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Soros blames Germany for eurozone ‘nightmare’

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14/09/2012
Billionaire investor George Soros has said the eurozone crisis will only be resolved when Germany "wakes up" and realises it is to blame for introducing a single currency in the first place.
Soros blames Germany for eurozone ‘nightmare’

Although Germany has been quick to point the finger at peripheral nations’ spiralling debt problems for the ongoing turmoil on the continent, Soros said Germany and neighbouring nation France are responsible.

Speaking to Bloomberg, Soros (pictured) said: “German public opinion should recognise they have a responsibility for what has happened to the other countries. It is too easy for the Germans to think that whoever has the debt has the guilt.

“In reality, Germany and France carry a very heavy responsibility, first for introducing the euro with structural problems, which has now really created this problem. Then they have imposed policies which are pro-cyclical and have aggravated the crisis – it has become a nightmare.”

He added until Germany realises this, the crisis will continue.

“I think if you recognise it is largely your own creation, nightmares can end. You can wake up and just correct your mistake, have this debt redemption fund and things would then turn around.”

However, he also said Europe is at an “inflection point” and if further impetus is given, such as a banking union, then the “disparity will be greatly relieved”.

“These are very positive developments, but they are not enough, absolutely not enough to turn the situation around because we are on the verge, or already in, a deflationary debt trap.”

He also said Spain is more likely to receive a partial bailout than a full bailout, but this should be enough to relieve its economic troubles.

“I think it is impossible for Spain to ask for a full-fledged programme, so it will be some kind of an extended, in-between phase, which would allow something like €100bn to be advanced. That would be sufficient as it would unleash the central bank, which has unlimited power now. That would be the solution.”

Speaking ahead of yesterday’s Federal Reserve QE3 announcement, Soros said: “It is pretty certain [QE3] will not be as effective as the previous one, there are a lot of diminishing returns, but it will be helpful.”

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