Germany and France are examining ways of creating a “two-tier” euro system to separate stronger northern European countries from weaker southern states.
A European official has told The Daily Telegraph the dramatic option was being examined at cabinet level.
Senior politicians believe their economies need to be better protected as they could not cope with another crisis on a par the one in Greece.
The creation of a “super-euro” zone would initially include France, Germany, Holland, Austria, Denmark and Finland.
The likes of Greece, Spain, Italy, Portugal and even Ireland would be left in a larger rump mostly Mediterranean grouping.
The official said French and German officials had first spent months examining how to exclude poor-performing states from the euro but decided it was not feasible.
A two-tier monetary system in the 16-member euro zone is being examined as a “plan B”.
“The philosophy is the stronger countries might need to move away from countries they can’t afford to bail-out,” said the official. “As a way of containing the damage, they may have to do something dramatic, though obviously in the short term implementation is difficult.
“It’s an act of desperation. They are not talking about ideal solutions but the lesser of evils. Helping Greece could be done relatively cheaply but Spain they can’t afford to let fail or bail-out.
“And putting more pressure on the people of France and Germany to save other countries is politically unfeasible.”
One option, to protect the wealthier northern European countries and to help indebted southern Europeans, would be for Germany to lead a group of countries out of the existing euro into a new single currency alongside the old.
The old euro would decline sharply against the new German and French dominated currency but both north and southern Europeans would be protected.
Northern economies would be protected from debt contagion and southern countries would be spared the horrors of being thrown out and forced to go it alone.
Angela Merkel, the German Chancellor, has already paid a political price for forcing the rescue plan on a reluctant public, losing her majority in the upper house of parliament in a recent election.
The official pointed out that France held lent £500 billion to Spain and the Germans had lent £335 billion.
Nicolas Sarkozy, the French president, is understood to have been initially cool on the idea but has grown so frustrated with Greece and now Spain that he has allowed officials to explore proposals.
“He would prefer to keep the euro in place but if Spain, Italy and Greece are dragging him down he accepts he may have to cut them loose,” said the official. “They are trying to contain the contagious effect but they don’t have a solution yet.”
The crunch time will come in September, when Spain has to refinance £67 billion of its foreign debt.
“If the markets don’t buy that will trigger a response by Germany and France,” said the official.
Expelling a country from the euro could push the whole region into a slump because European banks are so exposed to debt in southern Europe. The consequences for the exiting country would be even more catastrophic.
“The euro zone debt crisis has a long way to run,” said one senior EU negotiator. “No one knows where it is going to end up. Only one thing is sure, the euro zone will change.”
Alex Spillius in Washington and Bruno Waterfield in Brussels
sursa: telegraph.co.uk
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