George Soros, the billionaire speculator best known as "the man who broke the Bank of England" in 1992, has launched a stinging critique of Germany's role in the euro crisis and suggested the single currency's prospects would be improved if its most dominant member were to quit. In an incendiary speech made on Tuesday afternoon in Germany's financial centre of Frankfurt, the hedge fund trader told Europe's richest country it had gone too far during the bailout of Cyprus, was itself heading for recession and should either leave the euro or reverse its long held opposition to eurobonds – a form of sovereign debt that would mean each member country's borrowings were guaranteed by the whole eurozone. "My first preference is eurobonds; my second is Germany leaving the euro," he said in his lecture, entitled: How to save the European Union from the euro crisis. "It is up to Germany to decide whether it is willing to authorise eurobonds or not," he said at Frankfurt's centre for financial studies. "But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing eurobonds. "In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting others introduce them." In an address which appealed over German chancellor Angela Merkel and directly to German voters, who go to the polls in federal elections later this year, Soros implored the country to change course. "I hope that by offering you a different perspective I may get you to reconsider your position before more damage is done," he said. "That is my goal in coming here."
He added: "The financial problem is that Germany is imposing the wrong policies on the eurozone. Austerity doesn't work. You cannot shrink the debt burden by shrinking the deficit.
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Spain and Slovenia have been given a stark warning by their eurozone partners to reform their economies rapidly or risk financial crisis.
In a hard-hitting report on the countries facing macroeconomic imbalances, such as overvalued housing markets or hefty government debts, the European commission identified a total of 13 member states – including France, the Netherlands and Belgium – which it said should take urgent action to restore the health of their economies.
The large number of countries involved underlined the growing scale of the eurozone crisis, which has been exacerbated by a deep recession in many of the single currency's 17 member states. Christine Lagarde, managing director of the International Monetary Fund, warned on Wednesday of the emergence of a "three-speed" global economy, lumping the eurozone and Japan in the slowest lane among countries that "still have some distance to travel".
The European commission's harshest criticism was reserved for Spain and Slovenia, which were warned to agree reform proposals with Brussels next month or face potential sanctions under the EU's new "excessive imbalance procedure".
Slovenia, which has been forced to bail out its banking sector, has repeatedly been identified as the next domino to fall in the ongoing eurozone debt crisis, since Cyprus received a controversial bailout.
The commission warned that the close connection between Slovenia's partly state-owned banks, which made reckless loans during the boom years, and the country's public finances could jeopardise financial stability. "These challenges require urgent action in the areas of the financial sector, state-owned enterprises and microeconomic reforms in order to prevent a situation in which severe imbalances would steeply increase towards unsustainable levels," it said.
First off will you guys please take away that photo I just makes me want to throw up.
Nothing new here. While America was restructuring its banks Europe was telling us that everything in Europe was A1. We did not believe them so they gave us "stress tests" we did not believe the "stress tests" so they gave us second "stress tests" now did we believe them? No! European banks were hiding and are still hiding massive losses in some instances they transferred their losses to the state eg. Ireland and have become wards of the state in the process bankrupting the country. Ireland's latest impressive feat was to turn 30bn of promissory notes linked directly to one broke bank into sovereign bonds that would be paid off by their kids in 2053 when their current finance minister is 110 years old that's right one hundred and ten years old!
In Ireland and Spain they still have massively impaired property loan books getting worse every week. In Ireland bankers and regulators are waffling on about moral hazard something they only discovered recently, of 1 in 15 people possibly being "strategic defaulters". In Spain they are repossessing houses and apartments but selling nothing. As George Soros says the European experiment is over unless the Germans agree to mutalisation of debt.. Eurobonds jointly and severally supported or Germany leaves the Eurozone so that the currency can depreciate by 40% to 45%. If a country like Italy or Spain are forced to leave or just leave their will be a disorderly disintegration of the Euro.
The banking cover up has come home to roost.
At the start of all this with the PIIGS etc, I thought the EZ/EU was a sort of confederation that would help each other. It is now clear they have no intention of helping. They'll grind your country into the dust at the first opportunity.
Now I don't like conspiracy theories, cock-up usually a better explanation. It might still be crass stupidity, but the thoughts of conspiracy just won't go away. Find all who benefit first, and then look carefully for the evidence.
when have economists reports on the future of economies ever been anwhere near correct? Hardly ever for medium to long term predictions. Sometimes even 3-6 months is too long a time horizon for good prediction.
If their theories and ideas are sound, Japan should have collapsed years ago. The fact that it has not collapsed should give them pause for thought, consider where their ideas are wrong. Japan is part of our world financial system, they are not a special case, they have now special currency status. If they haven't collapsed, mainstream economists need to regain their credibility by explaining why their economy is still there, working away and the country is not a basket case.
Cyprus needs to get out of the EZ now; it should not wait until its economy has been wrecked even more.
It can lead the way and show what happens. It will still need help and support from the european community though. After all that's what communities are for, to help each other. The trika seem to have forgotten this.
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