European Central Bank Executive Board member Lorenzo Bini Smaghi said on Monday that talk about Greece reneging on debt commitments ?has been very damaging? and suggested ?that investing in the euro area is unsafe.?
Even for a country that flouted eurozone fiscal rules for a decade, ?a debt restructuring, or exiting the euro, would be like the death penalty – which we have abolished in the European Union,? he said.
The ECB has bought about 45 billion euros in Greek government bonds in the past year but Bini Smaghi said the impact of a default would fall largely on eurozone national central banks, rather than the ECB, and ultimately on taxpayers.
?We care about taxpayers? money and this is why we warn against restructuring. We seem to be the only ones,? he said.
Bini Smaghi added that a Greek restructuring would be nothing like those in Latin America in the 1980s. The Greek situation is ?totally different,? he claimed. An ?orderly? debt restructuring is ?a fairy tale.?
His comments, published in the Financial Times, came just as Slovak Prime Minister Iveta Radicova said on Monday that Greece?s debt needs to be restructured.
?A restructuring is necessary, but it?ll have to be decided how to do it,? Radicova told a joint news conference with her Slovenian counterpart Borut Pahor.
Radicova said Greece was likely to request more financial aid since much of the 110-billion-euro bailout provided by the European Union and International Monetary Fund so far had been swallowed up by Greece?s debt repayment.