MPS chairman sees more than 50 percent chance of Greek exit from euro

Alessandro Profumo, formerly CEO of UniCredit and one of Italy's best-known bankers abroad, said he was concerned that Europe was in "stalemate" but said he believed it would pull back from the brink as it has done in past crises.

"The euro is certainly at risk, but I am convinced that we will carry on, I am convinced the euro will not blow up," Profumo, who was appointed chairman of Monte dei Paschi last month, said in an interview on Italian state television.

"I am worried because either Europe takes a major step back or we move forward, but we can't stand still. But I am also confident because every time Europe has been in trouble, steps forward were made."

Asked about the risks of Greece leaving the single currency, he said: "Today the chances of a Greek exit are quite high, above 50 percent."

He said a "plan B" for Europe to protect other euro zone members from contagion would be to increase firewalls around countries like Italy, Spain and Portugal, either by buying their government bonds or through a new injection of liquidity by the European Central Bank.

Speaking about his home country, Profumo said the falling share of Italian public debt now being held by foreign investors was a "negative sign", and it was crucial to cut the debt pile and spur growth to reverse the trend.

Ratings agency Fitch said last week the proportion of Italian debt held by foreigners had fallen to 32 percent at the end of the first quarter from 50 percent in 2008.

Profumo said institutional investors had also been buying fewer bonds issued by Italian banks as the wholesale debt market froze up, forcing lenders to use cheap three-year funds offered by the ECB to fund the gap.

"It is important that in the next three years we manage to recreate a European market (for funding), so that institutional investors return to buy the bonds of Italian and Spanish banks " he said.

(Reporting By Silvia Aloisi; Editing by David Cowell)