarkable. 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.”

Looks like Jurgen getting out before the proverbial hit the fan. Greece now 57.04 for two year bonds. Expect an announcement this weekend before markets open Monday.

The ECB is supposed to be independent and its members are supposed to put the interests of Europe before their own country. Unfortunatly there is a ‘gentlemans’ agreement that 4 of the 6 exec board must be from France, Ger, Italy and Spain. This was a dangerous pecedent to set as it was presuming that members are going to favor their own country and trying to balance it out among the big boys.
Well it seems that exec board members are indeed favoring the stance of their own countries and banks in the crisis.
Now the Germans are going to stick in someone from the ministry of finance. Who even decides on his appiontment? Is he supposed to be impartial?
Still better than a ex-banker I suppose.

Remember what happened to Juergen’s namesake, Lord Eddard Stark, Hand to the King of Westeros, when he tried to stand up for what was right?

Indeed, the ECB is a very political entity. The smart thing would be to hire Swiss/British/US types to run it.


Worth popping this in again – good overview of German Viewpoints yesterday in Der Spiegel

Part 1: Merkel Faces Myriad Pitfalls in Bailout Vote
Part 2: How Many Billions of Euros Are at Stake?
Part 3: What Is the German Parliament Afraid of?
Part 4: How Has Germany’s Highest Court Ruled?
Part 5: What Is the Rescue Fund Permitted to Do?
Part 6: How Will the Crisis-Plagued Euro Zone Further Develop?
Part 7: What Is the Position of the FDP, Merkel’s Coalition Partner?
Part 8: Will Europe Soon Have an EU Finance Minister?
Part 9: What Is the Status of the Transaction Tax?
Part 10: Where Do Germany’s Opposition Parties Stand?
Part 11: Will Euro Bonds Be Introduced?
Part 12: Are We Headed Towards a United States of Europe?,1518,785135,00.html


Pls tell us more …

@ David,

Tune in to HBO for “Game of Thrones”, better still, read the book by George R R Martin.

It is just as well we are getting our economy in order because if MV Euro keels over Ireland needs to be well “adjusted” and settled into the life boats.

It would not surprise me if there will be some kind of “money splurge” coming after November , in a desperate 11th hour attempt to keep MV Euro upright under a new Italian Pilot, followed by a massive row.

The hangover from the last Euro “credit orgy” is, IMHO, enough to last Ireland for a lifetime. The ECB equivalent of a “Bunga-Bunga” party may be one which we might be better off skipping altogether.

Looks likely – Germany needs a poltical sacrificial lamb – then they can print.
But they must also deny the Greeks new capital as a Drachma success would be too much for some.

A finance friend in Paris says rumours there are that Greece will (be) declare(d) bankrupt very soon…the weekend even!

hmmm. worse characters to be . At least hes still alive end of DwD… Does this make Frau Dr M Cercei or Lady Stoneheart….

Greek finance minister just issued statement blaming speculators and orchestrated rumors ( per CNBC).
He said they are going to implement July agreement.
As Mandy whathername said…

An issue of little consequence – recall a guy called Weber? — not to be confused with a guy who argued Protestants were more diligent workers than papists.

Axel is teaching monetarism in Chicago and chairs a Swiss bank — but who cares?

Interesting article from Greece…
“EU ire is only natural

A sign of the worsening sentiment toward Greece on the part of our European Union peers is that fact that among those officials and politicians judging the cash-strapped country most harshly are several who just a few months ago appeared to be the greatest champions of a bailout agreement for Greece.

Why have the country’s former “friends” changed their stance so suddenly?

If we think about it at some length and reflect on the events of the past few months, we will see that people like Eurogroup President Jean-Claude Juncker and German Finance Minister Wolfgang Schaeuble have spent a significant amount of their political capital on behalf of Greece. The Greek government, meanwhile, has not upheld its promises to its foreign creditors and is once more asking for a “political” solution to the crisis. When our “friends” see this behavior, they naturally become enraged.

The only way to reverse this trend of anger and incredulity is for the government to at last put into action its promises and decisions, however painful this process may be. , Friday September 9, 2011 (16:20)  

On the plus side it would appear the ‘good boy’ policy has saw us change our position as 2nd worst to 3rd worst and approaching 4th worst. Portugal yields rose 1.135% today as ours actually fell after the review was issued.

Greece 10 year: 20.55%
Portugal 10 year: 11.14%
Ireland 10 year: 8.64%
Italian 10 year: 5.41%
Spain 10 year 5.17%

It seems to me the ‘Let’s bring the deficit to zero immediately’ strategy looks crazier and crazier by the day.

