Former Tory chancellor tells Radio 4's Today programme that time is running out for eurozone countries with bonds near to 7%
Former Conservative chancellor Lord Lamont has warned that the euro will not survive without urgent action to resolve the eurozone debt crisis.
His comments came as European leaders face renewed pressure to boost the firepower of the EU's multibillion-euro bailout package after Belgium's credit rating was cut.
Credit rating agency Moody's downgraded Belgium by two notches to Aa3, its fourth-highest rating. It warned that indebted eurozone countries such as Belgium will find it increasingly hard to fund their debts or achieve economic growth in the face of Europe's austerity drive.
"The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future," warned Moody's.
Lamont said the markets did not believe the EU's response to the crisis was credible.
"We need to get on with this a bit faster if the euro is going to survive in any sort of form," he told BBC Radio 4's Today programme. "The choice is between contraction or explosion.
"There is not time left. Italy and other countries cannot go on with interest on their bonds near to 7%. At some point there is going to be a real crisis.
"One of the big dangers is the longer it goes on, the more likely it is that a big financial institution somewhere is going to get into trouble because of its holding of sovereign bonds.
"This is going to happen if a crisis solution is not found very soon."
Another ratings agency Fitch said on Friday it would consider cutting Belgium's credit rating, along with those of Spain, Italy, Slovenia, Cyprus and Ireland. France's AAA credit rating remained intact for another day, although Fitch did revise its outlook down to "negative".
The latest credit rating changes came as the EU released details of the "fiscal compact" deal designed to rescue the euro and prevent countries from going bust. This was published amid concerns over rising bad debt levels in European banks and the growing dependence of major lenders on funds provided by the European Central Bank.
French president Nicolas Sarkozy and German chancellor Angela Merkel said the fiscal compact could go ahead with the backing of just nine of the eurozone's 17 members. It will allow Brussels to enforce greater budgetary control and provide a solid firewall against shocks from the financial system.
But Fitch said the wrangling over fundamental aspects of the compact and the failure to clearly identify who will pay if the plan fails was undermining its standing with the markets.
Elmar Brok, a German member of the European parliament for Angela Merkel's CDU party, said he was confident a solution would be reached.
"You see how problematic it is to find a position of majority within a country; how more difficult it is to do it between countries," he told the programme.
"But I think the crisis is so dangerous for everyone, within the euro or outside the euro, that we should find a solution that has credibility with the markets."
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Source: http://www.guardian.co.uk/business/2011/dec/17/euro-survive-urgent-action-lamont
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