Euro breakup

Euro architect Otmar Issing: Some members could leave

Some members of the eurozone may have to leave the bloc as the debt crisis continues, according to one of the architects of the euro.

BBC,

8 August, 2012

"Everything speaks in favour of saving the euro area," said Otmar Issing, a former European Central Bank chief economist.

"How many countries will be able to be part of it in the long term remains to be seen," he added.

His message comes as the ECB warned of a lack of lending within the region.

The central bank highlighted the fall-off in money being lent across borders between the 17 countries that share the euro, saying the eurozone is becoming increasingly fragmented.

The ECB said cross-border loans in the overnight money market fell to 40% of total loans, from 60% in a similar period last year.

A recent report by Morgan Stanley focused on the "Balkanisation" of the eurozone banking system.

"Its banking and money team have highlighted how the weaker eurozone economies - Spain, Italy, Portugal, Cyprus, Greece and Ireland - have been progressively starved of credit as banks in the bigger, stronger economies of Germany and France have stopped lending to them," the BBC's business editor Robert Peston said.

'Reforms pending'

Mr Issing was a member of the German Bundesbank until 1998 and then worked at the ECB, during the introduction of the euro in 1999 until 2006.

Promoting his new book on saving the euro, Mr Issing said: "We are still a long way off saying 'that's it, now we are sure to make progress'.

"Substantial reforms in almost all countries are still pending."

He added that it was not true that Germany would be better off returning to the deutschmark, saying the euro had been more stable than the mark.

"One should focus on bringing the euro back to what it was meant to be: a stable currency, stabilised by an independent central bank, which follows a clear mandate, nothing else, and that the other protagonists, especially national governments, do their homework," Mr Issing said.

The comments come after France's central bank said that its economy would fall back into recession this quarter.

The Bank of France estimates that the economy will contract by 0.1% in July to September. It has already predicted a fall of the same level between April and June.

Italy is also set for its third consecutive quarter of contraction, while the Bank of England cut its UK growth forecast to close to zero from about 0.8% predicted in May.

The UK is not in the eurozone.