–Bini Smaghi: Greeks Must Pay Taxes And Retire At 65 Not 50
–Says Greek Default Would Be ‘Devastating’ – A Disaster For Greece

MILAN (MNI) – Greece must fix its economy and avoid default
otherwise it will become an emerging market economy again like
Argentina, European Executive Board member Lorenzo Bini Smaghi
warned Wednesday.

“Greece has to convince its citizens to pay taxes and to retire at
65 instead of 50, and it must also reduce public spending,” Bini Smaghi
said at an event in Milan.

“These are all normal things for a country that wants to have a
western economy, the alternative is to return to being an emerging
country like Argentina.”

The task ahead of the Greek government is “very difficult
politically” but the alternative, defaulting and not being able to pay
public sector employers and pensioners, would be worse, Bini Smaghi
said. The government must adapt restrictive policies that cut public
spending and reduce debt as quickly as possible, which is technically
easy and politically hard, he said.

If Greece stopped paying its debt it would be ‘devastating’ and
that would put the whole European financial system at risk, Bini Smaghi
said.

Greece is a rich country with assets worth more than 100% of
its gross domestic profit and in just a few years it could sell assets
worth 25% of GDP, he said.

“A lot of time has been spent in the past few months discussing a
possible restructuring of Greek debt and then it was realized this would
be a disaster for Greece,” Bini Smaghi said.

“Instead of passing its time discussing a restructuring, Greece
should think about implementing the plan to fix its public finances and
carry out privatizations that it has agreed to.”

The economies of Greece and other southern European countries are
not doing as well as those in northern Europe because they do not export
enough, Bini Smaghi said. To stimulate growth and exports the southern
European countries need to open up their economies to competition, he
said.

The ECB considers the aggregate condition of the Euro zone economy
when deciding on interest rates and keeping rates low to help out just a
few countries would lead to a loss of confidence on the markets, Bini
Smaghi said. When markets are unstable, it is the job of the ECB to push
governments to use fiscal policy to fix their problems quickly, he
added.

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