Germany must defend the euro

By George Soros
August 12, 2011

By George Soros
The opinions expressed are his own.

Financial markets abhor uncertainty; that is why they are now in crisis mode. The governments of the eurozone have taken some significant steps in the right direction to resolve the euro crisis but, obviously, they did not go far enough to reassure the markets.

At their meeting on July 21, the European authorities enacted a set of half-measures. They established the principle that their new fiscal agency, the European Financial Stability Fund (EFSF), should be responsible for solvency problems, but they failed to increase the EFSF’s size. This stopped short of establishing a credible fiscal authority for the eurozone. And the new mechanism will not be operative until September at the earliest. In the meantime, liquidity provision by the European Central Bank is the only way to prevent a collapse in the price of bonds issued by several European countries.

Likewise, Eurozone leaders extended the EFSF’s competence to deal with banks’ solvency, but stopped short of transferring banking supervision from national agencies to a European body. And they offered an extended aid package to Greece without building a convincing case that the rescue can succeed: they arranged for the participation of bondholders in the Greek rescue package, but the arrangement benefited the banks more than Greece.

Perhaps most worryingly, Europe finally recognized the principle – long followed by the IMF – that countries in bailout programs should not be penalized on interest rates, but the same principle was not extended to countries that are not yet in bailout programs. As a result, Spain and Italy have had to pay much more on their own borrowing than they receive from Greece. This gives them the right to opt out of the Greek rescue, raising the prospect that the package may unravel. Financial markets, recognizing this possibility, raised the risk premium on Spanish and Italian bonds to unsustainable levels. ECB intervention helped, but it did not cure the problem.

The situation is becoming intolerable. The authorities are trying to buy time, but time is running out. The crisis is rapidly reaching a climax.

Germany and the other eurozone members with AAA ratings will have to decide whether they are willing to risk their own credit to permit Spain and Italy to refinance their bonds at reasonable interest rates. Alternatively, Spain and Italy will be driven inexorably into bailout programs. In short, Germany and the other countries with AAA bond ratings must agree to a eurobond regime of one kind or another. Otherwise, the euro will break down.

It should be recognized that a disorderly default or exit from the eurozone, even by a small country like Greece, would precipitate a banking crisis comparable to the one that caused the Great Depression. It is no longer a question whether it is worthwhile to have a common currency. The euro exists, and its collapse would cause incalculable losses to the banking system. So the choice that Germany faces is more apparent than real – and it is a choice whose cost will rise the longer Germany delays making it.

The euro crisis had its origin in German Chancellor Angela Merkel’s decision, taken in the aftermath of Lehman Brothers’ default in September 2008, that the guarantee against further defaults should come not from the European Union, but from each country separately. And it was German procrastination that aggravated the Greek crisis and caused the contagion that turned it into an existential crisis for Europe.

Only Germany can reverse the dynamic of disintegration in Europe. That will not come easily: Merkel, after all, read the German public’s mood correctly when she made her fateful decision, and the domestic political atmosphere has since become even more inhospitable to extending credit to the rest of Europe.

Merkel can overcome political resistance only in a crisis atmosphere, and only in small steps. The next step will likely be to enlarge the EFSF; but, by the time that step is taken, France’s AAA rating may be endangered. Indeed, by the time Germany agrees to a eurobond regime, its own AAA standing may be at risk.

The only way that Europe can escape from this trap is by acting in anticipation of financial markets’ reactions, rather than yielding to their pressure after the fact. This would require intense debate and soul-searching, particularly in Germany, which, as the EU’s largest and best-rated economy, has been thrust into the position of deciding the future of Europe.

That is a role that Germany has been eager to avoid and remains unwilling to accept. But Germany has no real choice. A breakdown of the euro would precipitate a banking crisis that would be beyond the global financial authorities’ ability to control. The longer Germany takes to recognize this, the higher the price it will have to pay.

George Soros is Chairman of Soros Fund Management and of the Open Society Institute. This piece comes from Project Syndicate.

63 comments

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[...] The longer Germany takes to recognize this, the higher the price it will have to pay." Germany must defend the euro | The Great Debate Reply With Quote + Reply to [...]

Indeed Mr. Soros. Once again taxpayers, now germans, paying the prodigality of politicians and protecting the interests of the financial minds who, helping the politicians, have driven the world into this mess.

Are you one of them?

Posted by Caribbeanomics | Report as abusive

Sir,
Since Europe still consists of sovereign countries that can set their own budget, the need for a debate on deficit constraint and debt control is unavoidable, and, in my opinion, rather late. Setting up a larger EFSF fund may answer the popular “weakest link” theory but what good would it do on the long-term when it gives a free lunch to some (e.g. Greece) at the expense of AAA countries ? Yes, it would save us the embarassment of getting cut by rating agencies, and the political bickering, but at least we are not getting into the situation of “too big to fail”.

Let the euro devaluate. We welcome the exports already.

Posted by FBreughel1 | Report as abusive

When Soros is cheering for Euro, this means only one thing- he bet against dollar!

Posted by kommy | Report as abusive

Funny, how the the rich and powerful think that governments should back their investment bets while giving those who gambled and lost relief…..

Soros does short anything he can make a profit on … so what if he loses some a$$ets?

