Juergen Stark, European Central Bank Chief, Unexpectedly Resigns
PRESS ASSOCIATION -- Europe's handling of its debt crisis returned to haunt global stock markets after a top European Central Bank (ECB) official unexpectedly resigned.
Stocks were down sharply and the euro sank to its lowest level against the dollar in more than six months after the resignation of Juergen Stark, a key member of the ECB's rate-setting governing council.
The ECB said Mr Stark had quit for personal reasons. Investors, however, noted that Mr Stark has been a consistent critic of the ECB's programme to purchase government bonds of debt-ridden European nations in the markets.
The programme is designed to prevent the European debt crisis from enveloping Italy and Spain in particular, but it potentially exposes the ECB to the risk of huge losses on shaky bonds.
Mr Stark will stay in the job until a replacement is found.
Disagreement over how to handle the European debt crisis, which has already led to multibillion-euro bailouts for three of the euro's 17 members, has been cited as one of the main reasons why it continues to flare up.
"The European troubles are permeating across global financial markets," said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank.
The euro, which was already trading lower after Thursday's indication from ECB president Jean-Claude Trichet that there will not be any more rate hikes in coming months, fell to its lowest level since the end of February after news of Stark's resignation.
By late afternoon in Europe, the euro was 1.4% lower at 1.36 dollars (86p), its lowest rate since February.
Stocks also took a hit. In Europe, the FTSE 100 index of leading British shares closed down 2.4% at 5,214.65 while Germany's DAX fell 4.0% to 5,189.93. The CAC-40 in France was 3.6% lower at 2,974.59.