Euro zone mulls action to isolate Italian turmoil - ECB's Praet

LONDON (Reuters) - Euro zone policymakers have discussed using the bloc's bailout fund, or European Stability Mechanism (ESM), to prevent financial tension in Italy from spreading to other indebted countries, the European Central Bank's chief economist said.

"There is one discussion which is at the political level about precautionary measures we could take if there would be spillovers to (other) countries," Peter Praet told an audience in London on Tuesday.

"(These are) not central bank measures, it is related to the ESM and to countries ... having spillovers to some external events."

(Reporting By Marc Jones; Writing by Francesco Canepa in Frankfurt; Editing by Janet Lawrence)