Evans-Pritchard: Soros tells Germany to step up to its responsibilities, or leave EMU

According to Soros, those responsibilities include increased debt issuance and debt purchase by the German government (which he calls as "growth strategy"), and they are vital to "democracy".

Soros tells Germany to step up to its responsibilities, or leave EMU
(Ambrose Evans-Pritchard, 6/23/2010 Telegraph UK)

"Legendary investor George Soros has called on Germany to leave the euro unless it is willing to embrace a growth strategy, describing Berlin’s austerity doctrine as a threat to democracy and political stability in Europe.

""German policy is becoming a danger that could destroy the European Project. A collapse of the euro cannot be excluded," he told the German weekly Die Zeit.

""Unless Germany changes policy, its withdrawal from the currency union would be helpful for the rest of Europe. At the moment Germany is pushing its neighbours into deflation: this threatens a long phase of stagnation, leading to nationalism, social unrest, and zenophobia. It endangers democracy," he said.

"Mr Soros saw the political effects of wage cuts first-hand during the Great Depression, and narrowly survived the Holocaust as a Jewish boy in Nazi-controlled Budapest. He has since dedicated much of his wealth to philanthropic works promoting freedom and pluralism across the globe, mostly through Open Society institutes.

"His comments reflect growing alarm in influential circles on both sides of the Atlantic over the 1930s-style policies of wage cuts and debt-deflation being imposed up the Club Med bloc, Ireland, and parts of Eastern Europe by the EU authorities, at the behest of Berlin." [The article continues.]

Cutting the government spending and lowering wages ARE a "growth strategy" for a country like Germany, which has many things to export to other countries that people actually want and even want to pay premium to get them. Cutting the government spending frees up capital which otherwise goes to the government coffer to be squandered in bureaucracy (look no further than the US's TARP, so-called stimulus packages) to be directed to wealth-creating private enterprises. Lowering wages means input cost will be lower for their export products.

No way, says George Soros. He says that would destroy other eurozone economies like the Club Med. According to Evans-Pritchard,

"Mr Soros said Germany was treating the deeply-flawed Maastricht Treaty as it were a "sacred text", warning that monetary union cannot endure for long as a narrow construct based on debt and deficit ceilings. He said wage rises in Germany are imperative to help lift the whole eurozone, allowing peripheral economies to claw their way out of trouble without fighting the extra headwinds of deflation."

In other words, Mr. Soros is calling for self-immolation by Germany in order to save Greece, Spain, Portugal, Italy, Ireland, and possibly France. I guess he wasn't expecting resistance.

The article also mentions the US economist an Nobel Prize winner (as well as a candidate for Obama's new budget director) Paul Krugman, who basically said the same thing to Germans recently and pissed off the entire nation. (Some sweet snippet from Zero Hedge: "Germany daily Handeslbatt, which ran an interview with the "economist" in which Krugman stick not a foot, but an entire SS-20 nuclear warhead armed ICBM, in his mouth". To read the article, click here.)

Germans are more than happy, I suspect, to leave the EMU and get their Deutsche Mark back. One of the large financial portals in Germany, BoersenNews.de, has started to quote in Deutsche Mark alongside euro.

Great Britain, which is outside the EMU, may be embarking on the unthinkable - drastically cutting the government spending and raising taxes to achieve fiscal solvency.

Evans-Pritchard ends the article by recalling the famous George Soros maneuver on British Pound in the 1992 when George Soros' fund shorted pound sterling against Bank of England intervention to prop up the currency:

"Investors are likely to pay close attention to the views of Mr Soros, whose Quantum fund played a key role in the crisis of the Exchange Rate Mechanism in 1992. He famously pounced on sterling and the Italian lira after a top Bundesbank official described both currencies as over-valued, an invitation for a speculative attack.

"The crisis proved a blessing in disguise for Britain, which was liberated early from a destructive policy of job wastage. Mr Soros yet to receive a a knighthood for his services."

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