FRANKFURT (MNI) – The political rhetoric used by some Eurozone
governments during efforts to rescue Greece exacerbated the crisis,
European Central Bank Executive Board member Lorenzo Bini-Smaghi said on
Friday.
He appeared to be particularly critical of the German government.
“For instance, in one large euro area country it was thought that
public support for swift action could be achieved only by dramatizing
the situation, for instance, by telling the public that ‘the euro is in
danger’ or by considering the possibility of expelling a country from
the euro area,” Bini-Smaghi said.
“But it was not realized that, in the midst of a financial
upheaval, such words are like fanning the flames and that the cost of
the support package could only increase following such dramatic
declarations,” he said.
Other governments, on the other hand, may have shown too much
activism, he argued.
“Leaders want to be seen as being in control of the situation and
taking all sorts of initiatives to reassure their electorates,” he said.
“The media, of course, have a field day reporting on such
apparently inconsistent activities” which “totally disconcert financial
markets,” he said.
–Frankfurt bureau; +49-69-720142; jtreeck@marketnews.com
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