The ECB is part of the same criminal bankster organization who operate the FED. All of the FED’s assets should be seized for the economic damage that was caused by the mis-management of the US economy.

Posted by fnpmitchreturns | Report as abusive

Gentle people,
Let’s all agree that what this is about is simply a matter of conjecture for now.
My solution is to have a pass/ fail on each lot as the Romans still do…thumbs up/ thumbs down. Get it done and move on sil vous plais.
Be well and continued courage.
Ciao!

Posted by Jlmeshell | Report as abusive

I understand and respect German people’s concerns about their governments spending. They are all hardworking people. They earn money by hardworking and giving high taxes. Those people only want to direct their public spending to their education systems, public health etc. not to people who close their shop at 15:00 p.m for endless siesta, leisure.
Italy can not e to close gap between north and south and todays europeans’ problem seems to like Italy’s N-S problem. This kind of gap can not be solved in 20 years integration period because there is difference in mentality, this is a huge continent. Italy can work hard for centuries try to change its people and make a harmonious society. This is same for integrated European society maybe after 100 years they will get the point they want but not now. It is too early to establish a continent which is financially united.
If germany would not to cease this those kind paying the bills of irresponsible spendings they will feel some kind of feelings which todays french felt for credit ratings. And those days were to last chances.
Pay the some part of PIIGS debts and push out them and continue to euro by a small number of nations or EU will default. With this plan, EU can still have a strong currency(without piigs),and can still pay the bills by printing money and get rid of this problem.

Posted by Itri | Report as abusive

The Euro must come into parallel with major currencies. It is over-valued.

Posted by Intriped | Report as abusive

Mr. Soros,

I greatly enjoyed your excellent and accurate depiction of the current situation, however I was disappointed in the way your article ended.

Suppose Germany suffers through some collective soul searching and bitter debate at last to realize that they must lead by acting in anticipation of the financial markets reactions.

I can still see no way forward. How are all these separate governments going to find a way to manage a collective economy for their mutual benefit?

Even if the political will to take decisive action could be forged, the financial liabilities of southern Europe and Ireland are massive. Germany and other financially responsible governments can’t possibly back all of those debts through the EFSF and still maintain their own AAA ratings.

Even if everyone who has an interest in seeing the Eurozone succeed decides to guarantee those massive debts, the ineffective governments and/or economies that created those massive debt burdens will not suddenly blossom into a federation of sturdy, revenue-generating, quasi-German Republics.

How can Germany possibly lead Europe out of this quagmire?

I hope I’m wrong, but It appears to me that the Euro and the Eurozone are doomed. If so, then investing more and more capital in those faltering governments and banks is an absurd, ill-advised, and immoral exercise in futility that can only serve to fuel an eventual European financial apocalypse.

I’m not just being cynical. I value your learned opinion and I hope to read a sequel to this article in which you present a few concrete suggestions that might work.

Posted by breezinthru | Report as abusive

Move on, nothing here.
Just part of the British and pro-israeli cabal that wants to see Germany’s brought to its knees.

Merkel better pay attention to the ultimate aim of people like Soro’s who took pleasure at bringing the Bank of England to its knees.

Posted by rocco999 | Report as abusive

[...] inevitably be affected thanks to the structure of the EFSF as it will come to the tough dilemma of either defending the euro or allowing it to meet its [...]

@breezinthru: Euro doomed ? well, we know that Americans can’t wait to see the Euro dissapear but let’s not use this blog to advertise your deep patriotic desires here.

Germany doesn’t have to show leadership. Each EU country has to clean up themselves. That’s why the Eurozone is very easy to attack, and at the same time very diffcult.
Maybe it is time to say goodbye to Greece. Do you think this will inflict even a dent in the EU GDP ? No, it’s consolidation and we’re not afraid of it.

No moral hazard. We have other funds for foreign development aid.

Posted by FBreughel1 | Report as abusive

Soros points to the hopeless quandary we are in: the politicians are of no help and are even making matters worse. After the reckless economic policy of the Bush/Greenspan team, after the unchecked borrowing spree of the PIIGS, after the breakdown of this whole unrealistic arrangement, there is nobody willing to stand up to the consequences. We loved dancing to the low-interest tune but we don’t want to face the music. Angela and Barack not, in any case and, alas, there’s no Winston in sight.

Posted by Lambick | Report as abusive

Thnank-you for your insights, Dr. Evil.

Posted by Pleasespareme | Report as abusive

@ FBreughel1

I have no interest in seeing the Euro disappear. Repeatedly giving money to Greece and other countries who are unworthy of assistance has created a debt situation that is untenable.

Continuing to pour ever more capital into those financial systems is ineffective, counterproductive and fraught with moral hazard.

