EU's Barroso calls euro a 'shield'

(FRANKFURT) - The euro is a "protective shield" amid the global economic crisis, European Commission President Jose Manuel Barroso said on Wednesday, dismissing fears of a eurozone break-up.

"The euro is not in danger. The situation is much worse outside the eurozone than within it," Barroso told the weekly Die Zeit in an interview to appear on Thursday.

The 16-nation eurozone's cohesion has been tested as governments fund massive economic stimulus packages in response to the global economic crisis, putting their public finances under strain.

The eurozone itself is now in its first recession ever.

Fears concerning the bloc's stability that accompanied the launch of the euro 10 years ago have resurfaced but Barroso said: "It is not without a certain irony that the eurozone is suddenly said to be under threat.

"The euro is an important protective shield," he stressed.

"Compare the development of Iceland and Ireland," the European Commission president added in reference to the two island nations.

Ireland has benefited greatly from joining the eurozone, although its financial situation is now under pressure and it finds itself bound by fiscal limits that come with membership.

On Tuesday, Icelandic Prime Minister Johanna Sigurdardottir said that joining the European Union and the eurozone would be the best option for the crisis-hit country.

Barroso, who is from Portugal, also urged European countries not to use protectionism as a way out of the economic crisis.

"Countries tend to make protectionist decisions in times of crisis. At the Commission, we fight against that and are regularly pressured, in particular regarding competition regulations" that the body seeks to enforce, he said.

In late 2008, the EU Commission came up with an economic support package worth 200 million euros (260 million dollars) which many critics said was too little but Barroso declined to go further in the interview.

"A basic political principle is to not talk about plan B if plan A has not even taken effect," he said.

In reference to a Group of 20 summit on the global crisis in London in London, Barroso said said EU countries wanted to agree on a common position later this month in Berlin.

"We should use the crisis to reach a fundamental change" in the structure of global financial markets, Barroso said. "The broad outlines were worked out in Washington in November."

After enacting them, global leaders also needed to come up with plans "to increase the transparency of banks and other financial institutions and to oversee them more effectively," Barroso said.

The meeting in Berlin on February 22 will include leaders from Britain, France, Germany and Italy, along with the EU Commission head.

Germany has also invited Spain and the Netherlands.