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ECB may have to cut rates: Bini-Smaghi

Former European Central Bank (ECB) board member Lorenzo Bini-Smaghi said Mario Draghi may have to cut interest rates if bond yields keep rising, jeopardizing the euro zone's economic recovery.

"If (market) rates are starting to go out of hand, then if you want to avoid that, you have to act, not just talk," Bini-Smaghi told CNBC at the Ambrosetti Forum on the shores of Lake Como in Italy.

On Thursday, ECB President Mario Draghi warned that the region's economic recovery was nascent and said he was ready to act if borrowing costs kept rising. In its monetary policy decision on Thursday, the ECB kept rates on hold at a record low of 0.5 percent.

Bond yields have been rising on improving economic data in the U.S. and the euro zone. U.S. 10-year yields rose above 3 percent for the first time since 2011 on Thursday. In Europe, German 10-year yields are above 2 percent and U.K. 10-year gilt yields have also risen above 3 percent.

"Market rates are looking at the recovery, they are looking at the political enthusiasm around the recovery, they may not be cautious enough and if central bankers are really serious, they have to act, not just talk," Bini-Smaghi said. He served as a member of the ECB's executive board between 2005 and 2011.

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Contact Europe: Economy

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