Europe Economy

Kiss-and-tell: Former ECB insider reveals all in book

Andrew Harrer | Bloomberg | Getty Images

Former European Central Bank (ECB) board member Lorenzo Bini Smaghi has dropped bombshells in a new book that reveals the secret machinations of European politics during the economic crisis.

Entitled "Morire di Austerita'" (Dying of Austerity), Bini Smaghi's book reveals that former Italian leader Silvio Berlusconi floated plans to pull his country out of the single currency when he was prime minister in 2011 which he said precipitated his toppling from the premiership shortly after.

(Read more: Berlusconi 'remarkablyresponsible': Mario Monti)

The Italian economist noted that Berlusconi even discussed an Italian exit from the euro with fellow leaders, German chancellor Angela Merkel and then French president Nicolas Sarkozy, according to extracts from the book published in the Telegraph newspaper on Thursday.

Though Berlusconi's anti-euro sentiment was never a secret, it was not previously known that he had seriously mooted withdrawal plans to other leaders.

(Read more: Remember euro breakup fears? They are back)

Bini Smaghi was on the six-member executive council of the central bank from 2005 to 2011 and was thus within the inner-sanctum of European economics and politics during the region's economic crisis.

Relating to the troubled Greek and German relationship during the economic crisis, Bini Smaghi noted that Merkel continued to think that Greece could be thrown out of the euro as late as Fall 2012. He said, however, that she changed political tack on Greece once the full repercussions of an exit were appreciated.

The book's revelations are timely as the specter of Greece continues to haunt Merkel during her current re-election campaign, with anti-euro parties seeking to capitalize on her handling of Greece and the euro zone crisis.

(Read more: Greece returns as hot-button issue in German election)

Of a euro collapse, however, Bini Smaghi warned that any state leaving the euro would face likely default on external obligations which would then precipitate "substantial losses for counter-parties in other euro zone countries, including central banks and states."

He criticized the adoption of austerity as a path to recovery, however, saying that it was the result of the "incapacity of democracies to promptly confront, with adequate measures, problems facing advanced economies." Rather, austerity nurtured dissatisfaction and the disintegration of society, he said.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

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