ECB board member says no orderly eurozone debt restructuring

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European Central Bank executive board member Lorenzo Bini Smaghi slammed on Friday those who suggest distressed eurozone states could reschedule debt payments, in a veiled strike at Germany.

"There is no such thing as an 'orderly' debt restructuring, especially for advanced economies integrated into a monetary union," Bini Smaghi told a conference in Brussels.

"Those who propose it just assume that it exists, but forget to specify its functioning and its implications, particularly in terms of contagion to the whole financial system."

Bini Smaghi did not cite Germany directly, but Chancellor Angela Merkel and central bank chief Axel Weber, a prominent member of the ECB governing council, have called for the eurozone to establish an "orderly" bankruptcy procedure for states that can no longer service their debts.

On May 28, Bini Smaghi accused Merkel of "fanning the flames" of financial upheaval by warning German lawmakers that Europe's single currency was in danger.

Smaghi said in an address in Rabat, Morocco, that "telling the public that 'the euro is in danger' or by considering the possibility of expelling a country from the euro area" was "like fanning the flames" of financial upheaval.

© 2010 AFP

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