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FRANKFURT (MNI) – There are no inflationary dangers in the Eurozone
looking out over the next two years, European Central Bank Executive
Board member Juergen Stark said in a magazine interview published
Wednesday.

Furthermore, monetary analysis confirms this view over the
medium-term, and long-term inflation expectations remain “in line with
price stability,” the central banker told German weekly Die Zeit.

Currently, there is a crisis in public finances, not in the euro
itself, Stark asserted.

The central bank’s decision to purchase government bonds is
temporary and not aimed at artificially reducing risk premia, Stark
emphasized.

“Last week we published our new staff projections,” and over the
next two years “there are no inflationary dangers,” he assured. “Our
monetary analysis confirms this also over the medium term,” he added.

Given flat monetary and credit growth, Stark underlined that “the
long-term inflationary expectations are in line with price stability.”

It “was not our goal to artificially reduce risk premia” when
implementing the bond buying program, Stark insisted.

“The point is not to aid member states with their financing,” he
said, reminding that this would violate the bank’s mandate.

“We are very aware of the fact that the border between monetary and
fiscal policy cannot be crossed and that we must not set incentives” for
governments to misbehave, he said.

“The currency union is and remains a community of stability,” he
said. “It will not become a transfer union.”

“What we are experiencing at the moment is not a currency crisis,
but rather a crisis of public finances,” he said.

“There is no fundamental change in the conceptual design of the
currency union,” he underlined. “The independence of the ECB and its
mandate to ensure price stability are decisive pillars,” he said.

Stark rejected the “purely mechanistic observation” that the
reduction of public deficits leads to less growth, he said.

“To delay consolidation would undermine trust in the solidity of
public finances and with that also limit the chances of growth,” he
argued.

–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com

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