FRANKFURT (MNI) – The European Central Bank has always had things
under control and the recent decline in liquidity went “very well,” ECB
Executive Board member Juergen Stark said Friday.

In remarks to the media on the margins of the “ECB And Its Watchers
Conference,” Stark said “where we stand now is that it seems that the
worst is over.” He noted that “the markets have calmed down” and that
most recently “the decline in liquidity was in our view well managed.”

Moreover, “we have seen only a slight increase in the Eonia rates,”
which will not have an impact on the economy, and “this is an important
signal for confidence.”

Referring to market developments that occurred in rapid succession,
most notable among them the maturity of the one-year LTRO on July 1,
Stark affirmed that “all this went very well.”

Any rumors to the contrary “were unfounded, really unfounded,” he

Although the 6-day operation conducted during this period did not
yield the result expected by many, this only shows it is important “not
to have a look at a single operation” when reaching a conclusion, he

All in all, “what we saw last week is, in the end, a decision by
the market, so banks don’t need the additional liquidity to the extent
it was [available],” Stark said.

Stark said bank stress tests would be “a very serious exercise,”
and “we should not give too much weight to those voices who always ask
for more and more and more.”

He continued: “When it comes to the assumptions or the scenarios
…as far as I know, this is really a serious test” based on
“assumptions that will make this stress test credible.”

Asked if the tests might reveal a bank in serious trouble, he
replied, “we have to wait for the results of the stress tests. There is
no reason at this stage to speculate, this creates confusion. So this
has to be carried out and we will know the results on July 23rd.”

As for real economic developments, “taking into account the most
recent indicators…all this is confirming the recovery will continue,”
he said. “Maybe it is premature to say it is self-sustaining,” he added,
though he noted that European recoveries “always follow a similar
pattern” in which export growth is followed by increased investment and
ultimately more robust private consumption.

The IMF’s assessment “has not caught up,” he said, and it is
“underestimating the strength of the recovery in the euro area.”

“Maybe on balance the IMF is right for the world economy,” Stark
allowed, but the weight it assigns to the different regions is not
correct in Europe’s case, he asserted.

Stark lauded European politicians for having finally understood
that “the current crisis is a wake-up call, that they have to change
their behavior, that they have to change their attitude and their
policies. And this is exactly what we are seeing.”

Efforts by Greece, Spain and Portugal among others are “positive
signs,” and the welcome developments are not limited to fiscal
consolidation but also include the will to embark on structural reforms,
he said.

In an apparent reference to the U.S., Stark said, “I don’t see this
commitment in other leading economies,” where there is instead “an
ongoing fiscal stimulus which in the end will turn out to be

–Frankfurt bureau tel.: +49-69-720142. Email:

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