Speaking in Italy at the Festival of Economy, the Financial offered a variety of comments on the economy, but has spent most of his time on the current situation in Europe. In a speech long enough, Soros covered Greece, Germany and the reasons why it considers that the Union will survive financial and trade-offs between the EU governments will be made. But it will not be an easy path. At one point, he discussed the bubbles and in fact described the EU as a.
“I maintain that the EU itself is like a bubble In the expansion phase of the EU was that the psychoanalyst David Tuckett called.” Fantastic object “- unreal but immensely attractive,” he said. “The EU was the embodiment of an open society -. An association of nations based on the principles of democracy, human rights and the rule of law in which no nation or nationality have a dominant position “
What is crucial now to Germany, Europe’s largest economy and one of the largest in the world. “We must do everything we can to convince Germany to show leadership and to preserve the European Union as the great object he used to be,” said Soros. “The future of Europe depends.”
The German economy continues to grow, while the euro area as a whole is in decline, he noted, meaning that a “discrepancy” is widening between the Germans and just about everyone. “The political and social dynamics are also working to disintegration,” Soros said. “Public opinion as expressed in the results of recent elections is increasingly opposed to the austerity and this trend is likely to grow until the policy is reversed. So something has to give. ”
Soros said that in his opinion, the “authorities” – by which he means primarily Germany – have three months to “correct their mistakes and reverse current trends.”
Why three months? He explains as follows:
“I expect that the Greek public will be sufficiently frightened by the prospect of expulsion from the EU that it will give a narrow majority of seats in a coalition that is willing to comply with the agreement current [Note: Greek elections are scheduled for 17 June], “he said.” But no government can meet the conditions so that the Greek crisis is likely to come to a climax in the fall. Right now the German economy will also be weakened so that Chancellor Merkel is even more difficult today to persuade the German public to accept additional responsibilities in Europe. This is what creates a window of three months. ”
Among other things, Soros argues that banks need to plan a European deposit insurance that will keep capital from leaving the continent, direct funding by the European Stability Mechanism and the general supervision and regulation.
“The highly indebted poor countries need relief on their funding costs,” he said. “There are many ways to provide it but they all need the active support of the Bundesbank and the German government.” Germany, provides, “is likely to do what is necessary to protect the euro – but nothing more.”
While what will ultimately happen to Europe can not be known, Soros does believe that a reorganization “progressive financial system on a national basis could provide a breakdown of the euro possible ordered in time a few years and If it were not for social and political dynamics, one could imagine a common market without a common currency. ”
A break earlier, he said, would almost certainly be “messy” if it is not catastrophic, potentially leading to the collapse of the common market and the EU itself. “But it is likely that the euro will survive as a disruption would be disastrous not only to the periphery, but also for Germany,” he said.