'Nobody's Leaving the Euro': OECD Secretary-General
Staff Writer, CNBC.com
Angel Gurria, secretary-general of the Organisation for Economic Co-Operation and Development, issued a strong defense of the euro over the weekend.
As speculation continued that heavily indebted Greece may abandon the euro Gurria, a former finance minister in his native Mexico, told CNBC: "Nobody's going to be leaving the euro. More countries are going to be joining the euro."
The resignation of the European Central Bank’s de facto chief economist, Juergen Stark, on Friday, in a dispute over the ECB's bond-buying program, unsettled Asian and European markets on Monday. He will be replaced by German deputy finance minister Joerg Asmussen.
The bond-buying program was enacted in order to assist Spain and Italy after yields on their government bonds rose.
Several plans have been floated in hopes of binding the euro zone countries more closely, including a single Finance Ministry co-ordinating all 17 countries, or the issuance of Eurobonds.
"There doesn't have to be a single minister of finance," Gurria, who spoke to CNBC during the G7 meeting in Marseilles, France last weekend, said. "There does have to be something pretty close to de facto fiscal union."
"If you don't have the solution of both fiscal and political integration, then asking that (other euro zone members) issue Eurobonds or share the pain of others is very difficult," he added.
Gurria emphasized the need for stronger fiscal discipline within the euro zone countries.
"Discipline will be the critical element that, combined with a strong safety net, will give the markets confidence," Gurria said. "We built a fantastic safety net, with the (European Financial Stability Facility, the International Monetary Fund) and the ECB. But then you make sure that you are never going to have to use the safety net through strong discipline and strong co-ordination on the fiscal side."
While protests in Greece over austerity measures continued at the weekend, Greek Prime Minister George Papandreou said Saturday that he is determined to stop his country from going bust and also stay in the euro zone.
There are fears that France's top banks are facing a credit rating downgrade from Moody's
because of their relatively high exposure to Greek banks.
Italy's Prime Minister Silvio Berlusconi is hoping to pass a 54 billion euro ($73.5 billion) austerity package in the Italian lower house of parliament this week.
"The best thing for them (troubled euro zone economies) is to persevere and move on with the adjustment program," Gurria said. "They need the credibility. If they continue with consolidation, they will be better able to grow in the future."
"If they do not appear to be strongly dedicated, they will suffer in the markets and short-term problems will derail medium-term ambitions," he added.