June 27, 2011

Soros: EU Unprepared for a Country’s ‘Inevitable’ Departure

Euro zone needs a Plan B, billionaire says

According to billionaire financier George Soros, it is "probably inevitable" that a country will end up leaving the euro zone. When that happens, he said Sunday, policymakers had best have a Plan B in the works to avoid economic collapse in the European Union (EU).

Reuters reported that, over the weekend, Soros spoke at a panel discussion in Vienna, Austria, on the subject, and pointed out that there was a basic flaw in the joint currency: there was no joint treasury or true political union to back it up. "The euro had no provision for correction. There was no arrangement for any country leaving the euro, which in the current circumstances is probably inevitable," he was quoted saying.

While he did not specify any country as the "inevitable" one, he did say that survival of the EU was of "vital interest to all," and that there had to be provisions to prevent complete destruction of the body—provisions that needed to be devised now.

"There is no plan B at the moment. That is why the authorities are sticking to the status quo and insisting on preserving the existing arrangements instead of recognizing there are fundamental flaws that need to be corrected," he said. "Let's face it: we are on the verge of an economic collapse which starts, let's say, in Greece but could easily spread. The financial system remains extremely vulnerable ... We are on the edge of collapse and that is the time to recognize the need for change."

He went on to detail some possible measures the EU could put into place to prevent disaster. These included tripling the size of the bailout fund through tax revenue; having a European institution guarantee banks; creating a larger central budget; and directing some income from a value-added tax or a levy on financial transactions to Brussels.

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