Posted by breezinthru | Report as abusive

I understand and respect German people’s concerns about their governments spending. They are all hardworking people. They earn money by hardworking and giving high taxes. Those people only want to direct their public spending
to their education systems, public health etc. not to people who close their shop at 15:00 p.m for endless siesta, leisure.
Italy can not e to close gap between north and south and todays europeans’ problem seems to like Italy’s N-S problem.
This kind of gap can not be solved in 20 years integration period because there is difference in mentality, this is a huge continent.
Italy can work hard for centuries try to change its people and make a harmonious society. This is same for integrated European society maybe after 100 years they will get the point they want but not now. It is too early to establish a continent which is financially united.
If germany would not to cease this those kind paying the bills of irresponsible spendings they will feel some kind of feelings which todays french felt for credit ratings. And those days were to last chances.
Pay the some part of PIIGS debts and push out them and continue to euro by a small number of nations or EU will default.
With this plan, EU can still have a strong currency(without piigs),and can still pay the bills by printing money and get rid of this problem.

Posted by Itri | Report as abusive

Greece’s politicians should not be paid 90-95% of their f salary until they pay back their debt and do things properly. This way they will learn the true value of money and will give them the motivation to do things right for years and years to come.

Posted by JohnLX | Report as abusive

Italy can not e to close gap between north and south and todays europeans’ problem seems to like Italy’s N-S problem.
This kind of gap can not be solved in 20 years integration period because there is difference in mentality, this is a huge continent.

Posted by Itri | Report as abusive

This idea is simply incorrect. The best thing Germany could do, to decouple its strong economy from the declining wreckage of socialist failures, is revive the Deutschmark.

Posted by Goatlocker | Report as abusive

I believe the biggest problem is the perception of the market and the market regulations. I would ban rating agencies to rate countories and i would ban short selling of governement bonds and limit the use of cds’s only against beling long of bonds.
The speculation againt the countries should stop,people tend to forget that we drive cars in the roads finance by governemants and our children use the scolarity system
offered by the governements and we use public health system.Without the governements all this probabaly would not exist .
I blame only market greed for the current situation.

Posted by destress | Report as abusive

Dear Mr. Fbreughel1. I am Greece. How would you have felt if the USA had said goodbye to Germany after WW2 instead of investing US800 billion in todays values in your economy and then writing off your debt in the 1950s. What short memories you Germans have. Wake Up. Stop seeing doom and gloom. Have a vision that expands beyond Deutschland ueber alles. Did WW2 teach you nothing. There is no such thing as a German or a Greek. We are all humans. At the moment, we all belong to Europe. One day there will be one country – the world. Wake Up.

Posted by ginabina | Report as abusive

Possibly so Goatlocker. How then would Germany remain competitive with a soaring New Deutschmark and what would happen to all the Euro debt they hold? Versus the soaring New D and the then tumbling Euro, in which the debts are denominated, the Germans banks would be bust. No problem other banks, including those of the UK, hold German bank bonds so they could then support German banks. Result – the rest of the Eurozone crumbles and a new economic Dark Age is upon us. What a solution and what a mess!

Posted by ExpatGn | Report as abusive

I fear a degree of self interest in Mr Soros’ article. It seems to me that all the solutions presented are designed to protect the interests of the banks and other financial institutions and entities, and the politicians involved, at the expense of the sovereign states and taxpayers thereof. Irresponsible actions by both the financial institutions and the politicians have led to the current situation and until there are measures in place to curb those irresponsible actions, then the only thing that will happen is the proverbial can will be kicked further down the road until the end of the road is reached.

Posted by Teduardo | Report as abusive

Unless Europe unites in political union, the economic union will disintegrate.

Posted by libertadormg | Report as abusive

“The euro crisis had its origin in German Chancellor Angela Merkel’s decision…” GS

Simply untrue. The origin of the crisis was a failure of design and or the failure of the participating states to keep their commitments to the whole.

Changes in political economy are by their very nature reactionary. Their latencies are either problematic or catastrophic. This is how wars start. The outcome depends on the speed and the magnitude of the challenges presented. Greece’s exit from the Euro, while unsettling, is far less problematic than if Germany leaves. Germany, for it’s part, is captured by the Euro becuase it has lent so many of them to Greece and the other debtor countries. To renounce the Euro at large would be to abandon it’s loan principals in a currency confusion. German banks would be immediately insolvent. Soros is, like so many others, applying a Keynesian rubric across sovereign states. This is nothing more than a socialist doctrin. The patient is already bleeding out. Let Greece go and suffer the amputaion. In doing otherwise you continue to destroy the remaining capital and assets which are needed to fund the true recovery. We are destined to suffer here. The question is how much?

Posted by Zeronine | Report as abusive

Dear Mr. Soros. You are the epitome of what is wrong with this world. You have shown yourself to be a greedy narcissist who only cares about his own extreme wealth. Your past is shameful all the way back to your helping to deport your own race to the concentration camps of WWII. How are you able to even show your face today? You are a disgusting little atheist with disgusting goals. How many families have you destroyed with your currency killing plans around the world. I do not doubt that you have more evil up your sleeve. ONE DAY you will meet GOD face to face. Good Luck, Buckaroo.

Posted by blancojoe | Report as abusive

Let’s not be naive out there about where George Soros is coming from. Anyone who has followed the agenda of this evil man knows exactly what he is up to. It is called “One World Order,” folks. No one would be upset more than Soros if the grand scheme behind the European Union failed. Because to Soros, the EU must serve as the springboard for a single form of world governance in which all resources are redistributed to achieve social justice (and he gets to decide what that means) – and, of course, Soros and his comrades would preside over it all, like the Masters of the Universe. Of course, Soros’ brand of social justice includes not honoring promises made to the women he beds and beating them up if they protest. Get the picture, everyone? George Soros for Emperor of the World! Advice to Germany and France – whatever George Soros wants, do the opposite!

