Europe Economy

Euro Break-Up 'Unthinkable': ECB Vice-President

Reported by Silvia Wadhwa, written by Catherine Boyle,

A break-up of the euro would be “absurd” and “unthinkable,” Vítor Constâncio, Vice-President of the European Central Bank (ECB), told CNBC.

European Central Bank
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His comments are the latest attempt by the ECB to dampen speculation that the single currency may not survive the region’s debt crisis afterits most difficult year since being introduced in 2002.

“It’s still absurd and unthinkable in many senses of the word,” Constâncio said.

“For people who really understand what it means to have a monetary union, it’s really unmanageable and unthinkable.”

There has been speculation that struggling countries such as Greece might be better off if they left the euro and reverted to the drachma, their previous currency, which could reduce the cost of exports and labor.

“Some people that seem to think about it or have the idea of preparing for it, they don’t know what they’re talking about,” Constâncio said.

“In my view, it’s still not going to happen.”

A Euro Zone Break Up Is Unthinkable: Constâncio

Some have called for the ECB to act as lender of last resort to help restore markets’ faith in the euro, which has been damaged by high debt-to-GDP ratios in euro area countries such as Greece, Italy, Portugal and Ireland.

Constâncio said the ECB was determined to stick with its current policy of introducing new three-year funds to try to counter the freeze in interbank lending, and support greater fiscal integration in the euro zone.

“What we decided is very recent and it’s enough, but we never pre-commit, so we will see,” he said.

“So far, we think the decisions we made are very significant and should be enough for the objectives that we are responsible to attain.”

On Monday, ECB President Mario Draghi warned of the cost of a break-up of the euro.

Elsewhere, the UK continued its recent disagreement with its fellow EU member states over the euro zone rescue package by warning that it will not take part in a 200 billion euro ($260 billion) International Monetary Fund (IMF) package aimed at helping the euro zone.