Bank of Israel’s Fischer Says Breakup of Euro Zone Possible

The euro zone may begin to “crumble” if the leading countries in the area don’t succeed in making “difficult decisions” in time, Bank of Israel Governor Stanley Fischer said.

Fischer, a former first deputy managing director of the International Monetary Fund, said today that while Germany and France are working to avoid this scenario, market forces may force the breakup. If the disintegration occurs, some banks in Europe will go bankrupt, and some countries will be in a comparable situation, Fischer said.

“If countries start to exit, it’s not clear how this process will develop,” Fischer said at a meeting of the Knesset Finance Committee in Jerusalem. “What is certain is that there will be a big mess.”

European policy makers are meeting in Brussels this week to consider tougher budget rules as part of their efforts to craft their fifth “comprehensive” solution to the sovereign-debt crisis. Most international investors predict at least one nation will eventually dump the euro and they say greater fiscal ties or a smaller currency area are the best fixes for the region’s debt crisis, according to the quarterly Bloomberg Global Poll.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.

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