If the end game is a ‘Kick Greece out’. What are peoples thoughts on how European banks will be recapitalized. French/German tax payers? ECB? The latter puts us in a pretty strong position. Our banks being ahead of the recap game, our government gets the ‘one rule for us’ card to play, our exporters get a weaker euro and lower interest rates helping everyone.

According to Lewis in VF, Asmussen has a quotation from Henry Ford, that son of Ballinascarthy, displayed in his office:

“The secret of success is to understand the point of view of others”.

Which others will he bat for I wonder?

So is Greece defaulting this weekend? I don’t think the Stark resignation is sufficient to explain the scale of the shellacking the Euro got today.

Nicky sees the funny side
“16.52 Nicolas Sarkozy has called President Obama’s $447 billion jobs plan “very pertinent”, but added that Europe was unlikely to follow suit.
When asked by AFP if Europe needed a similar plan, Sarkozy said: “No. A recovery plan, we’re not going to be asking Greece to do that.”

It may not be this weekend but it is imminent. A story in the Greek paper today says that they are paying nothing at the moment other than wages and salaries and will not have enough for even this in October.
So if Mr Schauble refuses to open the purse by the end of September then only Allah knows what will happen.

New York Times

In a statement, Kurt Lauk, president of the economic council for the Christian Democrats, the party of Chancellor Angela Merkel of Germany, called the resignation “a dramatic alarm bell for the fact that the E.C.B. must be led back to the right path.”

It was “an unmistakable signal that the E.C.B. must be freed from its role as supporter of incorrect political decisions,” he added.

“The hawks are all gone and now there’s nothing but doves,” said Frank Schäffler, a federal legislator and finance expert for the Free Democrats, the government’s junior coalition partner. “It’s also a clear sign that the internal tensions are much greater than has been publicly known.”

@ John Foody

Think of the effect the collapse of Lehmans had. Then think of Greece being ejected or having to default. Irelands spreads of late, have nothing whatsoever to do with our economic performance. We have been cut some slack because we fit the austerity narrative. We are the poster boys of austerity. The country that does austerity better than anywhere else. Just as we did booms better than anywhere else. Scratch beneath the surface and you will see that this is a load of nonsense. The real story is that nothing has changed, we have preserved the minimum wage, preserved social welfare rates, preserved public sector pay, yet miraculously we are “meeting our MOU targets”? We might be down at the NTMA where there are no bond auctions, likewise over at the ESRI where the export of green jerseys has hit new highs. Pure fantasy. “Money Dr” is telling me that someone on 75.000 has seen reductions in income of about 6000! Well, I just smile and say. “so what!” it is not nearly enough, still means that we are borrowing every single day to pay the salaries.

When Greece goes the markets are going to shine a laser beam on Ireland and they are going to realise that we have done SFA in terms of getting our primary deficit under control. Mr. Chopra will learn the hard way about the gift of the gab.

Thats why the world is in a investment crisis – money is only a foregin policey tool , a weapon of war or at least patronage.
The fact that real world wealth creation has been negative relative to debt production for at least 30 + years is neither here nor there…… until you cannot extract anymore net new credit / oil……………… then the game is up I am afraid

PS you ALWAYS have to borrow to pay the salaries – how else can you pay in a debt based monetory system ?
Its just that the credit game is up – thats all.

It’s the mechanism of Euro break up that’s hard to understand.
Ok – Greece is declared bankrupt – what exactly happens then?
Does anyone know the steps here?
Greece goes bankrupt – it forces through severe austerity – that’s semi-managable.
Then SocGen or equivalent goes belly-up – that’s the hard piece

It’s only recently I’ve realized why EU policy action has been so ineffective. It is one thing for the authority to be spread across a confusing patchwork of nodes…but allied to this is problems for advice to the Heads of State.

They urgently need a top level Financial Stability Secretariat, one which can present options, do scenario planning, give warnings – and at times co-ordinate action. This could be set up tomorrow, as initially at least it would need no powers.

Absent this we have confusion, jingoism and dithering.

My bets are that the CBs buy Gold at the open physical market on a massive scale aiming for the M1 price clearing at least some of the debts to prevent the rest of them going south for the Winter – of course the hard core deflationists want physical cash in their hand and if it turns out like that you do not want to hold euros.

