–But He Sees No Consensus For Such Integration Now

VIENNA (MNI) – Shared liability of debt issues through the use of
Eurobonds can be reconsidered if there is much more political
integration in Europe, European Central Bank Executive Board member
Juergen Stark said Thursday.

However, he said he didn’t see the political will right now for the
level of integration, basically pooled sovereignty, that would be
required.

“If we achieve more political integration then we can think again
about issuing Eurobonds,” Stark, the ECB’s chief economist, who
announced last week he was resigning.

What is needed is nothing less than “an institution which has the
possibility to intervene on a national level, To give a signal if a
country is moving in the wrong direction,” he said. “But I am not sure
whether there would be a consensus now.”

Stark strongly dismissed the idea that Greece would have to default
on all or part of its debt, suggesting that the country could find the
money it needed by tapping its state enterprises and its wealthiest
citizens.

“As long as there are no signals that the debts cannot be paid
there will not be a haircut,” he said. “Greece is a rich country with
many millionaires and a lot of state-owned companies. Let’s start with
privatizations as suggested by the Greek prime minister.”

As part of its bailout agreement with the EU and International
Monetary Fund, Greece is meant to sell off state assets and to generate
E5 billion by the end of this year. However, European and IMF officials
have grown increasingly frustrated with Greece’s apparent inability or
unwillingness to get the privatization program off the ground.

Stark hit out at the rating agencies, saying that they are “playing
a part” in the current financial market “exaggerations.” He said they
“have not fulfilled their task before the crisis. They knew where the
risks were. They have acted procyclically then just as they are acting
procyclically now.”

Stark also said that a European rating agency to counter the
virtual monopoly of the big three might be a good did. “Competition is
always good, and it might help,” he said.

But the bigger question is “what do rating agencies really know,”
he said. He noted that when negotiations were taking place with Greece
for a bailout program, the agencies downgrade the country’s sovereign
debt “before the program was agreed on just because they thought even if
there was a program it might have negative short-term effects — I don’t
think that a European Rating Agency would help here.”

He added: “In the ECB we said we are not looking at ratings, since
Greece has the trust of the ECB and the member states, which is worth
more than a rating.”

Stark also took a thinly-veiled swipe at the U.S. and others who
have been urging Europe to act quickly to solve the debt crisis.

“There are several countries wanting to give advice to Europeans,
which is okay, but they should get their houses in order first,” he
said.

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