MARSEILLE, France (MNI) – Departing European Central Bank Executive
Board member Juergen Stark resigned from his post for personal reasons
and has been an unfailingly faithful servant of the bank, ECB President
Jean-Claude Trichet insisted late Friday.

Speaking to the press following the G-7 meeting of central bankers
and finance ministers here — and hours after Stark made public his
intention to quit the ECB — Trichet called his chief economist “a very,
very old and dear friend for me,” noting that he had worked with Stark
for 18 years in a variety of posts.

Trichet was prompted to say something on the subject by a
journalist who noted that Stark was the second departure this year after
then-Bundesbank head Axel Weber resigned in April, foregoing his likely
succession to Trichet at the helm of the ECB.

The ECB president spoke warmly and at length of Stark, but he
seemed to dismiss Weber rather cooly, noting only that the questioner
had “mentioned another resignation which was not a member of the [ECB]
board.”

“Juergen took his decision for personal reasons,” Trichet
continued. “I have thanked him very, very profoundly, I have to say…
for all he has been doing, he has been totally dedicated…I have to say
that I appreciate that he has decided that he will…continue to work
until his successor will be appointed. I have taken note of his
decision, his personal decision for personal reasons…He has always
been perfectly loyal.”

Trichet declined to comment on whether he had tried to convince
Stark to remain, and he refused to address how Stark’s departure would
affect financial markets.

With regard to the G7 gathering, Trichet called it “an important
meeting taking into account the environment and the real economic
environment and also the financial environment as far as the global
economy is concerned.”

Participants were aware of the “challenges” facing growth, of high
fiscal deficits and of the still smoldering sovereign debt crisis, he
said. He repeated his assessment made at the monthly ECB press briefing
Thursday that risks to European growth tilt to the downside, adding that
this “is the reflection of what is observed at the global level.”

Concerning the evolution of the real economy, “there has been from
that standpoint of course news…that [is] clearly demonstrating there
is an element of slowing down which was not expected with this
amplitude,” Trichet conceded.

“So we are experiencing a period which calls for as
much…anchoring of confidence as possible,” he added. “It is what we’re
trying to do. Decisions have to be implemented in time, rapidly,
expeditiously, comprehensively and we are in this mode.”

It is “of extreme importance that all the decisions which have been
taken…the 21 of July be implemented fully, completely comprehensively
and rapidly,” he urged.

On fiscal policy, anything that does not take into account the fact
that more confidence is the best route to more economic growth “would
certainly be an error,” the ECB chief argued.

Trichet reported that he had “explained in detail” to his global
colleagues “what the ECB is doing” with respect to the provision of
liquidity, observing that he “thought it was useful for the G7 to take
fully note of the volumes involved.”

In this context, he said, he had “made the point that we had our
standard measures” in terms of interest rates, but at the same time an
array of non-standard measures, among which “we have this remarkable
concept of full allotment at fixed rate.”

“I think that the members of the G7 were impressed to learn” about
the ECB’s use of full-allotment, fixed-rate liquidity provisions, he
ventured.

More than E1.7 trillion in collateral, after applying haircuts, is
deposited with the ECB, while “what we are supplying is more than E500
billion,” he noted.

“That gives an idea of what stands ready,” Trichet explained. “The
total amount of eligible collateral…is estimated to be on the order of
magnitude of E4.5 trillion.”

Trichet defended as “indisputable” the ECB’s track record with
regard to delivering price stability and promised that the bank “will
continue to deliver.”

“We are…in our domain of responsibility a pillar of stability and
confidence,” he asserted. “One can have confidence in us to preserve the
stability of prices.”

Calling on “all governments to be up to their responsibility,” he
reiterated his characterization of the ECB as a “fiercely independent
institution.”

Trichet said he had “no information” about a German plan or any
other plan to prepare for Greek sovereign default and said that the
dictum that everyone “must do everything to stay ahead of the curve” is
valid “of course for Greece, and for all others.”

EU Economic and Monetary Affairs Commissioner Ollie Rehn, also at
the briefing, said that there was no plan for a Greek default at the EU
level.

However, German weeklies Welt am Sonntag and Der Spiegel both
reported over the weekend that the German government had concluded a
Greek default and Eurozone exit was manageable and that the finance
ministry in Berlin was studying two different default scenarios — one
in which Greece stayed in the Eurozone, the other in which it exited.

Rehn noted that given the “evident slowdown” of the global economy,
the G7 meeting had taken place at a “critical juncture…Our focus
is…to promote financial stability to restore confidence and support
growth.”

“In this context, the European economy is continuing its gradual
and moderate recovery,” he continued. “Short-term indicators point to a
further moderation of growth. And it is for this reason that a concerted
effort…is indeed essential.”

For Europe, he said, this means consistent fiscal consolidation to
shore up confidence. Countries in bailout programs — ie, Greece,
Ireland and Portugal — “have simply no choice and they have no room to
maneuver,” Rehn said. And countries under market pressure must meet
fiscal targets and thus “need to continue or even intensify” efforts.

“Meanwhile, countries that have a better fiscal space can have
their automatic stabilizers work,” he said.

Echoing Trichet, Rehn called for the rapid implementation of the
July 21 decisions by EU leaders, saying it was crucial to restore
confidence.

Asked why policymakers seemed unable to appease doubtful markets,
Rehn observed that global financial markets act in “microseconds,”
whereas “democratic policymaking in the EU moves with a speed of weeks
or months and this sometimes causes confusion…or opens up space for
speculative attacks. Our job is to do our task as quickly and
effectively as possible.”

–Frankfurt bureau tel: +49-69-720-142. Email: dbarwick@marketnews.com

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