market folly

Well known investor George Soros yesterday spoke with Bloomberg TV about the European crisis.  He called for the continent to start a fund to buy bonds of Italy and Spain.  The investor said that, "There is a disagreement on the fiscal side.  Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco.  That could actually be fatal."

Germany's Merkel today said that she's against Eurobonds.  Soros yesterday said that, "unfortunately, she has been leading Europe in the wrong direction."  Here are some other notable quotes from his interview:

Soros on the European Crisis

“Basically there is an interrelated problem of the banking system and the excessive risk premium on sovereign debt - they are Siamese twins, tied together and you have to tackle both. It's recognized that you have to do that and there is no widespread agreement on what to do on the banking side. It's the beginning of a banking union and there is a disagreement on the fiscal side and unless that is resolved in the next 3 days then I am afraid that the summit could turn out to be a fiasco, and that could be fatal, because you are facing the possibility of Greece leaving the euro and perhaps the European Union and you need to strengthen the remaining euro structure to withstand that shock.”


On What Europe Needs

“What you need is a European fiscal authority that will be composed of the finance ministers but would be in charge of the various rescue mechanisms, the European Stability Mechanism, and the one that preceded it and it would be empowered to issue treasury bills, to set up a debt reduction fund and actually buy up the excess stock of that that has accumulated in the hands of particularly Italy and Spain and finally combine issuing treasury bills. Those treasury bills would yield 1% or less and that would be the relief that those countries need in order to finance their debt.” 

“Euro bonds are not possible because Germany would not consider euro bonds until you have a political union, and I think it's actually quite justified, it should come at the end of the process not at the beginning. This would be a temporary measure, limited both in time and in size, and thereby it could be authorized according to the German constitution as long as the Bundestag approves it, so it could be legal under the German constitution and under the existing treaties. What it means is the political will by Germany to put it into effect and that would create a level playing field so that Italy and Spain could actually refinance its debt on reasonable terms.”


Embedded below is the video of George Soros' interview with Bloomberg TV:



For more from this investor's family office operations, we've posted up the latest portfolio activity from Soros Fund Management.