ECB in 'panic', say former chief economist Juergen Stark

The European Central Bank is in "panic" over the eurozone crisis and acting outside its mandate with its new bond-buying plans, the bank's former chief economist said in comments published Saturday. 

"The break came in 2010. Until then everything went well," Juergen Stark, the German who resigned from the ECB in late 2011 after criticising its earlier round of buying up of sovereign debt, told Austrian daily Die Presse in an interview.

"Then the ECB began to take on a new role, to fall into panic. It gave in to outside pressure ... pressure from outside Europe."

Mr Stark said the ECB's new plan to buy up unlimited amounts of eurozone states' bonds, announced on September 6, on the secondary market to bring down their borrowing rates was misguided.

"Together with other central banks, the ECB is flooding the market, posing the question not only about how the ECB will get its money back, but also how the excess liquidity created can be absorbed globally," Mr Stark said.

"It can't be solved by pressing a button. If the global economy stabilises, the potential for inflation has grown enormously."

Read more: http://www.telegraph.co.uk/finance/financialcrisis/9560102/ECB-in-panic-say-former-chief-economist-Juergen-Stark.html