Friday, November 28, 2014

The Accidental Empire

NEW YORK – It is now clear that the main cause of the euro crisis is the member states’ surrender of their right to print money to the European Central Bank. They did not understand just what that surrender entailed – and neither did the European authorities.

When the euro was introduced, regulators allowed banks to buy unlimited amounts of government bonds without setting aside any equity capital, and the ECB discounted all eurozone government bonds on equal terms. Commercial banks found it advantageous to accumulate weaker countries’ bonds to earn a few extra basis points, which caused interest rates to converge across the eurozone. Germany, struggling with the burdens of reunification, undertook structural reforms and became more competitive. Other countries enjoyed housing and consumption booms on the back of cheap credit, making them less competitive.

Then came the crash of 2008. Governments had to bail out their banks. Some of them found themselves in the position of a developing country that had become heavily indebted in a currency that it did not control. Reflecting the divergence in economic performance, Europe became divided into creditor and debtor countries.

When financial markets discovered that supposedly riskless government bonds might be forced into default, they raised risk premiums dramatically. This rendered potentially insolvent commercial banks, whose balance sheets were loaded with such bonds, giving rise to Europe’s twin sovereign-debt and banking crisis.

The eurozone is now replicating how the global financial system dealt with such crises in 1982 and again in 1997. In both cases, the international authorities inflicted hardship on the periphery in order to protect the center; now Germany is unknowingly playing the same role.

The details differ, but the idea is the same: creditors are shifting the entire burden of adjustment onto debtors, while the “center” avoids its own responsibility for the imbalances. Interestingly, the terms “center” and “periphery” have crept into usage almost unnoticed. Yet, in the euro crisis, the center’s responsibility is even greater than it was in 1982 or 1997: it designed a flawed currency system and failed to correct the defects. In the 1980’s, Latin America suffered a lost decade; a similar fate now awaits Europe.

At the onset of the crisis, a breakup of the euro was inconceivable: the assets and liabilities denominated in a common currency were so intermingled that a breakup would have led to an uncontrollable meltdown. But, as the crisis has progressed, the financial system has become increasingly reordered along national lines. This trend has gathered momentum in recent months. The ECB’s long-term refinancing operation enabled Spanish and Italian banks to buy their own countries’ bonds and earn a large spread. Simultaneously, banks gave preference to shedding assets outside their national borders, and risk managers try to match assets and liabilities at home, rather than within the eurozone as a whole.

If this continued for a few years, a euro breakup would become possible without a meltdown, but it would leave the creditor countries with large claims against debtor countries, which would be difficult to collect. In addition to intergovernmental transfers and guarantees, the Bundesbank’s claims against peripheral countries’ central banks within the Target2 clearing system totaled €644 billion ($804 billion) on April 30, and the amount is growing exponentially, owing to capital flight.

So the crisis keeps growing. Tensions in financial markets have hit new highs. Most telling is that Britain, which retained control of its currency, enjoys the lowest yields in its history, while the risk premium on Spanish bonds is at a new high.

The real economy of the eurozone is declining, while Germany is booming. This means that the divergence is widening. The political and social dynamics are also working toward disintegration. Public opinion, as expressed in recent election results, is increasingly opposed to austerity, and this trend is likely to continue until the policy is reversed. Something has to give.

In my judgment, the authorities have a three-month window during which they could still correct their mistakes and reverse current trends. That would require some extraordinary policy measures to return conditions closer to normal, and they must conform to existing treaties, which could then be revised in a calmer atmosphere to prevent recurrence of imbalances.

It is difficult, but not impossible, to identify some extraordinary measures that would meet these tough requirements. They would have to tackle the banking and the sovereign-debt problems simultaneously, without neglecting to reduce divergences in competitiveness.

The eurozone needs a banking union: a European deposit-insurance scheme in order to stem capital flight, a European source for financing bank recapitalization, and eurozone-wide supervision and regulation. The heavily indebted countries need relief on their financing costs. There are various ways to provide it, but they all require Germany’s active support.

That is where the blockage is. German authorities are working feverishly to come up with a set of proposals in time for the European Union summit at the end of June, but all signs suggest that they will offer only the minimum on which the various parties can agree – implying, once again, only temporary relief.

But we are at an inflection point. The Greek crisis is liable to come to a climax in the fall, even if the election produces a government that is willing to abide by Greece’s current agreement with its creditors. By that time, the German economy will also be weakening, so that Chancellor Angela Merkel will find it even more difficult than today to persuade the German public to accept additional European responsibilities.

