Talk of a Euro Break Up Dangerous: Slovenian President
Speculation of a euro zone break up has prejudiced the bloc and created a negative political dynamic the Slovenian President told CNBC Thursday.
“We’ve seen a lot of rather cynical, unfavorable talk about the euro, a lot of which has not necessarily been without prejudice and I don’t like that talk,” Danilo Türk, President of Slovenia told CNBC Europe’s “Squawk Box”.
He added that the media had played a central role is promoting euro negativity with “Europe bashing” common outside the euro zone but it was a situation that should be handled with care.
He went on to say the euro had become a very important symbol of Europe, echoing the sentiment of Angela Merkel who has declared that the failure of the euro would be a failure of Europe.
“We need serious commitment to the euro project. If people start believing that all this derisive talk is well founded then the political mood would change. If it collapses the consequences would be immense,” he added.
There has been increased speculation that Slovenia may be the next country to require a bailout, with the economic situation in the country being described by Eurogroup head Jean-Claude Junker as “serious” and the country having “no time to lose”.
Türk denied that a bailout would be needed as reforms have now been made.
The euro zone is now in the third year of its debt crisis that has brought the very survival of the currency bloc into question.
A number of analysts have questioned the viability of the bloc in its current form.
Citi economists said earlier this year there was a 50 to 70 percent chance of Greece exiting the euro. (Read more: Likelihood of Grexit Still 50-75%: Citi)
Ben May, European economist at Capital Economics, told CNBC.com that their view has been for some time for a Greek exit will most likely occur next year.
“A Greek exit is a matter of when not if and that is likely to be followed by another smaller peripheral country such as Portugal. Once this happens policymakers would put measures into place to safeguard the bigger economies of Spain and Italy,” May said.
Spain has found itself in the eye of the storm in recent weeks with mounting speculation that a bailout of the country is imminent, even as soon as this weekend, although many analysts say that Prime Minister Mariano Rajoy will stall a formal request until after the Spanish regional elections on October 21. (Read more: Rajoy Comments Spark New Bailout Confusion)
May added that giving out bailouts to various countries would just buy time and does not deal with the crux of the issue which is endemic structural flaws within these economies.
“It’s not a matter of the number of countries needing a bailout but the size of those bailouts. Slovenia is relatively small but Spain would be a major burden. If these peripheral countries are to stay in the long term they’re going to need help in that transition phase and ultimately we need fiscal union and as yet we’ve seen no sign of that,” May added.
Türk said the biggest problem facing the bloc was the banking union plan. Disagreements over what the union will entail have raised the risk that the plan could be derailed.
“The banking union which was agreed in June now seems to be undergoing puzzling discussions but why do these things have to be reopened? These discussions do not help,” he said.
—By CNBC's Shai Ahmed; Follow Her on Twitter @shaicnbc