The euro-zone will survive, if only because the alternative to the current market turbulence would be worse, said former Swedish prime minister Göran Persson.
Delivering the keynote speech at the eleventh annual IPE Awards Seminar in Brussels, Persson insisted the euro would continue to be the EU’s dominant currency.
He also admitted that, if traders started speculating against the Swedish or Norwegian krone, the countries could be forced to follow the Swiss National Bank in pegging the exchange rate to the euro.
“The euro will survive - that is important to say - because the alternative is worse,” Persson told delegates, saying that this was “self-evident”.
He said the currency was here “to stay and to grow”.
“The euro will survive also because we are more and more integrated with each other,” he said, explaining that to “constantly” have a currency risk reintroduced to trade would pose significant problems.
He warned against commentators predicting a swift exit of several southern European countries from the euro-zone.
“There is nothing as dangerous for the German export industry as Italy and Spain leaving the euro - that could also be said sometimes, the opposite message is always said and delivered.”
“If the euro is excluded from those four or five countries in the southern part of Europe, you will have the immediate risk of an upturn of the euro that is the same type of problem as the Swiss franc.”
He noted the irony that the first country to tackle the “turbulent” situation had been Switzerland, with the Swiss National Bank’s decision to peg the franc to the “scandalous euro” and devaluing it.
Persson predicted Switzerland would not be the last currency to have to pursue such a tactic.
“If someone starts to speculate against the Norwegian or Swedish krone, that creates an impossible situation for our export industry,” he said: “If that happens, we have to do the same as the Swiss - to peg to the euro.”
However, the former politician stressed that he believed in the euro and in Europe and criticised those who argued a loosening of the union’s structures was the way to reinvigorate economic growth. “We have in front of us huge problems, but we can’t solve them by dismantling the European structures,” he said.
He said he agreed with the German Chancellor Angela Merkel and French President Nicolas Sarkozy, even though it went against many of the policies he and his party had espoused in the past.
He also highlighted the problems facing Europe, contrasting the situation with the US.
He noted that, in the US, recovery could be driven by the number of young people in the country, contrasting this situation with the ageing population in Europe.
“It’s not the 60-year-old person who is the driving force for the economy, it is the six-year-old girl or boy,” he said.
“In Europe, a growing majority will be 50 years or over - that is the most difficult political threat not yet addressed.”