–Adds comments on bank’s mandate, inflation fears

FRANKFURT (MNI) – The European Union should consider setting up an
independent body to survey member states’ fiscal policies that would be
similar to the United States’ Congressional Budget Office, European
Central Bank Executive Board member Juergen Stark said Monday in a radio
interview on Austria’s Oe1 radio.

Although there is a severe crisis at present in the Eurozone, the
viability of the single currency is not in doubt, Stark assured.

In an effort to control balooning budget deficits, the European
Union should “consider having an independent commission…that would
regularly address the condition of public finances in individual
countries,” Stark argued.

Stark mentioned the Congressional Budget Office as being a possible
inspiration for such a body in the European Union. He noted the CBO is
accepted by both parties in the United States. “I could imagine…that
we could have a similar practice here in Europe,” he said.

“We are in a severe crisis,” Stark intoned, “but nobody is
questioning the euro.”

“I see the current situation as a wakeup call for politicians in
the Eurozone and in the EU to reconsider their actions and to orient
more strongly their national economic policies to the conditions of the
currency zone,” he elaborated.

The concept of mutual supervision of economic policies cannot be
limited to “purely preventive measures” such as checking on the coming
year’s budget, Stark said. “Rather it must go beyond that so that
corrective measures can be taken in a timely manner, if budget deficits
are threatening to get out of control.”

Asked whether he supported a proposal to create automatic sanctions
against countries who violate the Stability and Growth Pact, rather than
allowing member states to vote on sanctions, Stark said, “that goes in
the direction that I just suggested: more [automatic functioning]” of
sanctions.

Stark conceded that he was “fearful” that the ambition shown by
heads of state and government in November of 2008 for financial market
regulation has faded somewhat.

“I hope it is not too late…to come to a serious and fundamental
change of the international financial system,” he said.

Questioned as to whether the ECB’s decision to buy government bonds
will spark inflation in the Eurozone, Stark assured that the bank’s role
as the guarantor of price stability in the currency area “has not
changed. Our primary task is unchanged and will remain unchanged.”

“No inflationary impulse will emanate from these additional
measures,” he promised.

–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com

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