The euro zone debt crisis will flare up again towards the end of this Fall, former European Central Bank chief economist Juergen Stark told German daily Handelsblatt on Friday, warning that a new phase of crisis management is upon us.
One year after ECB President Mario Draghi said he would do"whatever it takes" to keep the euro intact, Stark said he feared the bank would soon need to support France by purchasing its government bonds.
Stark said the bond buying program is expected to be called into action for heavily-indebted countries such as Italy and Spain. "But pressure will mount for the instrument to be used in France as well," Stark told Handelsblatt. The bank could even come under pressure to activate the program without it being attached to a strict program of fiscal reforms.
That contrasts with Draghi's insistence that any bond purchases will be dependent on strict adherence to such a program.
Stark was a key figure at the ECB and his resignation in 2011 – rumored to be over disagreement over ECB buyingof government bonds – surprised many. The ECB started buying government bonds in May 2010 after agreeing to support emergency loans for Greece.
Stark conceded that Draghi's "whatever it takes" speech in London had calmed financial markets. "But I doubt it is a lasting calm," he said.
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But other economists challenged Stark's view.
"The dire predictions that all would end in tears two years ago were wrong, they were wrong one year ago," Holger Schmieding, chief economist at Berenberg Bank told CNBC.
"The European Central Bank will not commit suicide by letting the euro founder. One year ago,Draghi made that plain and the results of his commitment are spectacular," Schmieding said.
Stark said a sustainable solution to the crisis was not yet in sight and that Draghi had just bought euro zone governments some time. "But that time remained unused," he told Handelsblatt.