Barring an accident like the Lehman Brothers bankruptcy, Germany is likely to do enough to hold the euro together, but the EU will become something very different from the open society that once fired people’s imagination. The division between debtor and creditor countries will become permanent, with Germany dominating and the periphery becoming a depressed hinterland.

This will inevitably arouse suspicion about Germany’s role in Europe – but any comparison with Germany's past is quite inappropriate. The current situation is due not to a deliberate plan, but to the lack of one. It is a tragedy of policy errors. Germany is a well-functioning democracy with an overwhelming majority for an open society. When the German people become aware of the consequences – one hopes not too late – they will want to correct the defects in the euro's design.

It is clear what is needed: a European fiscal authority that is able and willing to reduce the debt burden of the periphery, as well as a banking union. Debt relief could take various forms other than Eurobonds, and would be conditional on debtors abiding by the fiscal compact. Withdrawing all or part of the relief in case of nonperformance would be a powerful protection against moral hazard. It is up to Germany to live up to the leadership responsibilities thrust upon it by its own success.

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    1. Commentedcaptainjohann Samuhanand

      Even in Eastern Europe the East Germans were hard working and always outperformed the other Warsaw pact countries.Germans not only work hard but also save while the Greeks spent on Cyprus,Olympics,soccer etc and wanted to spend continuously with German savings. I feel the Greeks should be thrown out of Euro and then they can see how it feels

    2. CommentedCarl Rylett

      So it seems the main difference between the credit crisis in USA/UK on the one hand and Europe is that with the former the governments knew they had to bail out their banks for the reckless borrowing and got on with it whereas Germany is trying to avoid bailing itself out, hoping the borrowers pick up more of the bill (and trying to shift the burden of guilt on them). This is because the European Union is halfway between a unified state and group of distinct states so lines of responsibility are not clear. Thus responsibility is abdicated causing uncertainty and an economic drag until a solution is found or the Euro disintegrates uncontrollably. Despite being a big fan of the European Union in general I think southern European countries should seriously consider exiting the Euro, basing the decision on economic fundamentals instead of politics or national pride. I would be interested in whether George believes dividing the Euro between a northern 'Neuro' and southern 'Seuro' would be a viable option. Surely we have to start thinking outside the proverbial box

    3. Commentedpeter fairley

      Hard to reply to an article by god. whew. Ok I try. Kind of nervous. Could an assistant to Mr. Soros please elaborate on how much more skin in the game Germany really has since bank liabilities(including capital flight deposits) has ballooned to USD $804 billion? It seems banks are not reinvesting deposits too aggressively these days. Charles Biderman thinks Germany will exit EU. Martin Wolf sees some similar breakup. Also final paragraph has me scratching my head. Thanks. Please, no thunder until I leave. Sorry if I disturb. I am a big fan.

    4. CommentedFlip Bibi

      Interesting article, but few realize that there is more in between those lines. What is presented here is that Germany needs to change its stance or else become the single responsable "individual" of the total European meltdown. In another way: if Germany changes: the EU wins, but if the EU fails: Gernamy is guilty.
      Now, with all due respect, Mr. George Soros is one of the biggest currency market investor and his business is to make $. If Germany changes it's stance: he wins extra $, but what if Germany doesn't? What then? Take a close look at history.
      1. Thailand in 1997: The nominal U.S. dollar GDP of the ASEAN fell by $9.2 billion in 1997 and $218.2 billion (31.7%) in 1998. What did Paul Krugman say again?
      2. September 16, 1992. What does the British Goverment call it? Oh yes, Black Wednesday.Someone earned $1.1billion as the Sterling devalued.
      3. 1988, France. The Socialist Party fell and privatization of companies began; and Mr. Soros earned a significant amount of money. But someone noticed discrepancies.
      4. 2005: Mr. Soros was convicted of insider trading.
      5. June 2006: The French Supreme Court confirmed the conviction.
      6. December 2005: Mr. Soros appealed to the European Court of Human Rights.
      5. October 2011: The European Court of Human Rights rejected his appeal in a 4–3 decision, saying that Mr. Soros has been aware of the risk of breaking insider trading laws.
      No, I am not attacking Mr. Soros' character, I am just saying that any article under his name, always begs to be read closely, very closely. There is more than meets the eye in this article. Of course he presents opinions/ideas on what can de done to solve the issues, but also the seeds of a different idea are placed.

