By John Geddie
LONDON (Reuters) - The former head of the European Central Bank said on Wednesday that the euro zone will stay intact despite testing times ahead politically but differences between member states' banking put the bloc's markets at risk of fragmentation.
Jean-Claude Trichet, ECB president between 2003 and 2011, who oversaw the global financial crisis and the start of the euro zone debt crisis, said elections in France, Germany and the Netherlands next year should not deal a killer blow to support for the monetary union.
"The resilience of the European project is under-assessed. We could see that in the worst financial crisis since World War Two when a lot of people were expecting the euro as a currency to be put into question, or the euro area as a concept to be dismantled. Neither of those happened," he told Reuters.
On the sidelines of an event in London, Trichet said Austria's decision on Sunday to choose a pro-European candidate for president over far-right, eurosceptic Norbert Hofer was a positive sign, and that support for the euro area in Italy should remain strong despite political uncertainty there.
He later told an audience of financiers in London that while Britain's vote to leave the European Union in June was an "abominable decision", he saw worrying signs that euro zone countries were taking a more nationalistic approach to their own banking sectors.
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"What could be a fragmentation of the euro area, would be ... that the single market of financial services will be renationalized," Trichet said.
"That is a big danger not only because of Brexit, which is from that standpoint an abominable decision. ...but we see also a tendency ... to re-embark on mercantilist policies that is no good for global prosperity."
(Editing by Louise Ireland)