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We have indeed been warned repeatedly by the ECB, too:
Bini Smaghi: the euro is not too strong - Il Sole 24 ORE

According to our analysis, debt restructuring would result in the failure of most of the Greek banking system, which holds bonds of that country and is largely guaranteed by the state. Greek banks would no longer have access to refinancing with the ECB and would have to reduce their lending to households and businesses. Not to mention finally the impact on individual investors, pension funds and other Greek institutions that hold their savings in government bonds. The Greek economy would be on its knees, with devastating effects on social cohesion and maintenance of the democratic system in that country. Ultimately it's up to Greece to decide the way forward, given that it will face the worst of the consequences. But other countries should avoid pushing Greece towards disaster.

EUObserver: ECB warns of threat to Greek democracy (15.04.2011)
ECB board member Lorenzo Bini Smaghi warned on Thursday: "According to our analysis, a debt restructuring would result in the failure of a large part of Greece's banking system."

He did not mince his words, saying that Greek democracy would be threatened by such a move.

"The Greek economy would be on its knees, with devastating effects on social cohesion and the maintenance of democracy in that country," he told financial daily Il Sole 24 Ore.

He also subtly told Berlin to not push Athens into a corner.

"Ultimately it's up to Greece to decide the way forward, given that it will suffer the worst consequences. But other countries must avoid pushing it towards a catastrophe."



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Jun 13th, 2011 at 08:51:04 AM EST
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