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Soros suggests that Greece and Portugal should leave the European Union, Stiglitz shows Germany the door

16 August 2011 / 16:08:11  GRReporter
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There is something wrong in the euro area or even in the entire European Union. In early 2010, when the Greek crisis was still in its infancy, all mocked at some forecasts made mainly by economists of Anglo-Saxon origin for the beginning of the end of the euro zone. Today, the common opinion is not only that it could no longer exist in its present form but there are also views of the European Union’s disintegration.

The U.S. investor George Soros known for his charity activities in Eastern Europe set this pace by suggesting in an interview with the German magazine Der Spiegel that Greece and Portugal should leave voluntarily the euro zone and the European Union. The founder of Open Society says that the Greek crisis was mishandled and the only remaining option to solve it is the country to leave voluntarily the euro zone and the European Union and that Portugal should do the same, arguing that this is the only way the European Union and the euro would survive.

At the same time, George Soros supports the issuance of euro bonds. In his opinion, whether we like it or not, the euro exists and to function properly, the countries that use it have to be able to refinance their own debts. To the magazine’s remark about the reluctance of Berlin, the billionaire replies that since Germany has the strongest economy in the euro area, it should dictate the conditions under which to issue euro bonds. Soros, who won billions betting against the pound in 1992, ensures that he does not participate in the betting against the euro. "I certainly would not short the euro because China has an interest in having an alternative to the dollar. You can count on China to back the efforts of the European authorities to maintain the euro." he explains his reasons.

Different is the opinion of the Nobel laureate Joseph Stiglitz, who in an interview with the BBC said that the rescheduling of the debts of Greece and Portugal would have worse consequences for the global financial system than if Germany leaves the euro area. "If Europe decides that the only way it's going to continue is through some stabilisation or solidarity fund in the form of eurobonds, which Germany doesn't want, than it will be Germany that has to leave," suggests the scientist who has always demonstrated his cordial friendship with Prime Minister George Papandreou. He said the governments are borrowing from their banks even now and then cash the government bonds from the European Central Bank – there are euro bonds even now, but they are operating in a very opaque regime.

While theorists are arguing, practitioners in Athens issued another tranche of bonds with a 13-week maturity. The Greek state managed to raise € 1.3 billion at the rate of 4.5 per cent, i.e. 0.08 per cent lower than the previous tranche. Foreign investors bought 23 per cent of the bills compared with the previous issue when the share of foreign investors was 25 per cent.

Tags: George SorosJoseph StiglitzEuro zoneEuropean UnionGreecePortugalEuro bonds
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