ECB's Draghi warns divergence a threat to euro

By John O'Donnell and Axel Bugge

SINTRA, Portugal (Reuters) - Stark structural differences between countries in the euro zone could unravel the currency union, European Central Bank President Mario Draghi warned on Saturday.

Draghi's blunt remarks address the widening rift between countries such as Germany, which seeks to balance its spending against income, and heavily-indebted Greece, which resists economic reform.

"In a monetary union you can't afford to have large and increasing structural divergences between countries. They tend to become explosive," Draghi told an audience of academics and central bankers.

"Therefore, they are going to threaten the existence of the union, the monetary union," he said.

Differences in the cultures of the 19 countries in the euro currency bloc, from Cyprus, close to the Middle East, to Ireland or Finland in the north have often extended to the management of their economies.

Labor laws and the degree of protection against losing your job are different, for instance, depending on which country you live in.

There has been increasing tension within the euro zone as the financial crisis required the emergency bailout of countries including Ireland, Portugal and Greece.

Germany has sought to persuade others to follow its conservative approach to spending, while others accuse it of doing too little to bolster the bloc's wider economy by refusing to borrow for investments.

(Reporting By John O'Donnell; Editing by Axel Bugge and Janet Lawrence)