Friday, January 28th 2011 - 02:14 UTC

Europe Could Fall Apart Sustaining Euro Warns Soros

Billionaire financier George Soros warned on Wednesday that Europe could potentially fall apart because of the “two-speed Europe” of haves and have-nots that is being perpetuated by the reform of the embattled euro.

George Soros

He told a news briefing at the World Economic Forum that the currency used by 17 EU nations is in the process of reform following concerns over the debt crisis that enveloped Greece and Ireland and is threatening others.

Its flaw, he said, of having a common central bank but no common treasury was being addressed with the creation of a permanent European Financial Stability Facility, which was created to bail out debt-ridden countries.

But Soros said the reforms are not addressing the euro's real problem — that the currency has divided the richer EU countries from the poorer ones.

“The euro was supposed to bring about convergence, and effectively it created divergence and that is now being perpetuated,” he said. “So you are going forward with this new structure. You're going to have a two-speed Europe, and that is going to be politically very disruptive.”

“That is the unsolved problem that I think needs to be recognized and some solution found because otherwise I think the euro is clearly here to stay. There's a clear commitment to the euro. But it could put into motion this very divisive political force of two Europe’s,” Soros warned.

“Europe potentially could fall apart because of this two-speed Europe so it needs a solution,” he said.

Soros said countries in surplus ought to be investing and expanding more in poorer European countries, but he said Germany, Europe's largest economy, can't do it because of very strict constitutional limits.

He called for a Europe-wide stimulus that can spur growth in countries that are lagging economically.

He noted that “there's a big push now on continental Europe for a financial transaction tax” which could possibly be used to help these countries as well as for other activities like fighting climate change.

Britain, which is neck-and-neck with France for the second-largest economy in the 27-member EU but not part of the euro zone, has embarked on a major austerity program to cut government spending aimed at putting it on sounder economic footing.

“I think they may be right in embarking on it,” Soros said when asked about the measures introduced by the coalition government led by Prime Minister David Cameron.

“But I think they will probably have the sense that they'll have to modify it when the effects are felt,” he said, “because I don't think they can possibly be implemented without pushing the economy into a recession.”

Soros said the initial reaction has been “very positive” and the world will be watching to see what happens, “but my expectation is that it will prove to be unsustainable.”

As for the broader global economy following the 2008 economic crisis, Soros said, “I think there was a serious danger of a deflationary trap of debt with deflation reinforcing each other, the burden of debt and prices falling.”

“This has been successfully fought off, and the balance is now tipping the other way,” he said.

 

6 comments Feed

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1 Be serious (#) Jan 28th, 2011 - 10:30 am Report abuse
Good news!
2 gdr (#) Jan 28th, 2011 - 10:34 am Report abuse
George SOROS ( black György) !

Why ! you make these bullshits ? why ?

1-you invest in Interoil ( Papua New Guinea),
2-you invest in Manas Petroleum ( Albania),
3-you invest in Desire Petroleum ( illegal zone Malvinas around).

1- you can make money tolerable,
2-you can make money very.. very hard,
3- you can not make money there.

once you were not bad at monetary-speculations
but today, you are not .. indifferent on commodity speculations.

best.
3 xbarilox (#) Jan 28th, 2011 - 04:59 pm Report abuse
“because I don't think they can possibly be implemented without pushing the economy into a recession.” shhhh, they just don't know it yet György.
4 Typhoon (#) Jan 28th, 2011 - 09:21 pm Report abuse
Good!

Let's have Europe fall apart into separate areas that we'll call, what, nations?

Europe is really beginning to feel like a form of South American fascism.
5 Fido Dido (#) Jan 28th, 2011 - 10:39 pm Report abuse
South American Fascism..really Typhoon, or just good old German fascism?
Get real kiddo, stop watching world war two youtube video clips and stop playing video games. Do your school homework.
6 Typhoon (#) Jan 30th, 2011 - 01:40 pm Report abuse
Sorry, Fido (good doggie), schooldays to long ago to remember. Longer than a Zimbabwean's life expectancy!

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