Posted by maritxusf | Report as abusive

Somewhat simplistic.
The article takes the position that the EUR future depends mostly on Germany.

Alas, Germany alone cannot substitute for the recklessness of other EUR states, starting with the PIIGS. (Not to mention that not all is well in Germany either).

On paper (punt intended) the EUR is the closest thing to gold standard. At least till the ECB started buying toxic debt on par.
The beauty of gold standard is that it curbs gov profligacy (including out-of-control banking).

Bad loans has been made to the PIIGS (and other recipients).
The only question is how the bad loans will be recognized. Who will take the losses.
It is morale and just that those who made bad lending decisions will take haircuts.
Regrettably, we have been seeing socialization of debt in the past 4 years. Bad loans were transferred one-way-or-another from the original lenders to the public, pretty much on par. The public will pay the bad loans back, generally in full, via taxes and inflation (money printing and credit bubbles).

Must Germany transfer wealth to the PIIGS to sustain the EUR? No.
Would the PIIGS be willing to go through the ramifications of broad defaults? Probably not. They are likely to depart from the EUR.
Albeit, given how broken the EUR is, it may still be a better deal for the average German citizen.
As Soros says, the cost of sustaining this broken model becomes worse with time.

Posted by AB_1234 | Report as abusive

>Germany must defend the euro<

At the cost of committing the German people to generations of foreign unlimited debt??

Warum?

Your exposure to euroland making you nervous? It should. Pretend currencies have no place in the 21st century, and stop trying to bleed the Germans dry for God’s sake.

Enough is enough…

Posted by Curtis_Lemay | Report as abusive

Good article Mr Soros. The sad part is people who cannot change this situation are reading your article. I doubt Angela Merkel will ever read it…I think reuters should email it to her…You are so right about governments acting after a crisis and not before…this is a problem in every country…Eventually as you say taxpayers will bear the brunt so better now then tomorrow…

Posted by Jonty1982 | Report as abusive

It is becoming increasingly clear that belonging to any sort of political union means you are responsible for the actions of whatever irresponsible politicians manage to get in power by whatever means, but that you have no control over their behavior and no support should you need it from them.

A world made up in such a way is a world of slaves and masters. How is that different from any of the world conquering Empires humanity has endured for thousands of years? The only freedom for people is the freedom of small, small States, not larger and larger ones. The support of massive capital helps the Empires, not the free independent States.

Why would any honest person support the Euro? It is an experiment that failed.

Posted by txgadfly | Report as abusive

It’s curious that George Soros and George Osborne (British Chancellor) have so much advice for the Eurozone in respect of Eurobonds and fiscal convergence. Does that mean the Eurozone sovereign debt scare is over and that attention is turning to the dollar and sterling?

Posted by Steve.Lawrence | Report as abusive

An educated man like Mr. Soros surely understands that the banking crisis of 1931 did not cause the Great Depression that started in 1929. When global governance is the prize, some people would rather jettison their intellectual integrity than let a good crisis go to waste. Europeans who value their sovereignty should arm themselves with a bit of simple arithmetic: their governing elites will soon be threatening them with tanks in the street.

Posted by Namazu | Report as abusive

After wandering in South Tirol (Italia!) and enjoying that fresh air and food, Merkel may, just may, rescue the euro contagion and finally, agree in principle, to forge the euro bond regime thru EP legislation. With that policy-making cleared, it’d be easier for financial markets to let go of the banking sector in EU. The contagion is REAL and will suffocate Euro and its Single Market – unless the markets are assured there will be euro bond regime in medium term, at least. Basta!

Posted by hariknaidu | Report as abusive

When these problems have been dealt with – as they surely will – the euro will shoot up to $1.60 or higher. The euro could well become the new reserve currency as the dollar falls even further down the inevitable plughole.

The fundamental difference between the US and the EU is that the US has a poorly-educated workforce and managers with little or no understanding of world markets. The EU countries – especially Germany, of course, but not just Germany – have long since moved from low-value added manufacturing into high value niche markets. European managers and entrepreneurs think globally and understand international markets. American ones typically have difficulty finding Canada on a map of North America. I suspect that most American managers are unaware that the euro even exists.

Posted by PAndrews | Report as abusive

Soros wants Germany to be the Wehrmacht of Euro Socialism. The Euro is the epitome of socialism on a monetary scale. Cede the individual currency to the community currency. After two “Great Wars” it comes back to Germany again. Capitalism or Socialism? Is it pre-determined?

Posted by debob | Report as abusive

@PAndrews: Yes, you’re right. Top 500 stock-listed companies in the EU are more profitable than their counterparts in the US. Besides, cash is in hands of the public, not just the lucky 10 % .

Americans who have been abroad are usually well-informed and understand this.

In the EU, the mark has been set and the battle has begun. Deficit control in 2013. We have already won half the battle, EU deficit is 4 %, much better than Japan and the USA. Japan is going into downgrade within two weeks, USA will when it becomes apparant that the super committee is just another committee. Chin up.

