Soros tells Germany to lead or leave euro zone
INVESTOR GEORGE Soros has issued a passionate plea to the German government to lead the euro zone out of recession by boosting growth, creating a joint fiscal authority and guaranteeing common bonds, or by itself leave the currency union to save the future of Europe.
“Lead or leave: this is a legitimate decision for Germany to make,” the billionaire financier and philanthropist said in an interview with the Financial Times.
“Either throw in your fate with the rest of Europe, take the risk of sinking or swimming together, or leave the euro, because if you have left, the problems of the euro zone would get better.”
“It is entirely dependent on Germany’s attitude,” he added. “If they insist on a policy of austerity, of reinforcing the current deflationary stance, and they won’t budge from that, then in fact it would even be better for them in the long run [to leave].”
Mr Soros (82), a strong supporter of European integration but an outspoken critic of Germany’s euro zone crisis management since 2010, praised the latest move by the European Central Bank to return to buying euro zone government bonds as “a more powerful step than the previous ones.
“It will have an effect,” he said. “It could even lay the groundwork for an eventual solution. But it is a stopgap, not a solution.”
Simply announcing the possibility of ECB intervention should reduce the risk premium Madrid has to pay on its bonds, but it would not be enough to stop the current deflationary spiral, Mr Soros said. He did not expect Spain to apply for support “until it has its back to the wall”.
Demanding tougher austerity conditions from countries such as Spain and Italy, however, would reinforce the division in the euro zone between debtors and creditors: “It is a step towards making a two-tier Europe permanent.”
Mr Soros will spell out his fears that such a split would lead to the eventual collapse of the currency union – and of the common market and the European Union as a whole – in a speech tonight in Berlin. He has also published a lengthy essay on the “tragedy” of Europe in the latest New York Review of Books.
He made clear, however, that his preferred solution is for Germany to abandon its deflationary stance and behave as a “benevolent hegemon” towards its partners, rather than leave the euro.
“Politically it would be a terrible blow,” he said. “All the pro-Europeans I know are shocked by this idea that Germany should leave the euro. It would be much more desirable if Germany underwent a change of heart. Once they look at the costs, they may want to stay.”