Lagarde: Euro will survive 2012

International Monetary Fund chief executive Christine Lagarde has pledged to support Greece through its economic problems and says the euro is unlikely to collapse in 2012.

Pressure has been building within the Euroarea as the new Greek Government said this week that unless a new bailout – which could have to be bigger than planned – is agreed for the debt-struck country it could be forced out of the single currency within three months.

Speaking at a press conference in South Africa, and quoted on the Guardian business blog, Largarde said 2012 would not be an easy year and that dealing with the euro-crisis would require “effort and focus”:

She said: “Will 2012 be the end of the euro? My answer is I do not think so. The currency itself is not likely to vanish or disappear in 2012.  Will Greece quit the eurozone in 2012? The euro partners have affirmed, reaffirmed their determination [that Greece will stay in the euro]. We can only support that.”

The European Commission, the European Central Bank and the IMF – known as the troika – are currently negotiating a second bailout package for Greece worth £107bn. Its delivery is dependent on the country being seen to implement a fierce package of austerity measures. The Financial Times Deutschland is reporting that the new bailout could have to be increased because of worsening Government finances.

In December, Economic and Monetary Affairs committee chair Sharon Bowles said the euro risked failure before 2012 had even started. According to Reuters, investor George Soros says the euro crisis is more serious than the crash in 2008 and that a collapse of the currency would be catastrophic.

He says: “Today the euro is potentially endangering the political cohesion of the European Union. If the currency itself were to break down, it will lead to the break up of the European Union itself. This will be catastrophic not only for Europe but also for the global financial system.”