Posted by FBreughel1 | Report as abusive

@PAndrews

A heap of rubbish. A terrible bet that you actually know what you’re talking about.

Posted by eitalia | Report as abusive

Geez PAndrews your comments are not only condescending but also misinformed. I do business throughout the world, mostly in China and Australia as well as some parts of Europe. I think it is amusing to imagine that a united Europe is superior to the United States. The truth of it is Germany and France and a few small Europen countries are what gives the Euro its value. Basically subtract out Germany and France and the Euro would most likely trade at parody or below the dollar. Now I do not argue your point about America falling behind on the education curve, but alot of this has to do with the failed principle of trying to accommodate all the people who enter the US without an education and are a drain on there resources. However, Europe suffers from a similar problem by offering entirely too generous pension packages and at an unsustainable age. In addition a good portion of the problem for countries like Italy and Greece is that they do not have a solid system to collect the tax receipts they should. in addition throughout Europe there should be no more real estate holding specifically residential real estate that should be passed on without paying and inheritance tax and when the person inherits the property it should be based on the current value and the property should be assessed on that value from there going forward and there goes for businesses as well. The idea that Portugal, Spain , Greece, Italy (maybe) can recover is laughable. There rates for labor are unsustainable in the global market especially here in the US, even if the Euro was near parody with the US dollar.

I would like to say that the US has gotten itself into these problems by creating a ridiculous sense of self entitlement to property ownership and on a state level given public employees far too generous pension packages which are unwwarranted and should have never been promised. I am afraid the US will NEVER recover because they cannot bring themselves to the fact that making money and being able to have a better life depends on the career that you choose and that talent does play a role in one’s financial success to a large degree. An example is should a San Francisco Policeman making $110,000 a year get to retire at 50 years old and receive his same salary for the rest of his life absolutely not, basically he is receiving what someone would get by owning a 2-3 million dollar shopping center get as income or having 3 million is a treasurey bill for 30 years clearly their job and talent level do not deserve this compensation and yet there are thousands of job description held by public state and federal employees that offer similar compensation packages. I do not believe this country has the political will to correct this issue.

Finally, I think your idea that US citizens are provincial idiots who do not know geography is unfounded. The only reason Europe has a better grasps of different cultures is that when you drive 2-5 hours in almost any direction you could be in another country, in the US it is going to another state which for some of us is going to another country. In the end I hope that the weaker countries like Greece, Portugal exit the Euro, infact I trully believe there should be something akin to a credit report done at this time and those who fall below the mark should exit the euro and have the opportunity to return when they have vastly improved their balance sheets. I certainly do not believe that German citizens will bailout the economically weak Eurpoen countries, its a burden that would be too much to bear.

Posted by maastar | Report as abusive

@FBreughel1

Breezinthru holds deep patriotic desires? That’s a rather rash and ignorant observation on your part as that had nothing to do with breezinthru’s comment.

Posted by eitalia | Report as abusive

P Andrews. In your dreams!!

Posted by ExpatGn | Report as abusive

I believe American’s grasp of Eurpoean culture or world geography is intact. If Europe allowed Portugal, Spain, and Greece to leave the Euro it would be more valuable. Get rid of France and Germany and the Euro is at par or lower than the US dollar. Also Eurpoe suffers from the same problems as US states which have far too generous pension programs for its employees and they kick in at too early of an age. On addition, there need to be reform on residential real estate inheritance laws throughout Eurpoe so that when a family member inherits a property it is revalued at the current market value and property taxes are collected accordingly. This also has to happen with family businesses to a larger degree and tax revenues are not being properly collected and need much greater emphasis on collection procedures and policies. The idea that Eurpoeans drive 3-7 hours in any direction and reach another country for us its just another state which for some citizens is another country. In my business Europeans have outpriced themselves the Chinese have out manuevered them in so many ways, the eurpeans have been great craftsmen but that ship has sailed. As for the US I tbelieve it will never recover as long as they feel obligated to keep allowing people to immigrate who do not bring any talent or skill that matches or exceeds the cost that they weigh in on the system

Posted by maastar | Report as abusive

@PAndrews and @FBreughel1: Perhaps it allows you to feel better about your situation to believe that EU managers are better than US managers, based upon a single snapshot in time. You may even smugly sleep better at night, content in the belief that that the EU workforce is more highly-educated than that of the US. Are these the same “highly-educated” people that are rioting and burning down your cities (Greece and UK)? And these EU managers that you are so convinced have learned to operate in a global market… Are these the same ones who cannot seem to manage consistent operations in all EU countries and the US at the same time? The arrogance of Europeans never ceases to astound me. You are so fond of comparing Europe to the US, boasting that you can “find it on a map” yet you seem incapable of understanding how to deal effectively with US capitalism.

