(Reuters) – The euro zone is unlikely to survive its sovereign debt crisis in current form, according to a majority of leading economists and former policymakers polled by Reuters.
Fourteen out of 20 prominent academics, former policymakers and independent thinkers polled over the last 10 days agreed the euro zone’s make-up would change.
A new “core” euro zone with fewer members received qualified backing from 10 economists as a possible solution, with seven of them saying Greece should be excluded from it.
“The euro zone can and should survive, but will not survive on the current trajectory,” said Jeffrey Sachs, director of the Earth Institute at Columbia University in New York.
There was a recurring theme that to tackle the crisis the European Central Bank should either become lender of last resort, or buy huge quantities of euro zone government bonds, in exchange for binding fiscal integration.
Germany, the euro zone’s paymaster, and the ECB itself are staunchly opposed to the central bank becoming a lender of last resort, or monetising debt through massive government bond purchases.
But pressure on them is growing. French Finance Minister Francois Baroin said on Wednesday the ECB should act as lender of last resort, citing the effectiveness of the U.S., British and Swiss central banks in this role.
Economists were clear that greater involvement from the ECB would have to come with fiscal strings attached.
The crisis took an unexpected turn on Wednesday thanks to one of Germany’s worst bond auctions since the launch of the euro, prompting concerns the debt crisis was even beginning to threaten Berlin — a previously unthinkable prospect which may change the approach of Europe’s largest economy.