‘Greek euro exit would bring contagion’Comment on this story
INTERVIEW-Greek euro exit would bring "devastating" contagion -Bini Smaghi
By Gavin Jones and Francesca Landini
ROME, June 15 (Reuters) - An orderly Greek exit from the euro zone is impossible and its departure would have devastating consequences, former European Central Bank board member Lorenzo Bini Smaghi said on the eve of a Greek election that could determine whether it remains part of the single currency.
Bini Smaghi told Reuters in an interview that if Greece voted for parties that broadly accepted the bailout deal agreed with its international partners, he believed the terms would be eased to help the debt-stricken country.
"The concept of an orderly Greek exit from the euro zone is simply nonsense. There can be no orderly exit," said Bini Smaghi, who left the ECB last year before the end of his mandate to teach at Harvard University.
He warned that a Greek exit would be "devastating" and would inevitably spread to other weaker euro zone states, as shown already by widening yields on Spanish and Italian bonds, while the practicalities would also be difficult to organise.
"The Greek government would have to adopt capital controls and expropriations from the savings of its own citizens," he said.
Bini Smaghi showed little sympathy with the plight of the Greeks, saying that they had received huge financing but were still unwilling to complete necessary economic adjustments.
"They want to have their cake and eat it too," he said, arguing that public sector salaries had doubled since the country had joined the euro with no economic justification.
Nonetheless, he said he believed that the terms of the bailout offered to Greece by the euro zone and the International Monetary Fund could still be sweetened.
"If the new government that emerges from the elections says it is willing to respect the commitments made with the EU and the IMF, then I think there will be an adjustment of the programme, partly to take account of the depth of Greece's recession," he said. (Reporting By Gavin Jones; editing by Ron Askew)
2012-06-15 16:01:18+00:00 GMT+00:00 (Reuters)