    5. CommentedWilliam Hampton

      Let me add this, I do not think that it is an accident that our economic mess was blamed on the financial industry. This insures that people will continue buy products produced by cheap labor. Some out there would not like it if all Americans stopped buying products of American companies, if they were made by cheap foreign labor.

    6. CommentedWilliam Hampton

      Looking among the trees, what you are saying George is probably true. But, looking at the forest I see world labor competition as the underlying problem. If the Europeans had not lost so many of their jobs to the cheap labor of the world, would this problem have arisen? It seems to me that the loss of jobs in the USA, and else where, has cause our economic problems. If I remember right when Ross Perot was running for president, he predicted this happening in the US. I am sure that it can be argued that this is not true. Economists do not seem to agree on much of anything. As a layman, looking at the forest rather than the trees, it seems rather obvious to me. Of course as a layman, I am probably wrong.
      As to the American banks needing bailed out, the sellers of credit default swaps (bond insurance) were the ones needing bailed out. The banks had turn their loans into bonds that were rated triple A by bond rating companies (S&P), and sold them. This means the bond holder and the ones selling credit default swaps were the one in need of bail out. (AIG) All of this might not have happened if American works had not lost so many of their jobs to world labor competition, (China) causing them to not pay their bills.

        Commentedpeter fairley

        There are many forest and trees issues out there. Economics is a vast subject, involving so much philosophy, that the math & various statistical data, practicalities of budgets & financing issues seem to get lost in politics and rhetoric. The cheap labor overseas is surely an important topic. But I am always surprised that there is not more focus on the cheap labor in USA vs the expensive labor in USA. States tend to guarantee construction contracts to union workers but largely ignore retail workers and various other working poor who might like to join with the benefits of state construction spending. GM workers were getting free cars as well as relatively high salaries and benefits until the company finally went into bankruptcy.Management was then blamed for the bankruptcy. It is curious to me that the left always blames Republicans, corporations or the rich but never blames the 'relatively rich' in some unions. Politics from these unions, along with health & litigation costs, can be seen as exacerbating the flow of jobs overseas. Foreign countries do their best to attract corporations to build factories. USA seems to feel it can just keep attacking corporations at will in the courts, and media ...and USA is such a wonderful place corporations want to stay there?

    7. CommentedDave O'Carroll

      It's not clear at all Mr Soros that the missing printing press was the problem.

      It was an endless supply of politicians whose manifesto based itself around a vote for me is a vote for jam caught the imagination of most electorates greedy for the unfunded jam of others.

      Now we have the unedifying sight of addicts wanting to steal the jam of those not even born to satiate the monsterous appetite they've created.

      Austerity or diet if you prefer is the right way for a long term solution but the withdrawal pains are too much for the fat underbelly to live with, preferring instead a sweet nothing sold on the next cheating stall.

      I've outlined a solution on the "Which Eurobond" article - The perfect cheaters charter to confuse the fattened fools bereft of willpower that there's an easy way.

      to a lack in explaining to each of the 27 electorates, that voting for me, where me=someone else's jam, actually means someone else's store of tomorrows jam

    8. CommentedGerardo Canto

      In order to kick the can of government insolvency down the road, in effect tilting the adjustment responsibility onto the backs of debtors, Greece will abide by the stipulations of the IMF and the European Central Bank in undergoing austere fiscal policy changes. In the worst case scenario, the government will probably then increase taxes while also removing public benefits and social safety nets. In addition, commercial banks will scramble to collect on their loans by foreclosing on homes and businesses. These simultaneous effects could be shattering to aggregate demand. In result, these central banking institutions avoid effectual restructuring that would extend repayment and uphold expenditures in the short-term. Instead, expedient deleveraging is given priority and the money supply dries up.

    9. CommentedJonas Almeida

      This is a fantastically clear analysis! "the EU will become something very different from the open society that once fired people’s imagination. The division between debtor and creditor countries will become permanent" - I think we'll remember this years from now. As a Portuguese native who grew up in Angola during the colonial war this sounds very familiar. So my home country went from colonialist to colonized in one generation: the wheels of history turn fast. How long before it will take another colonial war to break the new oppression and regain self-determination? Gentlemen and gentlewomen of the EU, faites vos jeux.

