Soros: Europe Facing Soviet-Style Collapse
The eurozone is in danger of collapsing in a manner similar to the old Soviet Union, which fell apart amid a crumbling economy that led to social upheaval, says billionaire financier George Soros.
"Europe is similar to the Soviet Union in the way that the euro crisis has the potential of destroying, undermining the European Union," Soros said at a debate on public policy in Budapest, according to The Wall Street Journal.
"With the profound social, economic and moral crisis that Europe is in, we can see a similar process of disintegration."
Soros has made similar calls in the past, including recently in Denmark.
"I'm afraid that the euro crisis is getting worse. It's not over yet, and it is going in the wrong direction," Soros said recently, according to Reuters.
"The euro is undermining the political cohesion of the European Union, and if it continues like that could even destroy the European Union," Soros said.
Soros recently called on Germany to do more to fight the crisis, according to an interview published in the weekly newspaper Welt am Sonntag.
"The Germans should decide if they want the euro or not. If so, they have to carry out financial transfers. If not, they should leave the eurozone," Soros told the weekly, as picked up by the AFP newswire.
If Germany chooses to ditch the eurozone, Soros warns, the country's exports would suffer as the "new German currency would find itself at a high value."
European central bankers have taken steps to stimulate the economy, including intervening in government bond markets to push down borrowing costs and also by making cheap credit available to the continent's banks.
Some monetary policy officials warn, however, that the European Central Bank (ECB) can do no more and that it's up to governments to right their ailing economies even if it means pushing through politically unpopular spending cuts and tax increases.
"Monetary policy is not a panacea, and central bank firepower is not unlimited," particularly within the constraints of a currency shared by 17 countries, says Jens Weidmann, Germany's top central banker and a member of the ECB's governing council, according to the Associated Press.
Calls for the ECB to intervene in bond markets have been growing now that the crisis has spread from Greece to the larger Spain, which some feel may be tough to bail out due to its size.
Many ECB officials hesitate to intervene, pointing out doing so would push up inflation rates and violated the bank's mandate.
"The analgesic we administer comes with side effects," Weidmann says, the AP adds.
"And the longer we apply it, the greater these side effects will be, and they will come back to haunt us in the future."