FRANKFURT (MNI) – A default on sovereign debt is more painful than
consolidation of public finances and necessary economic adjustments,
European Central Bank Executive Board member Lorenzo Bini Smaghi said
Monday.
Speaking at the Official Monetary and Financial Institutions Forum
in Abu Dhabi, Bini Smaghi, according to a text provided by the ECB, said
nevertheless that the possibility of a country not being able to pay
back the debt “cannot be excluded” and offered his views on how to best
design a European crisis management framework.
“Consolidating public finances is painful economically and
politically, but the alternative is worse. Governments in Europe are
fully aware of this,” Bini Smaghi said.
His comments follow those of Greek deputy Prime Minster Theodoros
Pangalos, who said on Sunday that “demonizing debt restructuring is
wrong. Debt exists to be restructured. We may pursue it ourselves or it
may be proposed to us and it may too advantageous to turn it down.”
Bini Smaghi, however, said that any projections of default do not
“take into consideration that in advanced economies a sovereign default
is very damaging for the citizens of the country concerned, as it would
drastically affect their wealth.”
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— Frankfurt bureau: +49-69-720 142. Email: jtreeck@marketnews.com —
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