LUCERNE, Switzerland The euro zone debt crisis can only be solved by member states getting their budgets under control, not by relying on the European Central Bank's extra liquidity measures or bigger bailout packages, ECB policymaker Juergen Stark said on Tuesday.
"The crisis of state finances can only be solved with far-reaching measures to consolidate government budgets," Stark, who will step down from the bank's six-strong Executive Board at the end of the year, said in a text of a speech prepared for a conference in Lucerne, Switzerland.
"Permanently continuing the measures of the ECB cannot solve the crisis," he said.
"For this, the trust of banks amongst themselves must be rebuilt, which can only be achieved by restructuring and recapitalizing the banking system."
Stark also dismissed any speculation about the break-up of the euro. "Does the debt crisis endanger the stability or even the existence of the euro?" he asked rhetorically. "This I answer with a clear no," he said.
Stark said Greece had lost a year in reforming state finances by focusing its efforts on securing private sector participation in its debt restructuring.
"Greece concentrated its capacities on figuring out how to make such a private sector participation work, how would a debt cut work, with what consequences," he told the conference.
"And nothing was done any more to consolidate the budget and to undertake structural reforms. And that's why we are in this very desperate situation."
The ECB has so far resisted growing political pressure to step up its support for debt-strained euro zone states like Italy or Spain and new ECB President Mario Draghi underlined in his first news conference last week that the ECB would not become the lender of last resort for governments.
"The ECB may not finance states. Whoever assumes that the ECB could be pressured into this -- I don't think so," Stark said during a panel discussion at the conference on Tuesday. "I don't think the ECB will ever cede to such pressure."
Many analysts see ramping up ECB buying of euro zone government bonds, and the firepower it could unleash, as the only way to steady markets unnerved by the deepening debt crisis, which is now focusing on Italy's massive debt.
Stark however has fiercely opposed the bond buying program and sources have said that was the reason for his decision to quit the ECB early this year.
On Tuesday he said expanding the European rescue fund would weaken incentives for governments to implement the necessary reforms, and only governments could end the crisis.
"The responsibility for solving the financial crisis lies with the European governments," Stark said, adding that the ECB cannot take over this responsibility.
He also said inflation expectations in the common currency area were well-anchored and in line with the ECB's target of just below 2 percent.