    10. CommentedJohn Zani

      In cases where borrowing is used to pay for early retirees (Italy, where in the 80's public workers could retire at 50 and then find another job in the black economy, without paying taxes on it), is right that the Germans don't pay for such wastes.
      Neither is their fault if politicians in southern countries are incompetent at what they do (always with Italy in mind).
      On a Eu level the solution is not easy:
      -Economic integration is almost impossible (and the aforementioned issues are a reason that adds to this).
      -Differences inside the Eu are huge (we range from countries like Germany and Uk to the likes of Romania and Bulgaria).
      -Europe is still the home for socialists (I'm just reading on Cnbc Ms. Merkel will campaign for a transaction tax)

      Leavin the Eu aside I'd like to comment on the Lehman Issue.
      In my opinion letting it fail was the right choice and the same should have happened to many other institutions.
      Let the responsibles suffer from the actions they've taken, but at the same time don't overtax and chase after those that have taken the right ones.
      What we have now is : we bailed you out but EVEN though you repaid us with INTERESTS this is not enough. This is just a game killer and goes against every principle of Free market.

      In the same fashion countries that took some policies should be held accountable for their actions, and shouldn't ask others to pay for their debt.

    11. CommentedGary Marshall

      Here is a solution to the Greek problem and for all those nations so afflicted. If anyone can find the flaw, I shall be more than happy to give him or her $50,000. I am just tired of doing this.


      The costs of borrowing for a nation to fund public expenditures, if it borrows solely from its resident citizens and in the nation's currency, is nil.

      Why? Because if, in adding a financial debt to a community, one adds an equivalent financial asset, the aggregate finances of the community will not in any way be altered. This is simple reasoning confirmed by
      simple arithmetic.

      The community is the source of the government's funds. The government taxes the community to pay for public services provided by the government.

      Cost of public services is $10 million.

      Scenario 1: The government taxes $10 million.

      Community finances: minus $10 million from community bank accounts for government expenditures.
      No community government debt, no community
      government IOU.

      Scenario 2: The government borrows $10 million from solely community lenders at a certain interest rate.

      Community finances: minus $10 million from community bank accounts for government expenditures.
      Community government debt: $10 million;
      Community government bond: $10 million.

      At x years in the future: the asset held by the community (lenders) will be $10 million + y interest. The deferred liability claimed against the community (taxpayers) will be $10 million + y interest.

      The value of all community government debts when combined with all community government IOUs or bonds is zero for the community. It is the same $0 combined worth whether the community pays its taxes immediately or never pays them at all.

      So if a community borrows from its own citizens to fund worthy public expenditures rather than taxes those citizens, it will not alter the aggregate finances of the community or the wealth of the community any
      more than taxation would have. Adding a financial debt and an equivalent financial asset to a community will cause the elimination of both when summed.

      Whatever financial benefit taxation possesses is nullified by the fact that borrowing instead of taxation places no greater financial burden on the community.

      However, the costs of Taxation are immense. By ridding the nation of Taxation and instituting borrowing to fund public expenditures, the nation will shed all those costs of Taxation for the negligible fee of borrowing in the financial markets and the administration of public

      Gary Marshall

    12. CommentedGary Marshall

      Hello George,

      The nations did give up their right to operate a printing press, but the main cause of their problems is a persistence in pursuing costly socialist polices that produce of value for the economy. Its fine if all do it, but Germany isn't as taken with the program.

      Now that hell is approaching, these troubled nations still wish to continue with their folly at the expense of everyone else. And the banks who funded and continue to fund this maniacism will earn their just desserts.


        CommentedGary Marshall

        Hello Aldo,

        I read through your comments.

        Fannie Mae and Freddie Mac, run by reckless and malfeasant Democrats for decades, did everything they could to create a housing bubble. When the crash came and FandF's paper looked dubious, the government guaranteed their paper. How nice!

        Spain had pushed 'housing for all' with a number of government policies, tax and regulatory, creating an immense bubble in Spain. Portugal may not have seen a housing bubble, but its government certainly created a good deal of reckless government expenditures that pushed borrowing into the stratosphere in an economy that could little bear it. But why face facts when you can explain them away as the fault of another.

        Its not the borrowers nor the lenders' fault for creating this mess, its the regulators. Right! They didn't put a stop to the madness. Shame on them. The regulators should have just snatched away the loan contracts from the borrowing governments and the lending bank reps, who behave as everyone knows little better than children. What were the regulators thinking!

