Bloomberg News

Stark Says Economy May Not Grow at All in Fourth Quarter

November 07, 2011

(Updates with Stark comments from second paragraph.)

Nov. 4 (Bloomberg) -- European Central Bank Executive Board member Juergen Stark said the euro-area economy may not grow at all in the final three months of the year.

“Possibly we will see, and I say this with all caution, a red zero in the fourth quarter,” Stark said in a speech in Frankfurt today. Growth will be “very weak” going into 2012 and “there are consequences for price and wage developments,” he said. Stark also said he assumes the ECB will end its bond purchases “as soon as possible” as they set the wrong incentives.

The ECB unexpectedly cut its benchmark interest rate yesterday by a quarter point to 1.25 percent, with President Mario Draghi saying the economy is heading toward a “mild recession.” At the same time he ruled out significantly ramping up bond purchases to reduce government borrowing costs. The ECB’s decision to resume buying government bonds in August prompted Stark’s resignation in September. He will step down at the end of the year.

Stark said today he is “no fan” of the purchases.

He said yesterday’s rate cut was unanimous and does not represent “changes in our strategy.” It was based on the deteriorating economic outlook, he said, adding: “we have to reckon with one or the other nasty surprise.”

“As is usual, the suggestion to change monetary policy came from the Executive Board member who is responsible for the macroeconomics department,” Stark said. “In other words it came from me.”

--With assistance from Gabi Thesing in Frankfurt. Editors: Matthew Brockett, Simone Meier

To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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