A TOP EUROPEAN Central Bank official has publicly discussed the reasons for his surprise resignation, saying he is not satisfied with the direction Europe’s currency union has taken.

Jürgen Stark said in an interview in today’s edition of Germany’s Wirtschaftswoche magazine that the ECB had done its job by keeping inflation under control across the eurozone, which it does through adjusting interest rates.

But he said some governments had tolerated excessive wage costs and unsustainable real estate booms that preceded today’s debt crisis.

Stark is leaving at the end of the year, two-and-a-half years years before the end of his eight-year term on the bank’s six-member executive board. The council runs the bank day-to-day at its Frankfurt headquarters, while interest rate decisions are taken by the broader 23-member government council, on which Stark also sits.

Stark was quoted as saying that “there is a broad theme that serves as the reason for this: that I am not satisfied with the way this currency union has developed.”

Stark said the ECB had done its part by keeping inflation under control but could not be expected to clean up policy mistakes by individual governments that ran up too much debt or let their economies become uncompetitive through high labour costs.

“Don’t overburden the central bank,” he said.

Curbing costs

He said governments should have avoided financial trouble by reining in labour costs. Stark was quoted as saying governments also failed to rein in excessive real estate booms that collapsed and contributed to the eurozone debt crisis. He didn’t mention individual countries but wage costs rose in Greece, hampering the economy and state finances, and Ireland and Spain had debt-fuelled real estate booms that collapsed.

The ECB earlier said Stark was leaving at year-end for personal reasons.

Analysts have said he appears to have left because of opposition to the European Central Bank’s program to buy government bonds. But Stark was not quoted in the interview as mentioning the bond purchase program.

The purchases lower the borrowing costs faced by indebted governments such as Italy and Spain. High borrowing costs are threatening to leave them unable to be able to borrow anew to pay off bonds that are maturing, resulting in a disastrous default that would shake the eurozone and global economy.

The bank and its President Mario Draghi have said the program is limited and only aimed at steering interest rates, and that governments must reform their finances and not wait for a central bank bailout.

Stark repeated his longstanding opposition to calls for the ECB to sharply increase the bond purchases through its power to create new money. He said that would violate the prohibition in the EU treaty on the ECB using its monetary powers to finance governments, although it is a step that the US Federal Reserve has been allowed to take.

Stark dismissed calls by “real or self-styled experts” to use the “big bazooka” of printing money.

“It is a fundamental arrangmenet of a currency union that the monetary financing of state debts through the ECB is not permitted,” he said.