Speaking ahead of Sunday's Greek election to form a government that could revoke the terms of its bailout, the former British prime minister told the Financial Times, "You look at what the Greeks are being asked to accept -- it's beyond tough."
The risk of unrest goes beyond Greece to Europe as a whole, Blair said.
"In the end, what people will ask is: 'Is the single currency worth it if that's what we're being asked to accept,'" Blair told the Financial Times in Jerusalem.
Blair is currently special envoy for the U.S., U.N., European Union and Russian coalition, or Quartet, mediating the Israeli-Palestinian peace process.
The euro crisis solution should be a "grand bargain" between Germany and the rest of Europe to save the euro -- a bargain that would include pooling European debt, he said.
The bargain would further need to include a new push for growth, matched by deficit reductions through pension and welfare reforms, Blair said.
EU leaders are under increasing pressure to consider a banking union and increased fiscal integration when they meet in a formal summit in Brussels June 28-29.
Germany has rejected the idea because the union and integration, with pooled credit and debt, would make Germany partly responsible for the debts of weak eurozone countries -- and would remove weak countries' incentives to clean up their fiscal acts, German officials have said.
It would also likely raise the borrowing costs of Germany and other creditworthy countries, analysts say.
Blair told the Financial Times he believed the euro would survive, even if the eurozone under its current 17-member set-up collapses.
"I have no doubt that the single currency makes sense," he said, adding the single currency was central to Europe's ambitions to be a power on the world stage.
Spanish Prime Minister Mariano Rajoy said Wednesday that three days before Spain requested a $125 billion bank bailout, he wrote to European Council President Herman Van Rompuy -- whose EU branch comprises the heads of state or government of all 27 EU countries -- calling for greater European integration to save the euro.
"It is necessary to adopt decisive and forceful measures to leave clear the irreversibility of our integration project, and in particular the single currency," the letter said.
"The uncertainty regarding the euro is preventing the adjustment measures many countries are carrying out to have the desired effects that they should have," the letter said. "This situation is worsening in an accelerated manner and it is necessary to address it as soon as possible."
Rajoy released the letter to parliamentary lawmakers in the lower house Congress of Deputies, and called on European leaders to commit to greater union, even if it means losing some sovereign authority.
"The future of the euro depends on us initiating this debate," he said. "The road won't be easy but it is an indispensable goal on which we must be in agreement."
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