–Adds Comments On ECB’s Limited Role,Promising New EMU Leaders

BERLIN (MNI) – European Central Bank Executive Board member Juergen
Stark said Thursday it is too early yet to warn about an all-out
recession in the Eurozone.

“We expect an economic weakening in the fourth quarter which could
continue into the year 2012,” Stark told reporters on the sidelines of a
conference here.

“But it is really too early to talk seriously about dangers” of an
all-out recession, he said.

In his speech here, Stark noted that the Eurozone’s economic
fundamentals do not argue for a prolonged phase of weakness, “under the
condition that we get the debt crisis under control soon.”

Indeed, the fundamentals of the Eurozone are currently better than
those of most other major economies, he noted.

Stark, the ECB’s chief economist, urged the highly indebted
peripheral Eurozone countries to undertake serious consolidation and
structural reform measures. “There won’t be any permanent aid coming
from anywhere,” he said.

If those measures are not implemented soon there could be a
“massive political crisis” in the peripheral countries, Stark warned,
again stressing that the ECB will not tolerate higher inflation to ease
governments’ debt woes.

Speaking at a panel discussion here, the ECB board member
acknowledged that the outcome of the debt crisis is “relatively
uncertain.”

Turning to Germany, Stark said he does not expect a recession in
the Eurozone’s largest economy. However, there will be a “marked
weakening” of growth in Germany in 2012, he said.

In another speech later this evening, Stark returned to the issue
of financing governments and made clear that the ECB had no intention of
becoming “the lender of last resort” for Eurozone waywards.

“It is not our job to finance states,” he declared. “We won’t allow
any monetarization of public debt.”

Stark ventured into the political arena to encourage countries with
financial woes to seek the expertise and guidance of non-political
leaders by remarking that the prospect that Greece could be governed by
a former central banker and Italy by a former European commissioner
gives “reason for hope that the crisis of confidence can be overcome.”

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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