Lorenzo Bini Smaghi, a member of the European Central Bank's executive board, on Tuesday cautioned policymakers against handing the reins of power to markets.

"I would like to warn against an illusion which seems to be spreading among policymakers in Europe," Bini Smaghi said. "The illusion is that the economic governance of the euro area can be strengthened not by increasing the responsibilities of policymakers, which would mean stronger European institutions and stronger rules, but rather by