ECB’s Bini Smaghi: Euro-zone problems are early warning alarm of the challenges others are going to face

Bah humbug. We’ve got a saying in the UK “misery loves company” It almost always seems to cross my mind when Bini Smaghi speaks.

• Greek default not a viable option in eye of euro zone, ECB, IMF
• Fiscal expansion may not be sustainable over time, may have to be corrected rapidly
• Price stability mandate implies ECB will not use inflation to reduce value of government debt
• Contagion under way, spreading to largest euro zone countries and through financial system
• One large euro zone country did not realise dramatic declarations on euro would fan flames of trouble
• There is no alternative to fiscal repair measures
• Sticking to commitments, particularly in case of Greece, essential for credibility of euro
• Inflation jump would produce big upward shift in yield curve, hit banks, may undermine recovery