There will be no bail-out of Greece by other European Union countries, a top European Central Bank official has said. “The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece,” Jürgen Stark, an executive board member, told Italian newspaper Il Sole 24 Ore.
His tough words have caught the eye of nervous financial markets. But they should not have been too much of a surprise. Mr Stark is a hardline conservative, even by ECB standards. He helped write the EU stability and growth pact, which sets fiscal rules for eurozone members, and believes strongly that the eurozone’s “no bail out” clause should not be circumvented. So he could hardly have been expected to suggest that other eurozone countries - that is, Germany – would soon come riding to Greece’s rescue.
But Mr Stark’s comments fit with Europe’s policy of “constructive ambiguity” towards Athens – by which policymakers are deliberately being vague about what would actually happen if the worst came to pass. Pressure is thus being maintained on Greece to make good its pledges of fiscal discipline.
One thing is clear. If there were a bailout of Greece, it would not be an ECB bailout. The central bank would have no authority to launch such an operation. Instead emergency help would have to be agreed by politicians – although the ECB would probably have a role in advising on the conditions attached to a rescue package. That limited role for the ECB also argues against putting excessive weight on Mr Stark’s comments.
