ECB Statement: Jürgen Stark resigns from his position

I for one welcome our new Italian overlords.

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.

.. from the Reuters linked by Seamus Coffey

‘MANFRED NEUMANN, EMERITUS ECONOMICS PROFESSOR AT BONN UNIVERSITY, FORMER THESIS ADVISOR TO BUNDESBANK PRESIDENT JENS WEIDMANN

“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.”

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.

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

@ David,

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

LHE
http://gameofthrones.wikia.com/wiki/Eddard_Stark

Now, all the other stark characters/those that share their points of view get to meet….intersting fates. But, do we really want Roose Bolton in charge of the ECB? Are we Reek?

@Yields
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.

@ Philip II

I dunno….I sort of feel like Tyrion most days.

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…

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.

ekathimerini.com , Friday September 9, 2011 (16:20)  

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?

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.”

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.”

http://www.nytimes.com/2011/09/10/business/global/a-top-ecb-official-to-resign.html?_r=1&ref=global-home

@Robert
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

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

@Eureka
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.

http://www.youtube.com/watch?v=NCIUf8eYPqA

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.

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.

http://insider.thomsonreuters.com/link.html?cn=share&cid=260559&shareToken=MzozNmI0MmFhZC1jYmU0LTRlYWQtYmI2Zi05Y2IxMDY3ZDFlMjI%3D

@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.

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.

@ 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.

In SOLIDARITY with Greece

&

Europe on the Verge of a Political Breakdown
Barry Eichengreen

http://www.project-syndicate.org/commentary/eichengreen34/English

Someone who understands the centrality of TIME when within a crisis. Pragmatism ….

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.

@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:

http://online.wsj.com/article/SB10001424053111904836104576558183451371662.html

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

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.