Eurozone Countries Could Split, Says Goldman Sachs Exec

(Reuters) Countries in the Eurozone will find it increasingly unattractive to stay in the single currency, if there is a German-led fiscal integration, the chairman of Goldman Sachs Asset Management said in a Sunday Telegraph interview.

Portugal, Ireland, Finland and Greece could all pull out of the Eurozone rather than operate under a single treasury, Jim O'Neill, whose division manages more than $800 billion (500 billion pounds) of assets, was cited as saying.

He also called on the European Central Bank (ECB) to show more leadership to reassure worried investors.

The Germans want more fiscal unity and much tougher central observation -- with the idea of a finance ministry, O'Neill said.

With that caveat, it is tough to see all countries that joined wanting to live with that -- including the one that is so troubled here [Greece].

He added that only countries such as Germany, France and Benelux were suited for a monetary union because their exchange rates were closely linked. But for others, it was questionable.

O'Neill said countries such as Finland and Ireland, which are neighbors of non-Eurozone countries -- the U.K. and Sweden -- might prefer to quit the euro, which would bolster the strength of the single currency.

He added that the Brussels bailout deal will not solve the crisis and that the ECB needed to buy bonds.

Since the ECB resumed its bond buying programme (SMP) around three months ago, it has purchased some 100 billion euros of government bonds, a majority of which are thought to be Italian BTPs.

Italy is seen as the next domino that could fall in the euro zone crisis, with yields on its 10-year bonds reaching 6.38 percent, close to the 7 percent threshold widely viewed as unsustainable.

A member of the ECB was reported on Saturday as saying it frequently debated the option of ending its purchases of Italian bonds unless Rome delivers on reforms.

O'Neill told BBC radio on Sunday that it will be really interesting to see how the markets react to the ECB's comments when they reopen on Monday.

He said the comments gave the impression the ECB was not an eager participant in trying to support the Italian bond market and bringing about stability.

It would appear clear in that regard that they might also prefer a more of a unity type government to try and come up with a new economic policy for Italy, he said.

But it is all very fragile and the markets are requiring a stronger leadership from within these countries as well as from the ECB.

(Reporting by Avril Ormsby and Lorraine Turner, Editing by Maureen Bavdek)