Euro zone countries could split, says Goldman Sachs exec

Sun Nov 6, 2011 12:45pm EST
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LONDON (Reuters) - Countries in the euro zone will find it increasingly unattractive to stay in the single currency, if there is a German-led fiscal integration, the chairman of Goldman Sachs Asset Management said in a Sunday Telegraph interview.

Portugal, Ireland, Finland and Greece could all pull out of the euro zone rather than operate under a single treasury, Jim O'Neill, whose division manages more than $800 billion (500 billion pounds) of assets, was cited as saying.

He also called on the European Central Bank (ECB) to show more leadership to reassure "worried investors."

"The Germans want more fiscal unity and much tougher central observation -- with the idea of a finance ministry," O'Neill said.

"With that caveat, it is tough to see all countries that joined wanting to live with that - including the one that is so troubled here (Greece)."

He added that only countries such as Germany, France and Benelux, were suited for a monetary union because their exchange rates were closely linked. But for others, it was questionable.

O'Neill said countries such as Finland and Ireland that are neighbors of non-euro zone countries -- the UK and Sweden -- might prefer to quit the euro, which would bolster the strength of the single currency.

He added that the Brussels bailout deal will not solve the crisis and that the ECB needed to buy bonds.

Since the ECB resumed its bond buying programme (SMP) around three months ago it has purchased some 100 billion euros of government bonds, a majority of which are thought to be Italian BTPs.   Continued...

<p>A protestor holds a placard next to the euro sculpture outside the European Central Bank (ECB) headquarter during a demonstration of the occupy-movement in Frankfurt's banking district November 5, 2011. REUTERS/Kai Pfaffenbach</p>