The simple truth is this: The US, as rough and uneducated as you seem to believe it is (because you focus on this segment of our populace?), still represents the largest, most successful economy in world history. The EU must deal with it. As educated as you seem to be, you must know this. Does this trouble you somehow? Does it bother you that so many of the world’s medical and technology advancements have come out of the US? Are you concerned that the US taxpayer has been picking up the lion’s share of Europe’s defense since WWII? Perhaps you didn’t realize that the very medium you are using to criticize the US on (everything from computers to the internet) came from the US. All from a populace far less educated than that of Europe…

I am a US citizen that, at one point in time, lived abroad in Europe for a couple of years. I was impressed by Europe, and I have the utmost respect for Europeans in general. But for you to make simplistic comparisons between the two with and apparent lack of understanding about how the US works is equally as troubling as any perceived lack of broad world knowledge by Americans. I assert that the two systems cannot be compared, and need no comparison, because they are very different economic models. Both are equally valid and useful. Both are needed for a strong world economy and general stability.

As a US business owner, I urge you to quit looking for differences and start looking at ways the the two economic systems compliment each other. It is only by working through this together that we can achieve a good result. The US taxpayers have sent billions of $$ to help shore up troubled European banks. If it ever became necessary, I assume Europe would do the same for us. We are allies, not competitors, and the sooner Europeans accept this premise, the sooner the world economy will be on a stronger footing.

Posted by SKMauss | Report as abusive

Mr. Soros, although learned in money matters, may not have a society’s best interest in mind, but his own. Extending the EFSF means extending profitability to someone who might influence activities that would take advantage of its’ gaurantees. Simple. More debt.

Posted by mdblitz | Report as abusive

Arguing about US and EU is just a waste of time. Anyone who is interested to find a solution should understand, that from the very beginning the power in not at each state but at the union. That is the reason of its existence. So as public wisdom says, one pole will yield on the wind, many no!

Posted by alivecitizen | Report as abusive

Soros is a war criminal. There is a special in hell for George Soros.

Posted by ncpg | Report as abusive

Germany cannot back the bad policies “implemented” by other governments. The current market situation points a very clear thing in Europe: except few countries (Germany, Austria, Netherlands and some from northern Europe) all the other do not have responsible governance since many years. For some the bill just arrived for others – soon to come.
And the solution is crystal clear: either non-responsible countries hand out the governance to Germany & al and receive credibility or they simply quit Euro and support the consequences of non-responsible governance on their own.
Altogether, this clearly points out to the solution of the recreation of the eurozone only with “strong economies”. Any other European country that gives up governance power in exchange for credibility (even Greece) is welcome as it increase the bloc weight and market size.
First, this is totally and exclusively in hand of Germany & al.
Second, this would impact immediately the makets as they will see it not as a Euro trouble but as a strong reinforcement. In this way Euro, not only will exit this clench but will exit much stronger. It will capitalize all credible European governance in one currency – very likely to take over the role of “de facto” reserve currency of the world. The world just lost the confidence in the USD and desperately need a replacement that the tiny CHF could not be…
Good luck Euro !

Posted by Tikydor | Report as abusive

Soros is part of the status-quo. He is a billionaire who made his money manipulating currencies and other assets, and, like other financial billionaires, is very closely connected with the banksters who create central banks and paper money.

The fiat Euro is a failed experiment that began in 1999 and should be ended. The fiat Federal Reserve Note is another failed experiment that began in 1914 and should be ended. The only answer to the greed and avarice of men like those that created the ECB and Federal Reserve is gold. The “Chairman” of the “Gold Reserve” is God, not Ben Bernanke, or Pierre Trichet. Unlike the other two, God is not in the pocket of men like the banksters. Gold is God’s money. It cannot be printed.

Posted by ttolstoy | Report as abusive

There will be euro bonds, QE(N) in Europe and US, prolonged high inflation, rest of the world suffers as gradual rebalancing which had been put off snaps back with a Bang!

Posted by limar | Report as abusive

Just look what is happening: we took what worked, at least up to the 1970′s, and blinded by greed, Western politicians, having been bought off, decided to embark on a grand experimentation with globalization. We are now witnessing the results. We have possibly unleashed forces with which we have no experience, but instead we of going back to what we knew worked, we are wading deeper and deeper into the swamp. However, the greedy refuse to back down. It seems that until the whole experiment in greed crashes, we will not learn. Just a take a look around the globe what is happening. We are experiencing collapse of social order in our societies. Yet, because the money has captured politics, we keep punishing the victims of this grand experiment. Witness, UK, Greece, U.S. and new victims keep coming. At this point, they just keep shifting the pain to the lower classes. However, I don’t expect things to improve until those that caused the problems begin to experience the pain on their own hides.

Posted by contrarianview | Report as abusive

Mr. Soros.

As I understand it, you have made billions betting against countries and their economies.

I would no more trust your opinion on anyone’s economic situation than I would trust a fox’s opinion on the best security for a hen house.

IF the day ever comes when you quit supporting all the various non-governmental organizations that ensure your continue profits by injecting instability into various political systems around the world, then perhaps you will be worthy of being listened to on mundane topics such as septic systems.

However, until that day comes, please just shut up and go away.

The world doesn’t need another Iago…

Posted by bobw111 | Report as abusive

It seems that this century Germany again is going to be accused of being the cause of Europe and the world’s problems. It looks like being a creative, responsible and hardworking people is a sin. We need to understand that politicians have a natural tendency to take debts to finance bad projects, politician don’t risk anything, they just left the problem to next one in office. On Clinton’s time was started the project to promote home ownership in the U.S. that eventually lead to the mortgage crisis because of the government oversupply of loans for this purpose and the irresponsibility of banks and loan takers. Now we see that again, but for governments, the over indebtedness to support development is a lie, the only way development is achieved is when you invest money in productive forces not in big houses or great government office buildings, those come afterwards.

