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"We will safeguard our financial independence. We will be transparent and accountable for our actions. Most importantly, we will remain faithful to our mandate and provide an anchor of confidence and stability in difficult times."
- Jurgen Stark articulating the ECB’s priorities at a speech in Luxembourg last year
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When a country such as Greece is slipping headlong into a vortex of ballooning debt and budget deficit, it takes a rare policymaker to decline a helping hand. But Jurgen Stark, Member of the European Central Bank’s (ECB) executive board, is a different breed. True to his brand of moderate policy-making, he has refused assistance until Greece gets its act together.
Stark, arguably, has been the voice of reason in the cacophony of diverse, and often unprecedented, policy-making throughout this global recession. He has emphasized a disciplined approach and a singular focus on controlling inflation. It is no wonder that when governments all over took the quickest and shortest routes possible out of the recession, the ECB’s cautious approach was criticized as a slow response.
Despite the criticism, though, Stark has not wavered in his belief that monetary excesses and massive bailouts are not the most appropriate methods of combating an economic crisis. “Weak banks should be allowed to disappear from the market,” he remarked in a punitive tone to the Sueddeutsche Zeitung, a German newspaper. Stark is also convinced that if restraint had been exercised earlier, the world could have avoided the worst recession since the Great Depression.
The flat denial to Greece is typical of the central banker’s conservative and forthright approach. A former vice-president of Germany’s Bundesbank, Stark has been instrumental in effecting the ECB’s policy of “gradualism” to combat the recession. Much like Stark’s solid and steady personality, gradualism has centered around stable but non-aggressive measures. All through the crisis, the ECB trimmed rates at a consistently measured pace because it believed that frequent steep cuts would knock out confidence.
Working closely with ECB President Jean-Claude Trichet, the German-born Stark has been focusing on maintaining price stability. The ECB slashed rates to an all-time low of 1% in early 2009. But it was only until mid-2009 that a unanimous decision was taken to restore confidence in banks with an infusion of $637 billion into the Euro-zone economy. The objective was to boost the economy and unclog credit channels. But Stark added a rider following the decision: “It is obvious that we cannot maintain the current degree of enhanced credit support indefinitely,” he had told IB Times.
Stark’s austere outlook might be rooted in his childhood, a time when Germany was struggling to build a stable economy from the embers of the Second World War. As Stark reveals to the Financial Times (FT), the milieu instilled in him “a sense of being modest. This is an important point: to know what is do-able, not to allow excesses”. His stoic attitude is clearly etched in the European Union’s Stability and Growth Pact, an accord he was instrumental in framing. The Pact, a fiscal policy handbook for Euro-zone members, contains a ‘no bailout’ clause, which Stark strongly advocates.
Authoring the Pact was one of the highlights of Stark’s career. It also enhanced his reputation as a ‘fiscal hawk.’ Stark has been described as a quiet, hardworking individual with a controlled air about him. “He is not an extrovert. Maybe, he talks less than other people. But knowing him, you know how he is thinking,” says Johannes Ludewig, a former colleague, to the FT.
Stark’s single-minded reiterations on the importance of restraint have not gone unchallenged. Contrary voices have questioned Stark’s wisdom in following economic policies wrought well before the recession. Gustav Horn of the Hans-Böckler research foundation points out to the FT: “Even in monetary policy, you need discretion. It is about judgment.”
Stark is the German word for ‘strong.’ True to his name, Jurgen Stark has stood firm in his beliefs and convictions through various economic problems, including the Asian financial crisis. And his stolid presence might be felt in the future too. Trichet’s eight-year mandate comes to an end in 2011. It is widely believed that Stark and Axel Weber, President of the Bundesbank, are strong contenders for Trichet’s replacement. If the 61-year old wins, Europe’s economy will certainly be in able hands.
Image Credit: The European Central Bank under a Creative Commons license
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