Europeans could use a little cheering up this week. One man who is trying to do that is George Soros. He knows his way around a currency crisis, of course, and he isn’t usually accused of being a Pollyanna. Soros thinks it is not too late to save Europe and the euro — but he warns that time is running out and that Europe’s leaders must fundamentally change their strategy to succeed.
Let’s start with the bad news. “Right now, the crisis has hit a new high, because there’s an unresolved government crisis in Greece and in Italy,” Soros said. “There is also a looming worsening of the financial crisis, because all the efforts to leverage the E.F.S.F. have run into legal or technical difficulties.” He was referring to the European Financial Stability Facility, the bailout fund for the euro zone.
“That means that currently Europe has no ring fence against a possible Greek default, and that is what is pushing the market into a renewed panic,” he said. “I expect the market to fall into despair and panic and I expect that to get worse.”
Despair may indeed be the right emotion, if you accept Soros’s prediction of what will happen if European leaders don’t get ahead of the markets: “This crisis is potentially bigger than the crash of 2008, because we have survived the crash of 2008 and we have not yet survived this one. There is a danger if they get it wrong then you have a financial meltdown. If there is a disorderly default in Greece, and the rest of the euro zone has not been insulated from contagion, then you could have a meltdown not only of the Greek financial system, but of the European and in fact the global financial system because we are so interconnected.”
So far, so dire. But Soros has two ideas that should perk you up. One is about the bazooka, and one is about the most important woman in the world.