Monday, July 09, 2007


Nicolas Sarkozy appears to be losing his battle to bring a dose of Jimmy Carternomics to France:

A top European Central Bank official rejected on Monday proposals by French President Nicolas Sarkozy for eurozone governments to have more say over the euro's exchange rate.

Increased political influence on the ECB, which has a strict mandate to keep a lid on inflation but not to directly influence exchange rates, could endanger price stability, ECB executive board member Juergen Stark warned.

The creation of a "European economic government ... would only lead to a confusion of responsibilities and duties," said Stark, who is also head of the German central bank the Bundesbank.

"Above all, the independence of the ECB would be damaged, and the ability to preserve eurozone price stability in a credible manner would be threatened as a result," Stark said in a speech given in Tuttlingen, Germany.

....But Sarkozy's call illustrated "ignorance about what monetary policy can in fact achieve," Stark said.

Sustainable growth can only be achieved by structural reforms in individual member states, particularly in the area of employment, and by the ECB ensuring price stability in the long term, he added.

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