When billionaire investor George Soros comments on regional or national economies the world’s investors sit up and take notice.
Interesting therefore that Soros has recently commented that the real threat to Europe’s troubled currency, the euro, comes not from bankrupt Greece or debt-ridden Spain but from solvent Germany.
Soros has nailed Germany’s plan to slash its budget between now and 2014 as the key element which could destroy the European currency.
It is a truism in international currency markets that Soros understands the dollar, the pound and the euro. He made an easy $1 billion in 1992 when he bet against the British pound and his words since then have been closely followed by investors and currency speculators.
In late June 2010 Soros told German weekly Die Zeit: “German policy is a danger for Europe, it could destroy the European project.” He would not, he said, “rule out a collapse of the euro.”
In the context of a Europe with richer northern and poorer southern nations Soros explained that: “the Germans are dragging their neighbours into deflation, which threatens a long phase of stagnation…That leads to nationalism, social unrest and xenophobia. Democracy itself could be at risk…Germany is globally isolated … Why don’t they let their salaries rise? That would help other EU states to pick up.”
Soros was commenting after Germany revealed that it intended to slash more than 80 billion euros from its public spending programme.
The German government, led by Angela Merkel, is imposing a bank levy from 2012, a tax on nuclear power and reductions in welfare provision and the size of Germany’s armed forces.
The German austerity message was echoed by Britain’s new Prime Minister David Cameron, who pledged to reduce the country’s runaway public spending with an emergency budget.
Soros however expressed the view that Germany should help pull the other EU countries out of stagnation and debt: “If the Germans don’t change their policy, their exit from the currency union would be helpful to the rest of Europe.”
When a voice such as Soros’s begins to talk of Germany leaving the European currency it’s certain that the speculators and politicians will have questions of their own to ask. Until summer 2010 most speculation about the european currency has centred on the possibility of Greece, Spain and/or Portugal being expelled from the EU club.
The difference now, voiced by George Soros, is that powerful Germany could be the one to ditch the euro….