The euro zone is at a dangerous brink, says billionaire investor George Soros, unless Germany agrees to lend money to Greece at below-market rates.
"It is 50-50 whether the euro zone breaks up," Soros says. "The damage that breakup would cause is so great, that I think that as people realize it, they will pull back from the brink."
He told the Financial Times that "we are at the brink now ... a solution has to be found in a matter of days."
If “Greece has to borrow at 6 or 7 percent, it cannot make the target,” Soros says.
“The IMF is in the business of making emergency loans with conditions and that is what Greece needs.”
Soros notes that “having a common currency was very sensible for a common market,” but added that if “the political will to keep Europe together” is lacking, disintegration is the most likely result.
“Currency traders find it very difficult right now to speculate because public opinion is very much aroused,” Soros observes. “If I were running a hedge fund now, I would be wary of making money because the political consequences would be too severe.”
Soros, who became a billionaire by betting against the Bank of England almost 20 years ago, also says he doubts that hedge funds are playing much of a role in the current crisis because “there is a kind of witch-hunt looking for someone who is profiting.”
Economists say that the weekend pledge by euro zone leaders to provide Greece with 30 billion euros ($40.3 billion) in loans should ensure Athens can meet its near-term funding needs.
"The deal still needs unanimous EU backing before it is made operational, so we are not there yet,” Kenneth Broux, senior market economist at Lloyds TSB, told MarketWatch.
“But at least we know how the plumbing looks like if Greece struggles to rollover short- and longer-term funding."
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