Posted by jboisselier | Report as abusive

One of the principal proponents of the globalist NWO, a totalitarian wet dream, deigns to come down from his arrogant and elitist perch to address the sheeple. Sorry, George, use your energies to enable your bankster buddies to rape and pillage some banana republic; you have already done enough damage to North America and Europe.

Posted by apber1941 | Report as abusive

I am surprised to read the emotional comments on Soros’ article. The Euro crisis is truly reaching catastrophic proportions that will shape the future of Europe and its people. The likely outcome of the coming months will more than likely sentence Europe to 20 years of pain and suffering

As unpalatable as it is, I agree with Soros. As long as Europe is a collection of individual states, it increases the risk for Europe and the Euro. The only true solution lies in greater integration. Alas, that is far away and Germany, the only possible leader of Europe, does not wish to lead the way, for perhaps plausible arguments. Indeed, Germans are heading in the opposite direction if anything and I expect Germany and a small club of homogenous economies, to pull out of the Euros in the coming two or three years, leaving the current Euro in tatters (I would not be surprised to see 3 or 4 ‘peripheral’ euros to the dollar within 5 years). Watch out for the rebirth of the Deutschmark a strong but relatively small currency. As correct as Germany, other Germanic and Scandinavian countries are to scold the peripheral European countries for the lack of productivity, their deceit and previous reckless governance, we all share the blame and ultimate burden for the current crisis, even if our guilt is one of omission. ‘Being right’ is poor consolation today and even poorer motivation for the present course of action in Europe.
Europe’s initial decision on Greece, which more correctly stated was Angela Merkel’s decision, was clearly penny wise and pound foolish. Unfortunately she bowed to the domestic political pressure on her in order to keep her job and her party in power. It is certain that this will go down in history as one of the most selfish acts and one sorely lacking in political leadership proportionate to Germany’s global economic stature and de facto guardian role of the European Union.
The approach described by Soros, being proactive with the markets is the only way but will unfortunately not happen as the politicians are fighting their own battles and not the one for the people of Europe. This is one of the grim snags with the European forms of democracy. How do individual European countries think their 10, 30, 60 million citizen sized countries will battle with China, India, Brazil or the USA in the future? Comments that the taxpayer is paying again is true but that has always been the case and always will be. Where else would the buck actually stop?

Comments supporting gold are misguided, in my humble opinion. Unfortunately we are months (at most) away from the gold bubble busting. I expect the $1850 level will be the point of realisation that it is a bubble. $1850 is the more or less the peak value (inflated) that gold has ever reached in the past. Unfortunately, the volume of trade in gold bears no significance to the actual reserves of gold and if people think that the sub-prime was painful, watch out because here comes a nasty surprise. The gold market is almost entirely speculative and is a castle built of cards. In addition, the size of economies around the world bears no relationship to the gold reserves, as they may have in the past, and gold simply cannot retake it former role as a safe haven. The world had grown too big for that.

On a side note, but related to our discussion, the future strength of China is also often overplayed in the media. There are two very serious problems at play there too that raise concern and puts China’s future global power status in grave danger. The first is the ‘soft landing’ the Chinese administration is trying to navigate. Unfortunately credit extension is massive again this year and the ‘Chinese sub-prime’ bubble is many times the size of the American/European ones of 2008. The clock is ticking loudly in the background but no one is listening. The bubble is reaching bursting point within the next year or two. The second serious problem is social unrest. China, due to its political nature, is a pressure cooker without a pressure value. There is no gradual release of pressure so expect a big bang one day out of the blue, fuelled by income in equalities between the costal and rural area and the ‘muslim’ unrest in the western region. The lid may stay on another few years but my guess is maximum another 4 years of perceived control before it explodes, probably following the financial bubble bursting.

We all know the dollar is in poor shape but those counting it as dead are moving too fast. The dollar is still the best of the worse going forward in the short to medium term. In currency terms, it is the one that is simply ‘too big to fail’. The Asian and Middle Eastern countries have so much invested in the dollar that they will not be able to let it fail (the same cannot, sadly, be said for the Euro).
Soros concludes his article by stating that Germany has no real choice. Unfortunately the German people and politicians are suffering from an (understandable) emotional reaction to the Euro crisis, smothered in an out-dated pseudo logic that is very short sighted. The consequences for Europe are dire as the dominoes are about to fall one by one in quick succession. Whether she likes it or not, Angela Merkel is the only person that can save the fate of Europe today. Let’s pray she finds the courage to do the right thing for Europe which includes a strong Germany. VmJ

