BRUSSELS (MNI) – A break up of the Eurozone is not an option, so
the 17-nation currency bloc needs to integrate more deeply and
eventually issue collectively-backed bonds, the Prime Minister of
Belgium, Yves Leterme, said here Tuesday.

“Breaking up the euro is not an option anymore,” Leterme told an
audience at the Center for European Policy Studies, a think tank. “The
consequences for banks and other member states is hard to foresee and to
control,” he warned.

“For me it is very clear that the option of breaking up the
Eurozone is excluded,” he added.

The strongly pro-European Prime Minister, who next year is expected
to leave the Belgian government for a senior job at the OECD, also put
forward ideas for Eurobonds that would be collectively backed by the
member states of the Eurozone and for ways in which economic governance
and integration could be increased.

Eurobonds are “unavoidable in the long run” Leterme said,
suggesting that limited volumes with varying interest rates could be
issued by a euro area debt agency under strict conditions, a variation
of the so-called ‘blue bond’ concept.

More simple versions of Eurobonds, however, appear to be
“politically and legally out,” as a result of a recent ruling from
Germany’s constitutional court, said the prime minister.

The amount of capital that banks need to set aside for holding
Eurobonds should also be lower than for debt issued by individual euro
area governments, Leterme said.

Belgium’s prime minister, whose government last week easily passed
legislation approving the enhancement of the Eurozone’s bailout fund,
the European Financial Stability Facility (EFSF), said he thought the
EFSF, though adequate, should be enlarged if necessary.

The EU may have made “more progress on economic policy in the last
year than over the entire previous decade”, but more measures are still
needed to strengthen the monetary union, he said.

He said that in order to strengthen economic coordination, Eurozone
leaders and senior officials involved in technical work should meet
regularly with future members of the Eurozone, contributing to the
ongoing debate on new measures that the European Commission and the
President of the European Council, Herman van Rompuy, are expected to
present in October.

The Eurogroup council of euro area finance ministers should also
become a more permanent institution, he said.

Leterme argued for the appointment of a single figure to help draw
together and oversee the Eurozone. That person should be either an “EU
finance minister,” directly appointed by the governments of the euro
area, or a commissioner of the Brussels-based European Commission, which
is the executive arm of the European Union.

Eurozone members are now “paying the price for a lack of
convergence at the start of the euro” and playing “catch up” to bring
economic governance of its members into line, he said.

–Brussels newsroom +324-9522-8374 pkoh@marketnews.com

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