FRANKFURT Nov 9 European Central Bank
policymaker Juergen Stark warned European governments on
Wednesday against asking the ECB for support in dealing with the
region's sovereign debt crisis, saying this would put the
central bank's independence at risk.
"We are not the lender of last resort (to governments) and I
do not advise European governments to ask the ECB to become
lender of last resort," Stark, a member of the European Central
Bank's Executive Board, told a business conference.
"This will mean that the ECB immediately will lose its
independence," Stark said.
Italy's borrowing costs reached breaking point on Wednesday,
with 10-year bond yields shooting above 7 percent after Italian
Prime Minister Silvio Berlusconi's promise to resign -- a level
that is widely deemed unsustainable and that forced Portugal and
Ireland to seek EU-IMF bailouts.
Political leaders have raised pressure on the ECB to step up
its support for debt-strained euro zone countries, such as Italy
and Spain, saying the ECB is the only effective bulwark against
Stark said the ECB backstopping would not solve structural
problems in such countries, adding that such measures would more
likely lead to moral hazard.
"We will not resolve the structural problems these countries
are facing, or have been facing for quite some time," Stark
"From my personal perspective, and I think I speak on behalf
of my colleagues on the Governing Council, we will not ask and
we will refuse to have an extension of the mandate for the ECB
to become lender of last resort to governments," Stark said.
Traders said, the ECB intervened to buy Italian bonds in
large amounts on Wednesday.
The ECB more than doubled its purchases of government bonds
in the first week of Mario Draghi's presidency, ECB data showed
on Monday, even though Draghi described the programme as
"limited" in his first news conference last week, offering no
commitment to scaling up the bank's purchases.
The ECB has, however, stopped short of the full-blown
quantitative easing policies pursued by the U.S. Federal Reserve
and the Bank of England.
"Exactly this is the reason why the ECB is so respected: it
does not have the mandate the Federal Reserve does. We have a
primary goal, we have a clear cut mandate, one objective ... to
deliver price stability over the medium term," Stark said.
Stark opposes the ECB's government bond purchases and will
resign by the end of the year. Sources said the ECB's decision
to reactivate is bond buying programme in August to start buying
Italian and Spanish bonds led to the decision.