by Ralph Atkins
May 30, 2011
Lorenzo Bini Smaghi, European Central Bank executive board member, used an interview in today’s Financial Times to explain in detail just why the ECB is so opposed to any kind of Greek debt restructuring. In doing so, he took on directly those such as Nouriel Roubini and Deutsche Bank’s Thomas Mayer, who have called for an “orderly” restructuring, drawing on lessons learnt from the Latin American experience in the 1980s.
His messages, based on extensive scenario analysis by ECB economists, were that an “orderly” restructuring was a “fairytale,” there was no such thing as a “soft” restructuring, and the consequences of default would be catastrophic.