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Sunday, January 27, 2013
Will the Euro Destroy the European Union? Says Soros
George Soros warns Davos: The Euro will destroy the European Union
The European currency was saved this past summer, but problems in recent years have seriously affected the euro area economy and created dangerous political imbalances therefore 2013 will be a very turbulent year, warned billionaire George Soros, who attended the World Economic Forum held in Davos .
Under the rigid single currency scheme,
in effect Germany has enslaved the other countries members of the EU. It is the smaller sized economies of the South and East of the EU that had been effectively “enslaved”.
Though retired from being an investor, and hedge-funds manager, Soros has a word to say in the world economy, being recognized for the attack on the British pound in the 1994s.
According to him, the European Central Bank’s intervention to save the single currency came only after German Chancellor Angela Merkel gave permission and, has achieved its goal, except to make Germany the powerhouse, which exports to the poor countries of the EU, which cannot devalue, in order to compete with Germany.
This strategy has nothing but it "damaged" financially the continent.
"Germany has done the minimum necessary to save the euro," said Soros.
The outcome of these interventions is a eurozone split into creditors - - countries like Germany, the Netherlands and the Scandinavian - - and debtors - Greece, Italy, Spain, Portugal and Ireland. "Lenders control everything and, unfortunately, arguing for a policy of austerity is counterproductive," said the billionaire who was quoted by the Daily Beast . Whilst the ECB and International Monetary Fund ( IMF ) completed spending cuts and tax hikes as a condition for providing financial support "excessive debt can not be reduced by reducing the gross national product," said Soros.
Thus, Soros believes that austerity push the euro area toward recession, which will exacerbate political tensions. Big dangers lurk within the EU, he said.
Now, the danger is that the European Union, a voluntary association of equal states, is going to divide the system into a "center", and a "periphery," Soros warns. The Center would control the public policies of the EU, and the poorer peripheral countries would always find a lower position of subordination. Moreover, problems begin to emerge between the European countries and other developed countries. There is already an "early war of coins, "said Soros. He likened the current situation to the aftermath of World War II, when the U.S. and other developed countries controled the flow of capital and imposed developing countries to be subordinated to very harsh fiscal discipline. The political problem in Europe is that creditor countries especially Germany, are in charge, and every other member of the EU is playing a smaller role in developing the union. Virtually nothing can be proposed at European level without “Germany’s agreement,"said the investor. The European financial solution to the problem "is not acceptable in political and long term, which is intorelable by the peripheral countries. Thus “the euro risks destroying the European Union, "Soros warned. Unlike other central banks, the ECB does not practice a relaxation of monetary policy.
In Japan, the central bank is trying to devalue the yen to increase exports. "It is a direct challenge to Germany," G. Soros said, considering that the two countries are direct competitors in exporting high quality products. "Divergences between the yen and the euro will worsen and this will have a negative effect on the performance of Germany " said the billionaire, who pointed out that this may create a lot of tensions between Germany and Japan.
January 26, 13