        Germany may have large socialist expenditures, but it is an economy that can afford it. Of course, Germany and its export markets benefit from a depreciative Euro, but that's life. They sell products that the rest of the world devours. Good for them. And they have many a lender on their doorstep.

        Of course government is redistributive. They take from the rich and give to the poor. Only the rich pay taxes, and none other. No fees for fuel for the poor and middle class. No income taxes for the poor and middle class. No VAT for the poor and middle class. Only the rich pay to sustain the poor.

        What a joke! Government takes from everyone and offers such worthless goods and services in return at the highest possible costs. Redistribution is the means. What is the aim or objective? Expensive and impoverishing green technology?

        Aldo, stop living in some kind of fantasy land. Stop voting for the wrong people.


        CommentedAldo Dias

        I have a lot of problems with a lot of these arguments. First of all I don't understand what you mean by "not with the socialist program", but germany has one of the most extensive wellfare states in the world. Its unemploymente benefits, for example, are huge. The reason it has much less trouble servicing its welfare system is because, for example, it has a much lower unemployment rate. Unemployment benefits, although I do think should be lower (in my country, Portugal, for example), there is absolutely no relationship between unemployment benefits and unemployment. We have had the exact same unemployment benefit rules and in the year 2000 we had an unemployment of 3 point something per cent and now its officially 15 point something. In reality, 20. This was regarding Germany not being "with it", whatever "it" means.

        Regarding Antoni Jaume's point, I don't see what Asnar had to do with it. No federal bodies like Freddiemac and Fannymae were created in spain, though I suspect Gary Marshal's interest in them is because, having a para-public nature, they fit into his the government is the boggie man creed.

        If you do want to blame internal forces you would have to blame the cajas, which belong to the the autonomies, or bank regulators. Given that bank regulators failed EVERYWHERE, including in frankfurt, I'm not sure if your argument is sound. I think, on the other hand, it has to do with what Mr soros says, in the beginning of this article:

        "When the euro was introduced, regulators allowed banks to buy unlimited amounts of government bonds without setting aside any equity capital, and the ECB discounted all eurozone government bonds on equal terms. Commercial banks found it advantageous to accumulate weaker countries’ bonds to earn a few extra basis points, which caused interest rates to converge across the eurozone. Germany, struggling with the burdens of reunification, undertook structural reforms and became more competitive. Other countries enjoyed housing and consumption booms on the back of cheap credit, making them less competitive."

        Frankly, when you resort to meaningless expressions like "some kind of socialist organization" I don't even know where to start. Do you mean redistributive? Government is ALWAYS redistributive. Even collecting taxes to build a road: do you collect a percentage of wealth of an absolute value. If you collect an absolute value, you are collecting less of a percentage from top earners than you are from lower earners, therefore redistributing to the top. If you choose a percentage even if its the same percentage you are redistributing to the bottom, since more of the road will be made using top earner tax money than lower. And I suppose realistic systems that acknowledge that there is an element of luck involved in success and that, regardless of this admission, there is a moral duty to those less priviledged... this is complete marxism to you then?

        Regardless, I will tell you what I know best, my country. We have highways to the moon and back. like the euro highways to nowhere were supposed to bring about cohesion, to take development to the desertified interior (which happened to have been filled with textile factories that were liquidated for cheap european buck - eu incentive). These highways were subsidized in 50 per cent and were built using mainly german and french banks. Again, EU incentives promoting the wrong thing, concrete over smart energy grides or clean energy. Why? Like the CAP, to feed lobbies of the main contributors. That is, exactly, the reason for their contribution. Moreover, these contracts generated a great consumption of resources and structuring of the economy around concrete and construction and not the export sector. On top of all of this, the creation of a parallel state of task groups and advisors and lawyers that excelled at sacrificing the sate and locking us in bullet proof contracts that will sacrifice the next 2 generations.

