George Soros is arguably the most well known, highly successful macro hedge fund manager around. In a recent interview he sat down with Der Spiegel to discuss the issues facing the Eurozone, among other things.
I have commented on the main issues before, but Soros outlined why these problems need sorting out as well as some potential solutions.
Essentially he states:
- A Eurozone breakup would lead to a banking crisis that would spiral out of control.
- A European fiscal authority is needed to re-finance indebted members on more reasonable terms.
- To do this the authority would issue Eurobonds.
- These bonds would be backed by the union.
- Germany, being the largest country with the best credit rating and largest surplus in the EU, is essential to making this work.
In short, the Eurozone acting as a whole would issue bonds to help member nations that are financially under pressure (Greece, Portugal, maybe Italy, etc.). These bonds would in part be backed by Germany who is the key player in the whole process.
Seems good to me. The problem? Germany doesn’t want any part of that quite yet.
My next post will comment on Germany’s objections, as well my take on what they should do.
