ECB Official Raps IMF's 'Helicopter Money'

European Central Bank Executive Board member Juergen Stark was quoted on Tuesday as criticizing decisions made at the G20 summit to boost the IMF's Special Drawing Rights (SDRs).

Stark suggested in a newspaper article that the decision was potentially inflationary as it would create "helicopter money" and that it had not been properly thought out.

Last week leaders from the Group of 20 wealthy and emerging economies agreed to support a general allocation of $250 billion worth of International Monetary Fund's SDRs alongside other measures to boost the Fund's firepower.

Countries hit particularly hard by the global economic crisis would be allowed to increase their SDR share by using those of another country which may not need them.

The results of the G20 summit have been broadly welcomed by policymakers by Stark questioned whether this decision was needed.

"That is pure money creation. That is helicopter money for the globe," he was quoted as saying in an article in German business daily Handelsblatt.

"There was no examination of whether there is a global need for additional liquidity at all... One used to take a lot of time to examine something like this," he said.

"Helicopter money" has become linked to pumping money into the economy as an extreme response to the threat of deflation.

In 2002 Ben Bernanke, then a Federal Reserve governor and now its chairman, quoted monetarist U.S. economist Milton Friedman's suggestion that money should be dropped from helicopters if an economy slid into deflation. This earned him the nickname of "Helicopter Ben."

The IMF created SDRs in 1969 as a way to support its 185 member countries and they are allocated according to members' IMF quotas, which are broadly based on a country's relative size in the world economy and which determines its voting power.

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