ECB Chief Warns Of Costly Eurozone Break-Up

Newly-appointed European Central Bank president Mario Draghi has warned that any country leaving the eurozone to escape the debt crisis would be worse off.

Breaking an ECB taboo by considering a break-up of eurozone countries, Mr Draghi told the Financial Times, that leaving the euro was not the answer to the problem.

"This wouldn't help. Leaving the euro area, devaluing your currency, you create a big inflation, and at the end of that road, the country would have to undertake the same reforms that were due to begin with, but in a much weaker position," he said.

In his first interview since taking on the top job on November (Stuttgart: A0Z24E - news) 1, he told the newspaper that a break-up would also create stresses and unknown consequences for those nations remaining in the euro.

"You would have a substantial breach of the existing treaty. And when one starts with this you never know how its ends," he said.

Mr Draghi remained adamant that the ECB should not start printing money to solve the crisis and urged political leaders to move fast to make the European bailout fund operational or face higher costs.

His comments are in stark contrast to those of his predecessor, Jean-Claude Trichet, who refused to talk of a scenario involving a collapse of the currency union, calling it "absurd".

But they come as there is increasing speculation that at least one struggling, debt-laden nation will drop the currency amid the crippling debt crisis.

Fitch Ratings on Friday warned it may downgrade Belgium, Italy, and four other eurozone countries in the absence of a "comprehensive solution" to the region's debt crisis.

London mayor Boris Johnson has tipped Greece as the first country to leave, telling the BBC's Andrew Marr show on Sunday that the eurozone was likely to break up in the next 12 months.

The Royal Bank of Scotland's chairman Sir Philip Hampton shared the same view, telling Sky News' Jeff Randall Live show: "I think it's likely that one country, a small country, will drop out."

Mr Draghi is due to meet the European Parliament economic affairs commission in Brussels to discuss the debt crisis later today.