- The Washington Times - Sunday, May 16, 2010

BERLIN (AP) — The 750 billion euro ($1 trillion) rescue loan package only bought eurozone countries more time — it didn’t resolve the Continent’s underlying debt problem, the European Central Bank’s chief economist says.

The market turmoil will calm down only if the 16 eurozone member states reform their economies and reduce their deficits, Juergen Stark told the Frankfurter Allgemeine Sonntagszeitung newspaper on Sunday.

“We bought time, not more than that,” he was quoted as saying, adding the euro was not in danger “but in a critical situation.”

RELATED STORY: Greece considers action against U.S. banks

Mr. Stark urged European Union leaders to use the limited time to introduce new rules to increase stability and growth, stressing the need for new automatic sanctions for countries that don’t abide by the EU’s debt rules.

“The process has to be depoliticized,” he was quoted as saying.

In the wake of Greece’s debt crisis, the euro has come under intense pressure because of fears about problems spreading to other heavily indebted eurozone countries. The euro sank to near a four-year low against the dollar on Friday in late New York trading, buying $1.2355.

Another top German top banker, meanwhile, expressed doubts about Greece’s ability to repay its huge debts in an orderly fashion.

Dekabank Chief Economist Ulrich Kater on Sunday told the German news website Handelsblatt that he shares the doubts voiced by Deutsche Bank AG Chief Executive Josef Ackermann.

“It will be very, very difficult for Greece to orderly repay its debt,” he was quoted as saying.

He said Greece’s new austerity measures and its lack of competitiveness were dooming its prospects for economic growth, making debt reduction difficult.

Mr. Ackermann, CEO of Germany’s biggest lender, caused outrage and nervousness on already jittery markets by publicly doubting Greece’s ability to repay its debt and mentioning the possibility of a debt restructuring.

In Athens, Greek Prime Minister George Papandreou said he is not ruling out taking legal action against U.S. investment banks for their role in creating the spiraling Greek debt crisis.

“I wouldn’t rule out” going after the U.S. banks, he told CNN on Sunday.

The government and many Greeks have blamed international banks for fanning the flames of the debt crisis with comments about Greece’s likely default.

The Greek leader also said a parliamentary investigation soon will examine the rapid swelling of Greece’s debt and the country’s banking practices.

The European Union and the International Monetary fund have approved a 110 billion euro ($136 billion) bailout package for Greece.

In an interview with German news weekly Der Spiegel to be published Monday, European Central Bank President Jean-Claude Trichet said Europe’s economy “is in its most difficult situation since World War II or perhaps even since World War I.”

Mr. Trichet said the eurozone’s debt crisis had provoked a market reaction similar to that at the height of the global financial crisis in 2008.

“The markets didn’t function anymore, it was almost like in the wake of the Lehman (Brothers) bankruptcy in September 2008,” Mr. Trichet was quoted as saying.

Mr. Trichet also urged European leaders to take further action to address the crisis’s underlying problems, calling for a “quantum leap” in control of financial and economic policy across the 16-nation currency zone.

“We need improved structures to avoid and sanction wrongdoing,” Mr. Trichet was quoted as saying.



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