The week started really bad for the euro zone. Spain formally sought a banking rescue of up to 100 billion euros Monday, Cyprus struggles to bypass EU and seek a loan from Russia, while France does not feel better either as its banks apparently fight to avoid bank contagion. Amid this euro zone turbulence, billionaire George Soros warned that the euro crisis is getting deeper and that it could destroy the European Union due to lack of cohesion. At the same time, Soros sharply criticized the policy makers for prescribing wrong medicine.
REUTERS: Soros Warns Euro Crisis Could Destroy the EU
Billionaire George Soros warned on Monday that the euro crisis is growing deeper, tearing at the fabric of European Union cohesion, because policymakers are prescribing the wrong remedies.
“I’m afraid that the euro crisis is getting worse. It’s not over yet, and it is going in the wrong direction,” Soros said in discussion with Denmark’s economics minister hosted by the daily newspaper Politiken.
“The euro is undermining the political cohesion of the European Union, and if it continues like that could even destroy the European Union,” Soros said. “That is due to a misunderstanding of what the problem is.”
Soros, the Hungarian born U.S. investor, said that the creators of the single European currency believed that imbalances were created in the public sector without understanding that markets themselves can create imbalances.
He said the euro crisis is being dealt with by policymakers as a fiscal crisis though the crisis began as a collapse of the banking system in the United States and was compounded by a divergence of competitiveness among European countries.
He said that failure to deal with the crisis was creating tremendous tensions because people, who see that policy is failing, are driven into anti-European positions and dissent is growing within and between the countries of Europe.
“It could be reversed at any time if only the authorities understood that the box is broken and you need to find some out-of-the-box invention to bring it back inside the box and then put it right, change the rules of cohesion,” he said.
Soros said the crux of the problem was that debt reduction was coming at a bad time for the European economy. “You can grow out of excessive debt, you cannot shrink out of excessive debt.”
And he warned that the euro zone fiscal compact, an agreement by 25 EU leaders to prevent another debt crisis and restore confidence, was pushing in the wrong direction because it obliged governments to balance budgets and reduce indebtedness at a time of inadequate demand.
He said that because fiscal stimulus was ruled out, monetary policy remained the only tool available. (Reuters)
I would agree with Soros that the EU policy makers have no idea not or they do not want to see how the whole game is being played.
The whole problem lies in the fact that there is this dogma about banks not being allowed to fail. Any other business, no matter how big or small, can fail, and is allowed to do so. Not banks, no matter how reckless they are. How many banks have been fined for reckless trading? How many have been closed due to management “incompetence”?
Compare those figures to business failures for those reasons in any other sector, and the question has to be asked “why”. Why must every 9 out of 10 people in the world suffer in order to save “the banks”. The answers lies with the 1 person who makes up the 10. He owns the bank, and dictates policy. Everybody else suffers policy…
I see that Reuters has very conveniently decided to omit Soros’s comments on Merkel:
“Merkel has emerged as a strong leader in Europe. Unfortunately, she has been leading it in the wrong direction.”
Now you see how dishonest, manipulative and basically crooked are the mainstream media. You cannot rely on them even to get the day of the week right, if that should suit them. And Reuters is one of the worst.
somebody stole Merkels’ compass
Either that, or her brain is missing.