Tuesday, April 17, 2012
Soros warns euro crisis could destroy the EU
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 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.