'ECB cannot resolve politicians problems' - Bini Smaghi

Bini Smaghi who addressed a conference at the Vatcian, said the debate about tackling the financial crisis in Greece showed the temptation to offload responsibilities that should lie with fiscal authorities onto monetary policy.

"Asking the ECB, as has been the case recently, to extend the maturities of the government bonds it holds or to accept as collateral bonds from a state that is considered to have defaulted for the re-financing operations of the banking system is a violation of the principle prohibiting the central bank from monetarily financing the treasury," he said.

Greece was "fundamentally solvent" and it would be wrong for it to be given encouragement not to pay its debts, he stressed.

"If you start to incentivise countries not to pay their debts it is a disaster for Europe and for all the investors that come from outside."

He said a default would bring economic depression, with severe consequences for democracy and society, and would hit poorer people hardest.