If they want a debt based system these are the only routes in my opinion as we have reached the end of the road.
However banks can always surprise with their game of keeping the balls in the air – they can bankrupt you longer then you can remain rational & solvent.
Europe does not have a major trading defecit even now after all what the banks have done , so to some extent the crisis is artifical – however it has a dramatic leverage crisis – this gold solution is the most obvious as it keeps the banks in the debt business.

A record?
“Two-year bonds were yielding 62 per cent on Friday and 10-year bonds 20.4 per cent, both close to all-time highs, while a 3-year bond maturing in March saw yields hit 129 per cent earlier this week.”

The fact of the matter is Schauble/Merkel replaced Stark (CDU) – formerly Satesek of MF/Bonn during Maastricht/Euro negotiations – by Assmusen (SPD).
This is unusual and a gift to SPD (opposition) in Berlin.

The shellacking the Euro got today is is largely due to the unenthusiastic reception of President Obama’s stimulus proposals. Europe is on the precipice and is likely to slip into a prolonged recession as the internecine political squabbling continues in Washington. Stock markets far and wide are signalling economic turmoil ahead.

Posted a link yesterday to this extraordinary contribution from Trichet. Among the curious parts was the very undiplomatic way he named Germany, France and Italy as having attempted to undermine the Stupidity Pact a few years ago – and contrasted that with German whingeing about the SMP. You have to appreciate that he views (he says this) the SMP as resulting from the sort of behaviour that the Stupidity Pact is there to prevent.

The German position is as bizarre as his. Is it possible that he and Stark have just had it with eachother and this outburst from Trichet was too much for Stark?

If you haven’t watched it, do.

When taken in conjunction with the extraordinary opinion piece by the Dutch Prime Minister and his finance minister in the FT, it is hard to avoid the impression of concerted action in this precipitate decision by Stark. However, the more benign explanation probably lies in the view of German officialdom – of which Stark formed part – that the euro was simply another version of the Deutschmark and their approach to its management could be summed up in the phrase “be reasonable, do it my way!”.

There is litle that Greece can do. It is now up to the governing class in Berlin, and Merkel in particular, to decide whether it might not be better for Germany not to get what it seems to wish for.

@mickey h

No, Stark did most of that. It is a remarkable resignation while markets are open on a Friday with open chatter about Greece confirming that, despite all the political lobbying and sophistry from the banking industry, financial risk exists after all.

From Bloomie:

Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.

The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government’s bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said.

The existence of a “Plan B” underscores German concerns that Greece’s failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country’s progress.

Greece is “on a knife’s edge,” German Finance Minister Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin on Sept. 7, a report in parliament’s bulletin showed yesterday. If the government can’t meet the aid terms, “it’s up to Greece to figure out how to get financing without the euro zone’s help,” he later said in a speech to parliament.

I disagree – I think Berlin has little control over what goes on in Frankfurt – this is a monetory crisis after all – Yes / no ?

It’s all getting very complex. The ECB bond buying story about Stark is just a smokescreen. I’ve heard that Stark was pulled by Germany (think fly half not playing very well – or because you need to make a tactical change – and getting pulled off the field to put it in rugby parlance – which is all anyone I’ve worked with today wants to talk about).

There’s some argument going on over Greece but I don’t know the full story. Some want to stop the next bailout payment being made for their reasons and some want the payment made to protect their interests. I still think Greece is toast and it’s looking more like it every week. It sounded to me, as Angela was speaking last weekend, that she was giving it the kiss of death. Maybe they’re just going to stop one payment to demonstrate what can happen to a society when the banks shut, cashpoints aren’t working, everyone’s out on the streets, etc. Madder and more deadly things have happened in history when powerful people are having a pop at each other.


“Maybe they’re just going to stop one payment to demonstrate what can happen to a society when the banks shut, cashpoints aren’t working, everyone’s out on the streets, etc.”

Pour encourager les autres. A particular favourite with the French elite and French army (WW1).

@ Joseph Ryan

I don’t think you can do a week of Lehmans and then reverse engines,” this is for real” as the Americans like to say.

@ Robert Browne

The closing of the deficit so far is very significant.

‘Irelands spreads of late, have nothing whatsoever to do with our economic performance’
It obviously does.

We can argue about what level public sector pay should be at, but it has been decreased.

Welfare has been hit and will be hit more.

‘Still means that we are borrowing every single day to pay the salaries’
Yes at the moment, it is obvious that we are on track not to be though.

I believe that the doom you’re espousing to be very similar to the ‘the boom will get boomer’ attitude during the boom. i.e. Lazy arguments giving very little consideration.

