Euro zone officials have just a few weeks left to take decisive steps to ensure the common currency's long-term future and avoid what could become a devastating break-up , former U.K. Prime Minister Tony Blair said.
"We're reaching the final decision point," Mr. Blair said during the Big Interview with The Wall Street Journal. Mr. Blair said European officials must put the full weight of the region's monetary system behind the effort or else it could fail.
Though Blair declined to put odds on the potential for a break-up, he said he thinks leaders will do what it takes to ensure the survival of the currency in its present form.
European officials will be holding a new round of meetings next week where long-term support plans could be formed or announced. The European Central Bank meets Dec. 8, while European Union leaders meet on Dec. 9.
"This is the big, defining moment for Europe," Mr. Blair said.
The recent surge in bond yields issued by euro zone countries is a sign that investors don't believe leaders are fully committed to saving the currency, he said. Until plans are announced that make it clear unlimited resources are at the ready to support the system, yields are likely to continue climbing, Mr. Blair said.
A break-up of the euro in any form would be economically "devastating" for the region, Mr. Blair said. The political fallout from a break-up would be harder than the difficult politics needed to reach a deal to save the currency, he added.
"This is the toughest set of decisions leaders, that I can remember, have to make," Blair said.
Italian 10-year bond yields have regularly been above 7% in recent weeks, leading investors to worry whether the region's third-largest economy will also need a bailout, following Greece, Portugal and Ireland. The pressure has subsided somewhat over the past two days, however, after major central banks agreed to lower the cost of dollar borrowing in an effort to improve market liquidity.
Providing unlimited firepower to support the euro would help save the common currency in its current form, Mr. Blair said. But if no agreement can be reached on how to enact such plans, the euro zone will face a "severe and fundamental challenge," he added.
The single currency project was politically driven from the beginning, but it is an economic program, Mr. Blair noted. The economics of the project must catch up and meet the politics for it to survive, he said.
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