Weaker euro zone nations need more support from core: UK
LONDON (Reuters) - The euro zone can protect its currency if its stronger countries provide more support for the weaker to help them deal with their problems, British finance minister George Osborne said in a newspaper on Sunday.
The future of Europe's 17-country single currency bloc is under threat from a political stalemate in Greece, which could lead to its departure from the monetary union at unknown costs to the financial system and global economic stability.
"Euro zone countries must either stand behind their currency or face up to the prospect of Greek exit, with all the risks that could involve," Osborne wrote in The Sunday Times.
"How can they stand behind the euro? First, those countries with high deficits and low competitiveness need to carry on confronting their problems head on. But in the absence of flexible exchange rates, the economic and political barriers to dealing with those problems will only get worse without more support from the core of the euro zone."
He added that the euro zone must follow "the remorseless logic" of monetary union towards greater fiscal integration and "burden-sharing", with Eurobonds one possible option.
"Finally, the whole of Europe needs to become more competitive and productive. That means reforming welfare systems, investing in infrastructure, more job-friendly employment laws, better education and lower business taxes," he wrote.
Greek voters this month toppled a government that had agreed to painfully austere terms of an international bailout plan, and uncertainty hangs over the next election set for June 17.
Osborne's comments follow a remark made by British Prime Minister David Cameron that a government source said was a veiled suggestion that the European Central Bank should follow the example of the Bank of England by embarking on an asset purchase program to lift economic growth in the euro zone.
"Clearly, just as Britain benefits from a strong government with a strong deficit reduction plan and strong banks but also an independent monetary policy giving us low interest rates, helping to push demand in the economy, so the euro zone I believe needs that approach as well," Cameron said at a summit of the Group of Eight major economies on Saturday. Continued...