* Bini Smaghi says Greek debt agreement comes at a price
* Says debate about debt restructuring weakened euro zone
* Says confident Italy will stick to savings programme
(Adds details, quotes, background)
By Sarah Marsh
BERLIN, July 23 The euro zone's strategy for
tackling Greece's debt crisis comes at a price and should remain
an isolated case, ECB Executive Board member Lorenzo Bini Smaghi
was cited as saying in a German paper.
Bini Smaghi echoed critical comments by fellow ECB
policymaker Jens Weidmann after the ECB relented on its
opposition to a temporary Greek default, giving an emergency
summit of euro zone leaders leeway to agree a second bailout for
the debt-chocked country.
A day before Thursday's summit, Bini Smaghi had said a
restructuring of Greek debt -- soft or hard -- would be "a
"Given the difficulty of the situation, a good compromise
was certainly found," Bini Smaghi was cited as saying in the
prepublication of an interview for release in Sunday's Welt am
Sonntag. "But we should not act as if this agreement was free of
Euro zone leaders announced on Thursday a second bailout for
Athens involving an extra 109 billion euros of government money,
plus a substantial contribution from private sector bondholders,
who will voluntarily swap their Greek paper for longer
maturities at lower interest rates.
To enable the agreement, the ECB had to relent on its
opposition to Greek default and signalled it was willing to let
this happen temporarily as long as it was a strict one-off.
"The agreement must remain an isolated case. Ireland and
Portugal have shown their determination to carry out their
savings programes and are on course," said Bini Smaghi.
Weidmann, who also heads Germany's Bundesbank, said on
Friday the Greek aid deal weakened incentives for euro zone
countries to maintain solid finances and was a step towards a
Bini Smaghi -- who is under pressure to quit the ECB to
smooth the way for fellow Italian Mario Draghi to become its
president -- said the debate about debt restructuring had
destabilised financial markets and weakened the currency union.
"We must avoid false incentives and the impression that
restructuring is an easy exit," he said. "We cannot reward
countries for not sticking to the rules of the stability pact."
Yet Bini Smaghi said that the agreement to restructure Greek
debt did not mean the euro zone was turning into a transfer
union, noting Greece would have to pay back aid with interest.
Regarding Italy, Bini Smaghi said he was confident that,
despite upcoming elections, the government would stick to an
austerity package launched earlier this month to avert a fiscal
(Editing by John Stonestreet)