UK Politics

Tony Blair: Euro collapse would be catastrophic

Media playback is unsupported on your device
Media captionTony Blair: ''The choices are very difficult and very painful''

Former prime minister Tony Blair has told the BBC the collapse of the euro would be "catastrophic" - and Europe must get behind it.

Mr Blair said he hoped it would not collapse, but European leaders faced "very difficult and painful" choices.

A "long-term framework of credibility" was needed, he said, which included "strong fiscal co-ordination".

Chancellor George Osborne told the BBC there must be more co-operation on tax and spending in eurozone countries.

'Whole weight'

As the debt crisis continues to grip the eurozone, Italian PM Silvio Berlusconi has resigned - expected to be replaced by former EU commissioner and economist Mario Monti - after a week which saw the Italian cost of borrowing hit 7%, the level at which Greece, Ireland and Portugal were forced to seek external help.

In Greece, Lucas Papademos has been sworn in as prime minister - after his predecessor George Papandreou was forced to step aside following a call for a referendum on a eurozone rescue package for the debt-laden country.

In his interview, Mr Blair told BBC One's Andrew Marr Show there had "never been a tougher time to be a leader than right now".

But he said the "whole weight" of European institutions - including the European Central Bank - had to stand behind the euro and a "long-term" frame work was needed.

"Major reforms" were needed to the European social model and European budget - as well as more "strong fiscal co-ordination" and he warned European leaders not to get "behind the curve" in their decisions.

He said economies had to align: "The myth that the Italian and German economies were the same - that ten-year myth has now evaporated."

Measures needed to stabilise the single currency would be painful, he said, but added: "If the single currency broke up, it would be catastrophic."

Tax co-operation

Mr Blair said he believed the single currency crisis had exposed the need for reform - but ageing European populations, and the state of welfare, government and public services meant change was always necessary.

Asked if his former chancellor Gordon Brown had been right to push hard for Britain not to go into the euro, when Labour was in power, Mr Blair said: "He was right, although I would also say by the way, I was never in favour of doing it unless the economics were right."

He said looking at the "very long term", assuming the euro stabilises, Britain should always "keep the option open" of joining the euro: "But right now we have our own issues to look at too."

In an interview with the BBC's Politics Show, UK Chancellor George Osborne also said there would have to be more co-operation between eurozone countries on financial issues - as long as the EU could still work for members which were not members of the euro.

"The lasting answer is that the countries of the eurozone are going to have to co-operate much more closely on issues of tax and spending.

"There's got to be more integration - the kind of thing actually that Britain would not tolerate and is one of the reasons we didn't go in the euro."

On Friday, UK Prime Minister David Cameron said there was still "a big question mark" over the future of the eurozone. He says it is not in Britain's interests for the single currency to break up but the government is "preparing for every eventuality".

But Labour leader Ed Miliband has said Mr Cameron and Chancellor George Osborne are using the eurozone debt crisis "as a cloak to hide their lack of action" on boosting UK economic growth.

Shadow Chancellor Ed Balls told the Politics Show the government was trying to "divert attention from what their policies have done" and said its plan to wipe out the structural deficit in one parliament was "backfiring".

"A year ago, the spin from the government was: 'Our plan will work, the private sector will deliver growth'. We're now in a position where David Cameron, George Osborne and Nick Clegg are desperately trying to tell people a new message, that however bad it is, it's all the euro crisis - it won't wash.

"Our slowdown happened before the euro crisis, we're growing slower than other countries, we've got bigger rises in unemployment, we are weaker and less able to withstand this latest crisis because of what the government has done."