Juergen Stark of the ECB spoke at the IIEA today and they have posted a video on their website:
http://www.iiea.com/events/crafting-monetary-policy-for-stability-and-convergence
The summary of the proceedings, from the IIEA website, is:
‘Dr Stark delivered a keynote address to a packed house in the Institute on the theme of Economic Adjustment in a Monetary Union. Commending Ireland as a “role model” for other countries embarking on programmes of austerity, he nonetheless acknowledged that “strong headwinds” in the global economy threaten to blow its recovery off course. “The sovereign debt crisis has re-intensified and is now spreading over to other countries including so-called core countries.”
Dr Stark delivered a keynote address to a packed house in the Institute on the theme of Economic Adjustment in a Monetary Union. Commending Ireland as a “role model” for other countries embarking on programmes of austerity, he nonetheless acknowledged that “strong headwinds” in the global economy threaten to blow its recovery off course. “The sovereign debt crisis has re-intensified and is now spreading over to other countries including so-called core countries.”
He went on to argue that the crisis was not confined to Europe and that it was in large part a crisis of confidence. It is important that advanced economies do not talk themselves into a second recession. That said, many of these economies urgently need to pursue fiscal consolidation or else their debts will sooner or later become unsustainable. Dangerous fiscal positions are often compounded by structural weaknesses and these too must be addressed. The fiscal outlook for many states threatens the broader economic situation, as do persistent macro imbalances.
Dr Stark recalled that there has historically been little urgency attached to the problem of heterogeniety across Eurozone economies by European leaders. Rates of inflation for example varied widely across Europe in the years leading up to the financial crisis. Risk was inappropriately priced up to 2007 and there are governments that have never properly adjusted to the demands of monetary union, which were well understood by its architects. As far back as 1998, finance ministers and heads of state and government agreed that economic and monetary union should never be used as a justification for financial transfers.
Speaking to journalists after the event, Dr Stark said that “Eurobonds, even if they’re called ‘stability bonds’, won’t solve the sovereign debt crisis in Europe, because they don’t tackle the structural problems some countries are facing.” They “seem to be feasible at a later stage, but only after the transfer of sovereignty.”’
Take a look. I promise to let you know what I thought of his presentation when France hits AA+. If this is avoided without a reverse tap (in Italy or somewhere!) from the ECB, I will devote the rest of my life to writing, on bended knees, the definitive history of the Bundesbank.