Soros Speaks: Eurozone Facing Do or Die Situation
June 25, 2012 @ 9:24 AM EST
Even at age 81, legendary investor George Soros still commands attention when he speaks. Soros is perhaps best known for making over $1 billion in 1992 betting against the pound, forcing the British government to abandon a peg to a basket of European currencies. He is reportedly worth over $20 billion and known more recently for his philanthropic and think tank activities, although still actively involved in managing his family’s fortune.
Soros gave an exclusive interview over the weekend to Bloomberg and essentially said Europe is facing a “do or die” situation in the short-term. He was highly critical of Angela Merkel and Germany from a policy perspective.
According to Bloomberg:
“Billionaire investor George Soros called on Europe to start a fund to buy Italian and Spanish bonds, warning that a failure by leaders meeting this week to produce drastic measures could spell the demise of the currency.
Policy makers should create a European Fiscal Authority to purchase sovereign debt in return for Italy and Spain implementing achievable budget cuts. Funding for the purchases would come from the sale of European Treasuries, which would have low yields because they would be backed by each euro member.”
Soros said of Merkel and the upcoming European summit in Brussels:
“Merkel has emerged as a strong leader. Unfortunately, she has been leading Europe in the wrong direction. There is a disagreement on the fiscal side. Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco. That could actually be fatal.”
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Comments
Sorry for the errors that attended premature button-pushing. Here it is again, corrected. Percy at 10:00 AM on June 25, 2012 So what if it's fatal for the Euro? The issue is whether it is fatal for Germany. Probably not, and that, among other things, is likely to be why Ms.Merkel and the German banks will continue the hard line they've taken. It is the so-called beggar nations who must alter their ideas of what they can do if the Euro is to continue. Why would one think that Germany's future somehow depends on its continuation? It may be expensive for Germany to take this course and being thought to be responsible for the Euro's demise (because of its intransigence), but it looks better than the Germans simply quitting the whole thing outright by withdrawing from the EU. That end-game means Germany will have to reinvent its own currency and force its own banks to take a big hit, but it looks lke they can afford it -- and not only will it stop the German bleeding, it will end it.
Thanks for the comment Percy. Wish we knew the right answers to the situation but enough others think they do. Analysis we have seen suggests that if Germany left the EU and the whole Euro structure fell apart, it would have very negative impact on German exports for some years, let alone the market panic which would ensue. But debating Germany's exit from the EU,seems futile right now as that seems far-fetched in the "near future". We see your point but would global politics really allow that? Doubtful.
So what if it's fatal for the Euro? The issue is whether it is fatal for Germany. Probably not, and that, among other things, is likely to be why Ms.Merkel and the German banks will continue the hard line they've taken. It is the so-called beggar nations who must alter thier ideas of what they can do if the Euro is to continue. Why wold one think that Germany's future somehow depends on its continuation? It may be expensive for Germany to take this course and being thought to be responsible becuase of its intransigence for the Euro's demise, but it looks better than the Germans simply quitting the whole thing. That end-game means Germany wlil have to reinven is own currency and force its own banks to take a big hit, but it looks lke they can afford it -- and not only will it stop the German bleeding, it will end it.