Posted by VMJ | Report as abusive

I admire Mr Soros as even though I have a legal background, I am an up and coming currency trader, but not becuase of his background in the forex market but rather his philosophy of fallibilism, and his understanding and open mindedness towards the financial sector greed which has paved the way for the euro crisis, but more so the US turmiol. Mr Soros is merely putting forward a rather well analysed approach to countering a major EU zone problem which is unfortunately well in place, and as much as I completely understand the approach of pro German viewpoints of why should a AAA rated nation risk its financial sector on bailing out nations with a less disciplined and developed economy, it should also be noted that Germany itself had a major kickoff boost by leading euro nations, and the US after WW2, as they took Germany into their inner circle rather than abandonment which was the ill fated decision primarily by the French after WW1. On a wider scale I think that the euro and US may just still recover but their troubles are way beyond being the financial, and political leaders of our time anymore as power is clearly shifting to the east which as much as many would not like to admit has a much more responsible, banking, private, and investment secotor whom are responsibly regulated by their respective governments. Where as in the euro, and more so the US, the level of corporate influence, and their powers to lobby which quite simply is buying out politicians, and political power brokers has paved the way for the current economical state of the west and yet its laughable that we still see in the US organisations like the republicans, and more so the tea party movement lobbying (with great public support) for less corporate and wealthy tax, and more social security cuts. And where are the western corporations now that their countries of origin are in ecomomic turmoil? capitalising and breaking into new emerging markets in the east, thats where. Congratulations to the US, and the majority of its public for for their outcries, and despair at the mere mention of socialism or state capitalism which is now leading the way. May you all now rejoice and capture the beauty of what you have helped to implement, and create aka free flow, lawless, unregulated capitalism.

Posted by baz1 | Report as abusive

Soros is a cancer. He and Warren Buffett need to expire. Tired old fools. Again, the taxpayer ends up bearing the brunt of this meltdown. Germany should tell the EU to shove it….

Posted by crg27 | Report as abusive

Germany should never accept Eurobonds until the whole European governance system is adjusted to suit the issuance of such bonds. Until then, the Euro will get devalued by bailouts but that ultimately helps German exports and fills German coffers to pay for the bailout – while slowly steps are taken to transform the union into a political, economic and fiscal union with respective, union-wide institutions and regulations.

No rush Sir, things like that need time. We will get it done to perfection, after all we are German.

Posted by dcschmoeka | Report as abusive

Add to this the fact that without the PIIGS, the German economy would be in serious trouble. The Euro would be trading at highs of 1.60 to the dollar, or likely higher in the 1.70 to 1.80 range, due to the very own debt/banking crisis in the USA. In the end, the Euro crisis will turn out a blessing for the Union, as bad apples will be removed, precedents set to regulate and deal with extrem market conditions, and fiscal control centralized along with much closer political intertwining. It is hard to see a similar silver lining for the US.

Posted by dcschmoeka | Report as abusive

of course the rescue will come with lots of strings attached so Greece and other countries will sure loose their economical and then political independence. German will “reluctantly” agree for the Eurobond and soon becomes the European ruler. What Hitler failed to achieve through the war the German banks will achieve through euro.

Posted by arthur2000 | Report as abusive

[...] Germany must defend the euro | The Great Debate. Share [...]

How entertaining it is reading comments from you whiney little euro girls slamming Americans.. You gentle men.. actually men is a word you are by no means worthy of, since you were so busy hiding under your mommies skirts while we poured our guts out all over you mother land to free you cowards some years ago. You sound so educated and interesting but you lack everything that makes a man… run home to your mommies boys, step aside and let the men do the real work here.

All that being said Euro boys.. So smart but so broke! Fancy words, small brains and not guts! Germany should let you cowards wallow in the ineptness you deserve it.. la la la we are smart.. la la la..

Posted by euroblaster | Report as abusive

Dear Mr. Soros,

Although you appear to be concerned about the welfare of the entire world, the fact is you must have much at stake financially. The funniest thing is that just because you throw some of your millions towards causes that the left embraces, they’re unable to see what a slimy, cold, calculating pig you really are. I’m offended that Reuters gave you an opportunity to spread you personal agenda opinion piece.. Hopefully, things turn out the way they should to benefit all safely and not just to increase your wealth..Here’s to hoping you crawl into a hole and stay there! Best wishes!

Posted by soccermom7026 | Report as abusive

Soros probably is saying this so he can make money out of it – true loser (or winner)!. Germany to pump good hard working German’s money into to Euroland so it can support the corrupt, lazy and useless countries (people) like Greece, Portugal, and Italy.

Posted by PAK_US_Man | Report as abusive

The best way for Germany to retain its AAA rating is for it to jettison the Euro and return to the DeutschMark. Rational self-interest is one’s best ‘life-preserver’.

Posted by Eric93 | Report as abusive

Mr Soros has made billions betting for or against various currencies. And that is my point: You cannot bet against one without betting for another.
The USD is the currency of a nations whose per captia debt load exceeds that of Greece. Just now speculators receive newly printed (electronic) dollars at next to no interest from the Federal Reserve and deploy them shorting the Euro, and thus the whole project of European union.
Given this level of irresponsibility in Washington it is surprising the Europeans remain as supine as they do.

Posted by ChrisHerz | Report as abusive

About the worst thing any one could possibly do is follow advise from the likes of George Soros.

At a guess, I’d say he’s long plenty of Euros and expects German taxpayers to guarantee his speculative position / ‘investment’. They should do what most intelligent investors do nowadays: ignore Mr. soros or, even better, trade opposite to his public statements.

Posted by Elektrobahn | Report as abusive

[...] the full story on the Reuters Blog. It has been originally posted on Project [...]