Soros' tonic for euro zone: A Plan B to ward off default
He is the one who made headlines for making $1 billion by betting against the British pound in 1992. Today, he paints a rather grim picture about the euro zone. It's time leaders got their act together and set aside their differences.<br /><br /> <br /><br />
When he speaks, the world takes notice. This time, billionaire investor George Soros is fairly clear that a member of the euro zone will eventually hit the exit button. To save the European Union from a looming economic collapse, he thinks a Plan B might just come to the rescue.
For obvious reasons, he did not single out the country. But the available evidence points to Greece where frantic efforts are on to cobble up an acceptable austerity plan to head off bankruptcy. Soros shot into the limelight for making $1 billion by betting against the British pound in 1992.
"There's no arrangement for any country leaving the euro, which in current circumstances is probably inevitable," Soros, 80, said at a panel discussion in Vienna on Sunday on whether liberal democracy is at risk in Europe. "We are on the verge of an economic collapse which starts, let's say, in Greece, but it could easily spread. The financial system remains extremely vulnerable."
He seems to have his own diagnosis in place. Euro had a basic flaw from the start in that the currency was not backed by political union or a joint treasury, Soros said. "The euro had no provision for correction," he said.
Even the prescription is ready: For Greece, structural changes are the need of the hour to halt a process of disintegration. Soros dubbed survival of the European Union a "vital interest to all". "There is no plan B at the moment. That is why the authorities are sticking to the status quo and insisting on preserving the existing arrangements instead of recognising there are fundamental flaws that need to be corrected," he added.
The EU's unity is on test as wealthier countries of the euro zone remain sceptical over bailouts. Some steps the EU could adopt included creating a larger central budget; directing some of the income from value-added tax or a levy on financial transactions to Brussels; having a European institution guarantee banks, and tripling the size of its bailout fund by topping it up with tax revenue, he said.
(With inputs from Agencies)
The bailout offers new financing of 130 billion euros and aims to cut Greece's debt to 121 percent of GDP by 2020.
Germany's top court is due to deliver a ruling that may grant legislators more say over future aid, but was expected to stop short of blocking Berlin's contribution to a current series of multi-billion euro bailouts.