FRANKFURT (MNI) – The involvement of the International Monetary
Fund in an aid package for Greece would damage the image of the euro,
European Central Bank Executive Board member Lorenzo Bini Smaghi said in
an interview published Wednesday.
“Those who are interested in economic and monetary stability in
Europe should resist the path to the IMF,” Bini Smaghi told German
weekly Die Zeit. Were the IMF to get involved, “then the image of the
euro would be that of a currency that is only able to survive with the
support of an international organization,” he warned.
“The markets reaction in recent days has shown that it can be
damaging for the stability of the euro to activate” the IMF, he
observed.
Bini Smaghi also said that the treaty forming the European Monetary
Union does not allow for fiscal transfers, but that temporary help would
not violate the EU’s treaty.
“The treaty is clear here. Fiscal transers between countries within
the Eurozone are not allowed, but temporary aid” is, he explained. This
“would not be a violation of the treaty.”
Bini-Smaghi asserted that failing to support Greece would be much
costlier for European taxpayers than offering temporary support.
He warned that “a Greek insolvency would hit banks all over Europe,
which would have to bear the cost. This would weaken the real economy
and the labor market.”
He added: “You saw what happened in 2008 after the Lehman Brothers
insolvency!”
Bini Smaghi noted that the instinctive reaction at the time was
that the U.S. taxpayer should not be asked to pay. However, “a more
rational analysis would have shown that letting Lehman go under would be
even more expensive. That is what happened,” he noted. “We in Europe
should be a little smarter.”
–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com
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