Financial Times
February 9, 2011
Greece would suffer greater damage if it defaulted on its debts than if it sticks to its current ambitious economic and fiscal reform plans, a top European Central Bank official has warned.
The comments by Lorenzo Bini Smaghi, an ECB executive board member, in a video interview with the Financial Times, explain why eurozone policymakers are keeping up the pressure on Athens to implement painful spending cuts and tax rises, as well as overhauling its economic model.
“Plan A has to work and therefore we are committed to make it work,” Mr Bini Smaghi said.
Greece’s fiscal plight is widely seen as significantly more acute than any other countries on the eurozone’s “periphery,” which have been worst hit by the debt crises of the past year. Earlier this week a report by the influential Bruegel think-tank, based in Brussels, concluded “that Greece has become insolvent and that further lending without a significant enough debt reduction is not a viable strategy”.
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