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The collapse of the euro can still be averted, according to Andrew Lilico, but only if some of the weakest members leave and the remaining countries take immediate steps to promote growth.
Speaking at Citywire's 2012 Montreux conference, Lilico, director of research bureau European Economics, said that a partial break-up is now a necessity. 'I don't believe that the Greeks can be in, and because the Greeks can't be in neither can the Cypriots,' he said.
The remaining countries then need to focus on raising the growth rates of the weaker members, particularly Portugal and Italy, Lilico said, so that they are able to service their own debts.
Proposals that would see economically prudent Northern European nations such as France and Germany assume the trillions of pounds worth of debt from the likes of Italy and Spain that was created before the euro was even created must be avoided, Lilco said.
He branded debt-pooling proposals 'monstrously unfair', and said the possibility of richer countries effectively bailing out the poorer ones is the main threat to the euro at present.
The current austerity drive in force throughout the region is doomed to fail, Lilico said. 'Austerity on the scale which is required for the eurozone at the moment can't possibly work, because for some of the member states the amount of the spending cuts involved... are completely beyond anything that's ever been achieved before in a developed country.'
If there's one lesson to be learnt from the crisis, Lilico said, it's don't be Ireland. The country's decision to jeopardise its credit rating and ability to borrow by bailing out its banks was 'about as crazy a thing to do at the level of fiscal policy as you can possibly imagine', he said.