MILAN (MNI) – European Executive Board member Lorenzo Bini Smaghi,
trying to soothe frazzled markets, declared on Monday that Italy will
never default on its debts because it is a rich country.
“You just need to look at the assets and liabilities to see that
Italy will never default,” Bini Smaghi said at a conference here.
His comments came after two days in which Italy has found itself in
the crosshairs of financial markets, dragged for the first time into the
tumult surrounding the Greek debt crisis.
Bini Smaghi said Greece is also a rich country that wants and can
repay its debts and that it should be helped to do so.
“It would be crazy to let a eurozone country default,” he said. “A
default would dramatically weaken the eurozone. I doubt letting a
country default would make markets work better. The failure of countries
in the past didn’t help markets function better.”
The fact that people are demonstrating in the streets of Athens to
protest belt-tightening measures passed by parliament is normal for a
democracy and it would be “strange” if there were no protests, Bini
Smaghi said. A democratically elected parliament approved the measures
and that shows that the Greeks want to pay their debts and avoid a
default, he said.
Turning to the global economy, Bini Smaghi said there is a threat
that inflation in emerging markets could slow growth. He added that
commodity price pressures will continue in coming years and could be a
drag on the economy.
The Eurozone remains competitive on world markets despite the
dollar being extremely weak, Bini Smaghi said.
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