Soros: Germany must change its ‘can’t do’ attitude

June 26, 2012

German Chancellor Angela Merkel watches the quarter-final soccer match between Germany and Greece at the PGE Arena in Gdansk, June 22, 2012. — Reuters picLONDON, June 26 — Germany must change its "can't do" policy against immediately forging a consolidated European fiscal and banking union, or risk becoming "the centre of an empire" responsible for the euro zone's collapse, US billionaire George Soros said on Tuesday.

German Chancellor Angela Merkel has resisted all proposals to provide relief to Spain and Italy from the excessive risk premiums prevailing in the market, Soros said in an opinion piece in the Financial Times.

This week's summit of European Union leaders could turn into a "fiasco" because of Germany's aversion and will leave the rest of the euro zone without a strong enough firewall to protect it against the possibility of a Greek exit, Soros said.

"This may serve Germany's narrow self-interest but it will create a very different Europe from the open society that fired people's imaginations," said Soros.

"It will make Germany the centre of an empire and put the 'periphery' into a permanently subordinated position."

The Hungarian-born US financier said there was a need to establish a European fiscal authority that, in partnership with the European Central Bank, could establish a debt reduction fund, that would acquire and hold a significant portion of the outstanding stock of debt of Italy and Spain.

A debt-reduction fund would "finance the purchases by issuing European Treasury bills and pass on the benefit of cheap financing to the countries concerned," said Soros.

He urged Merkel to abandon the "unrealistic and unreasonable" idea that a political union should precede a fully fledged fiscal and banking union.

"The three have to be developed together, step by step," Soros said. — Reuters