@Yields or Bust

Blind Biddy [via blackberry from a Polaris somewhere in the Aegean] will take some of that even money – she still has a biscuit tin of Ould IR£50 pound notes – Monkey OK?

Jim Flaherty the Canadian Finance Minister is predicting that Greece will secede from the Euro Zone. The reason stated is that they will be unable to push through with the austerity measures they are expected to implement and the rest of the Euro Zone cannot reach a consensus to relieve their pain.

The fact that Stark resigned shows a lack of solidarity in Berlin as the debate continues as to what actions are feasible politically and economically. The numbers are being crunched and the jury is still out. Stark’s resignation is a wake up call, particularly in Germany where people who fall on their sword on matters of principle are admired.

Central Bank for economy of 500 million people. Seeking new board members to replace existing tenants.

Must have long experience in banking sector and/or politics. Economic and/or accounting skills completely optional. Ability to remain stationary under pressure is preferred. Must be willing to make contradictory demands of bank creditors, and able to ignore requests of political leaders.

Inclination to leak personal opinions to the press is highly desirable, as is willingness to issue brute threats to hapless sovereign governments. Candidates should have a track record of remaining steadfast to unpopular, unhelpful, and insane policies. However, those with track records of switching camp at the last minute will be preferred.

Positions open to adherents of all free market denominations, and graduates of Goldman Sachs.

@David O’Donnell
Good article by Eichengreen.

Perhaps Merkel and Sarko will finally understand that fudge is toxic to balance sheets. They are two usless leaders, lacking both idealism for Europe…and an empirical understanding of Finance

Perhaps the US will use its clout, this good WSJ article makes clear European financial stability is of grave concern for the US:

The problem now is, as Eichengreen so ably says…is that Merkel is probably trying to achieve medium-long term goals…but we’re on the burning platform now, and there is a grave short term threat to financial stability

Since mid August I’ve been saying there’s days left…I think a grand intervention this weekend might still work, I’d be doubtful one would next weekend

@ Joseph Ryan,

“Hopefully he will be replaced by an economist that has a better handle on reality.”

What makes you think that any economist has a handle on reality?

Returning to the source of this thread…..

Just looking at the press release from a ‘technical’ PR perspective… the first thing that strikes you is its brevity. Very short, no real gush about the (highly placed, highly considered) departee suggests someone behind this press release who is angry and doesn’t want to give out any more information than they have to.

What’s really striking in such a short release is that the ‘for personal reasons’ is repeated. Somebody told the PR guy/girl writing this to make sure that was emphasised (and it wasn’t done elegantly – though in fairness, that may have been down to ‘speed to market’ – the need to get it out before someone leaks it).

What I didn’t know was that Stark and JCT have a history going back twenty years. You would normally think long and hard about ending a twenty year relationship…. or you were doing it because you had no choice in the matter. Someone was doing it for you. Also, if you were suffering from the kind of ‘personal reasons’ that required you having to quit your job so suddenly, you wouldn’t be hanging around until possibly the end of the year until a successor has been appointed (though as we all know, the successor was already waiting in the wings).

I don’t know enough about what central banks really do to comment on ‘his outstanding contribution to European unity’. Is that what the role/TOR of the ECB is meant to be? Seems an odd kind of mission for a bank.

The consistent stories in the press this morning about his resignation being triggered by a disagreement over bond buying tells you oodles just by the fact everyone is running with the same story – it’s the story being leaked/briefed to the press and is the smokescreen.

It will be intresting to see where Stark pops up next and how quickly he was able to put his ‘personal reasons’ behind him.

If anyone from the ECB Directorate Communications is reading this, I can provide similar analysis on future press releases for €2,400 per day to ensure you don’t release the kind of drivel that is only going to get the media speculating and calling you liars.

@ John Foody

Indeed, wee can argue amongst ourselves while we have the luxury of borrowing money and passing the bill for a wrecked economy to those who simply will not be able to afford it and who will be morally right in refusing to foot the bill for the greed.

Yesterday, John Corrigan of NTMA was already talking about bailout II.

Morgan Kelly and Ed Walsh want things to be halved. They are on the payroll and pension scheme respectively. They are not some looney private sector schill looking to undermine our public servants. Much more likely, is they realise that it is better to keep a show on the road than to run out of road altogether and end up with chaos. Walsh in particular, is a very conservative character.

In any event things will take their course, are are taking their logical course. Time will reveal that the “strategy” taken by unions and government workers was the worst possible choice for the country and for themselves.

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