De­fault would crush lo­cal econ­omy, hurt eu­ro­zone

Kathimerini English - - Business & Finance -

ROME (AFP) – A de­fault or a re­struc­tur­ing of Greek debt would crush Greece’s econ­omy and would im­pact the en­tire 16-nation eu­ro­zone, a board mem­ber of the Euro­pean Cen­tral Bank warned in an in­ter­view yes­ter­day. A re­struc­tur­ing would bring Greece’s bank­ing sys­tem to “its knees be­cause of the losses on sov­er­eign bonds... and be­cause it would lose its right to re­fi­nance with the ECB,” Lorenzo Bini Smaghi told Ital­ian daily La Stampa. “Since the state can­not re­fi­nance it­self by print­ing money as was the case in Ar­gentina, the gov­ern­ment would no longer have suf­fi­cient funds to pay pen­sions, salaries and cur­rent costs. A real econom- ic col­lapse,” he said. “Greece has lost time think­ing about this pos­si­bil­ity for sev­eral months, badly ad­vised by cer­tain in­vest­ment banks and law firms look­ing for com­mis­sions who for­got to ex­plain to it the neg­a­tive ef­fects,” he added. “It al­lowed it­self to be con­vinced that it was pos­si­ble to carry out an or­dered re­struc­tur­ing be­fore re­al­iz­ing this was a real fairy tale,” he said. “The process of in­ter­nal re­forms has slowed down... and we find our­selves one year on hav­ing to read­just the pro­gram to have more guar­an­tees.”

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