Tags: Soros | Euro | Crisis | Lethal

Soros: Euro Crisis Has Entered ‘More Lethal Phase’

By    |   Thursday, 12 Apr 2012 06:53 AM

Europe’s fiscal strategy to promote budgetary discipline can’t work and current policies must be changed to help fight the eurozone debt crisis that has entered a “more lethal phase,” billionaire investor George Soros wrote in an opinion piece in the Financial Times.

“Far from abating, the euro crisis has recently taken a turn for the worse. The European Central Bank relieved an incipient credit crunch through its longer-term refinancing operations. The resulting rally in financial markets hid an underlying deterioration; but that is unlikely to last much longer,” he wrote.

"The fundamental problems have not been resolved; indeed, the gap between creditor and debtor countries continues to widen. The crisis has entered what may be a less volatile but more lethal phase," wrote the chairman of the Soros Fund Management.

Editor's Note: Wall Street Insider: The System Is Rigged

Soros warned that "Europe is facing a long period of economic stagnation or worse" with the continent unlikely to survive its destabilizing effects.

"Other countries have gone through similar experiences. Latin American countries suffered a lost decade after 1982,” he wrote. “And Japan has been stagnating for a quarter of a century; both have survived. But the European Union is not a country and it is unlikely to survive. The deflationary debt trap threatens to destroy a still-incomplete political union," he wrote.

Europe's future isn't up to the Bundesbank, Germany's central bank, he said.

The Bundesbank is campaigning against the indefinite expansion of the money supply, and it has started taking measures to limit the losses it would sustain in a breakup, Soros said.

"This is creating a self-fulfilling prophecy: once the Bundesbank starts guarding against a break-up, everybody will have to do the same. Markets are beginning to reflect this," he said.

Earlier, Bloomberg reported that Soros, at a book party in Berlin, said the euro is “broken and needs to be fixed.”

“The fiscal compact is going to push Europe into a deflationary debt trap with potentially catastrophic consequences,” Soros said. “This can be prevented if only it’s recognized there’s fundamentally something wrong with the rules of the euro.”

Soros is best known for making $1 billion in 1992 betting the U.K. would be forced to devalue the pound. Soros Fund Management LLC decided in July to return outside capital and focus on running assets for Soros and his family, who made up the bulk of its then $25.5 billion assets, to avoid having to register with the Securities and Exchange Commission by last month.

Editor's Note: Wall Street Insider: The System Is Rigged




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