UPDATE 1-ECB’s Bini Smaghi-Greece deal a crisis turning point

* Greek deal marks turning point in crisis

* Problems show Europe must improve decision making process

* Size of banking sector needs to be reduced

(Adds detail, quotes)

By Marc Jones

FRANKFURT, April 15 (BestGrowthStock) – The Greek aid deal is a
turning point in the crisis that shows suggestions of a euro
zone break up and Greek default are absurd, a top European
Central Bank policymaker said on Thursday.

Speaking in Japan, ECB Executive Board member Lorenzo Bini
Smaghi said the deal for joint EU/International Monetary Fund
financial support agreed by euro zone leaders over the weekend
was a vital step.

“This announcement makes it clear what the euro area
authorities have said since many months, i.e. that a scenario of
default and exit from the euro area, which some market
participants and observers had toyed with, was simply absurd.”

He added that the problems had exposed the shortcomings of
Europe’s political decision making.

“Vague statements that some event, such as a default, will
not occur, are not sufficient to calm the markets. Concrete
actions are needed. This was not fully understood over the last
few months,” he said.

“This experience should now be used to create a more
efficient decision making process within the euro area aimed in
particular at preventing similar situations from occurring in
the future and eventually at solving them more efficiently.”

He warned that as speculators increase bets on events such
as default, problems mount, upping the chance of it actually
happening.

Bini Smaghi, one of the ECB’s six-strong Executive Board
also stressed the need to cut the size of the financial sector.

“Given the obvious negative impact of an excessively large
financial industry, we keep asking ourselves whether limits
should be imposed on the size of the financial sector itself …
The answer to this question is yes.

“A financial sector which goes beyond a certain threshold
(or breaking point) can harm the economy and society as a
whole,” he said.
To read speech please click:
http://www.ecb.int/press/key/date/2010/html/sp100415.en.html)

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(Reporting by Marc Jones, editing by Mike Peacock)

UPDATE 1-ECB’s Bini Smaghi-Greece deal a crisis turning point