The head of the European Union’s
(EU) main bail-out fund has dismissed the possibility of a breakup of the
16-nation eurozone.
Klaus Regling of the European
Financial Stability Facility said it was “inconceivable that the euro
fails”.
There has been speculation that
some countries may be forced to give up the euro in light of the Irish debt
crisis.
The currency has fallen by more
than three cents against the dollar this week because of events in the
Republic.
Mr Regling told Germany’s Bild
newspaper there was “zero chance” that the euro would collapse.
“No country will voluntarily
give up the euro – for weaker countries that would be economic suicide,
likewise for stronger countries,” he said.
Questions have been raised about
the cost to the EU, and the International Monetary Fund, of bailing out
eurozone members – over the summer, Greece was bailed out to the tune $147
billion, while the Irish Republic is currently negotiating what is expected to
be an $113 million rescue package.
Many commentators have also pointed
out that member countries are unable to devalue their own currency – one of the
key methods many governments use to trade their way out of recessions, as a
weaker currency makes exports cheaper.
As a result, some have suggested
that countries like the Irish Republic and Greece would be better off outside
the zone.
Mr Regling’s comments came as the
euro slid by more than half a cent against the dollar to $1.3314, as investors
digest the Irish Republic’s austerity plan unveiled on Wednesday.
The four-year plan is designed to
save $20 billion through spending cuts and tax rises, but investors remain
unconvinced.
There are doubts about the Irish
government’s growth estimates, which directly impact its deficit forecasts –
many investors see them as overly-optimistic.
The government still expects the
economy to average 2-2.5 per cent growth in 2011, and 3.5-4.5 per cent the year
after, whereas rating agency Standard & Poor’s has said it expects
virtually no growth over the next two years.
There are also doubts about whether
the government will be able to push through its austerity measures when
parliament votes on the budget on 7 December.
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