ECB Rejects Idea Of EU Fund To Bail Out EU Members
So much for a FDIC-like entity (with a limitless Treasury line of credit mind you) being set up in Europe. The ECB's board member Juergen Stark flatly rejected the idea of setting up a monetary fund to bail out troubled EMU member states. I think we all know who these are.
Market News cites Stark from a radio interview given earlier:
"I take exception to the consideration [being given] to granting additional means, even under strict conditions, for an instrument that is not necessary," Stark told German public radio Deutsche Welle. "And it is also not compatible with the rules on which we agreed at the start of the currency union," he stressed.
Greece has made an important step by recognizing the need for budget consolidation, Stark, the ECB's chief economist, said. He acknowledged that Spain, Portugal and Ireland are also not in a good position, be he argued that the problems of those countries "are of a different nature" to those of Greece.
"Especially Ireland has undertaken effective measures to get its public deficit under control," Stark noted. By cutting public sector wages it has increased its credibility, he argued. "I think that is a very important step."
"Once the situation has gradually stabilised we must also gradually unwind these measures. Firstly, this applies to central banks, secondly, this applies to governments," he elaborated. "They must start already this year to consolidate public budgets and must intensify this in 2011," Stark demanded.
It seems the ECB can't wait to see euro-dollar parity, Greece be damned. And they are well on their way: the euro just touched a $1.35 handle.