European Central Bank policymaker Juergen Stark urged the bank on Friday to call an early halt to its bond-buying program, stressing it sees the plan as temporary even as it faces pressure to scale purchases up to tackle the euro zone crisis.
The controversial program has come into increasing focus as Greece's uncertain future in the euro zone deepens the bloc's crisis. Many analysts see the ECB bond-buy plan, and the firepower it could unleash, as the only way to bring calm.
The ECB's new president, Mario Draghi, said on Thursday the program was temporary and limited -- comments that suggested he wants to keep up pressure on governments ensnared by the euro zone debt crisis to reform.
Mario Draghi made clear that this is a temporary measure and it's no secret that I have never been a particular fan (of the program), Stark told a conference in Frankfurt.
I expect that we should end this program as soon as possible, because it sets false incentives for member states, for governments to bring their budgets in order.
Stark suggested markets were wrong to have been surprised by Thursday's ECB decision to cut rates to 1.25 percent at its first policy meeting under Draghi.
Yesterday's decision has nothing to do with pragmatism, Stark said, adding that he made the proposal to cut rates.
We are witnessing a strong cooling of the global economy and in the euro zone.
Stark is quitting the ECB early this year in what sources have said is a protest against the bond-buying program.
Like many at the ECB, he believes the onus should be on the crisis-hit countries to make economic reforms and fears ECB market intervention, which can reduce government borrowing costs, could reduce their incentive to do so.
Stark said euro zone countries receiving aid from their wealthier peers must use the help to put themselves on a stable footing, pressing the crisis-hit countries to reform their economies.
Solidarity is not a one-way street, he said. It calls for input from both sides, from those who give as well as those who take. The financial support of the donor countries helps the crisis states to buy time to carry out reforms.
Core euro zone countries and the ECB are pressing Italy to make progress with long-delayed reforms to shape up its economy and stop to being drawn into the center of the euro zone crisis that is threatening Greece's membership of the bloc.
Draghi, himself an Italian, gave no hint on Thursday that the ECB's bond-buy program would be accelerated despite the chaos in Greece threatening to engulf the much larger economies of Italy and Spain.
At this juncture they want to stress that they don't see it as their remit to be the lender of last resort to governments, RBS economist Nick Matthews said of the ECB, adding that the bank still wanted markets to function in an orderly way to allow the transmission of its monetary policy.
If the governments are trying to put the Italian politicians under pressure to put in place the necessary reforms, you don't want to let them off the hook by all of a sudden buying huge amounts of their bonds, he added. So it's a balancing act we've got here.
Matthews expected the euro zone's EFSF rescue fund would have insufficient firepower to restore order to markets, even if it is leveraged to 1 trillion euros, and that the ECB would ultimately have to increase its bond purchases.
We think that ultimately they will be forced to step up massively their bond purchases in order to prevent a new escalation of contagion risks across the system, said Matthews, who correctly forecast the ECB's Thursday rate cut.
(Additional reporting/writing by Paul Carrel; Editing by John Stonestreet)