Soros: My new plan to solve the eurozone crisis

27 Jan 2012 | 15:36
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World renowned financier George Soros has outlined a fresh proposal for tackling the eurozone crisis, involving short-term loans for Italy and Spain.

Speaking to Bloomberg Television at the World Economic Forum in Davos this week, Soros suggested allowing Italy and Spain to access short-term borrowing at 1%, to avoid a restructure of the troubled economies' debt.

"If Greece were to default at the end of March or April, that would be a very severe test for the global financial markets because not enough has been done to isolate the rest of the eurozone from Greece," he said. " You could actually arrange for Italy and Spain to borrow short term. Short term only, but at 1%," he said.

Soros said Italy in particular is on a difficult course, both economically and politically, with reforms not going far enough.

"They have rather heavy accumulated debt. If they can refinance the debt on which they currently pay 4.3%, they can refinance it at 1%. That means they gain 3% on the GDP. So they do not have to be quite as austere as they would be otherwise," Soros said.

Soros also criticised policymakers for failing to insulate eurozone economies from the impact of a Greek default. However, he added an eventual default would not be catastrophic.

"I think that if Greece defaults, it should not be the end of the road. But the rest of Europe needs to be sufficiently ring-fenced, and not enough is being done to ring-fence it," he said.

Meanwhile Germany is at odds with the rest of the world over its proposals for tackling the eurozone crisis, he added.

"What applied to Germany in the 1990s does not work for Europe in 2012. So there has to be a second phase. I think it is important they should start thinking about it because without it, the situation is hopeless. And without hope, people do not act the right way.

"It is not that difficult to recognise that once you have got austerity and these labour reforms that you need and so on, you then still need a stimulus and you must find some way of stimulating the economy because there is a deficiency of demand in the world," he added.

Asked whether today's unsustainable situation can be viewed as an opportunity, Soros replied he is not playing the eurozone crisis.

"Opportunities are dangerous. I am no longer speculating on the market. I am now in a sort of a game piece trying to keep the system together because I really think it matters for all of us, for humanity, for hedge fund managers as human beings that our civilisation should survive," he said.

"So right now I am sort of on the side of the angels, not a player along to play."

Categories: Economics / Markets

Topics: George sorosEurozone

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