        Funnily, this isnt our main problem. Our problem is growth. We did not have a housing bubble. Most portuguese people wish we had. We are taking all of the heat without any of the gain. Quite simply, our problem wasnt too much government, it was too little. Not too little in size, but too little in political leadership, in recognizing shumpeterian forces with the enlargement and the openning to china and in helping promote exports. Because then we had the money, or we could get it. The state exists to help organize, provide direction, provide support for small and medium sized business. This is what happens in Germany. Almost all of their banks are public and their missions often are that of operating as public investment banks to the private sector and not commercial banks. None of this we did. There is tremendous will to "adjust", as the euphemism goes. But quite simply our educational profile is so different from what is now needed that we need time! Time and interest rates that do no treat millions of people like incompetent little children that must be taught a moral and espiritual lesson. Because despite everything, and a recession of all our major trading partners, portuguese exports have grown around 10% since the bailout started. The problem is that we are starting from a weak base and not just of exports does the economy live. Domestic consumption is at a virtual stand still and, unlike what is said about souther european labour markets, the truth is that we are so flexible that increases in exports cannot even dream of incorporating enough workers to off set unemployment.

        CommentedGary Marshall

        Hello Antoni,

        The Spanish situation is slightly different. But it all comes down to big government pushing the most insane policies and expenditures onto the backs of its people. In the US large publicly financed corporations had the largest hand in creating that mortgage mess as did certainly tax policies. It is the now the same in Canada with a state institution pushing home ownership.

        And I am sure it is the same in Spain. There are also a number of socialist institutions equipping their public employees with all sorts of wages and benefits for providing the most worthless services that the regular and impoverished wage earner must struggle to pay for. All sorts of green technology experiments that cost exorbitant sums will soon lie on some dung heap. Oh, the wisdom of squandering government, giving out scarce dollars, no doubt with large kickbacks, to firms for providing services that none desire and that serve no purpose. It is these people that recline in affluence speaking of their million dollar bonuses.

        And what is the European solution? More loans from prudent nations to fund more of this lunacy. Morals do not really enter into it. Its can be viewed as a purely financial question. And Europe is running out of runway.


        CommentedAntoni Jaume

        «[...], but the main cause of their problems is a persistence in pursuing costly socialist polices that produce of value for the economy. Its fine if all do it, but Germany isn't as taken with the program.»

        That is quite false of the spanish situation, and I suspect that the same can be said of the other cases, which include Ireland, the cause is rather the fact that an extreme right wing government, the one led by Aznar, who inflated a real estate and construction bubble, which was the cause of the debt, since in Spain there was not enough capital. It is the private debt that asphixiate Spain.

        «Now that hell is approaching, these troubled nations still wish to continue with their folly at the expense of everyone else. And the banks who funded and continue to fund this maniacism will earn their just desserts.»

        Oh, you're a moralist! Yes the poor who simply worked their life away now must pay for the grand schemes of the rich, who get even richer as the workers lost their jobs. As for the banks, they're no one, the individuals responsible for the situation have retired with their millions in bonus, letting the workers on the ground to solve the problems.

    13. CommentedUsama Tariq

      I expect real Euro disintegration the day labour divisions begin. By that I mean national discrimination of workers for jobs. Spanish companies hiring only spanish and little or no overseas hiring. When Labour selection will be on national basis, I guess that will be the real start of the fall of this empire for then real boundries will be drawn out. Not at the moment.

    14. CommentedSoren Dayton

      It seems to me that one of the largest problems here was the regulatory failure of asserting that the risk of a greek or spanish bond carried the same risk as that of a german bond. Indeed, as you point out, this completely disregards the price signals that allowed them to get more basis points for lower quality debt.

    15. CommentedAndré Rebentisch

      I don't believe in the narrative of German benefit from the crisis, but my governments actions seem "mature". It seems likely to get more order policy on the European level for the financial sector. The ball is also in the Court of Commissioner Michel Barnier to propose the right sets of regulation. The European Union is a great insurance mechanism to balance political madness in member states and keep societies open. Just think how the EU institutions exercised their influence in Hungary.

    16. Portrait of Asgeir B. Torfason

      CommentedAsgeir B. Torfason

      In this otherwise good article, calling the bankruptcy of Lehman Brothers an accident – must be an accident. The investment bank was both insolvent and illiquid; not due to accident but because of how it was managed. Not having used taxpayer’s money to save the bank is also hardly accidental. Saving it would only have keept the music playing a bit longer, but some day the party had to end.

    17. CommentedWilliam Wallace

      The three month window is getting a lot of press echo. Additional comment on this by the author would be most welcome.

    18. CommentedFrank O'Callaghan

      Mr. Soros has a clear analysis. Almost all of it is beyond doubt. His giving the benefit of the doubt that this is the result of a lack of policy and planning is, at best, naive. I think it was at least directed negligence. The outcome of empowering the German core at the expense of 'peripheral' countries is hardly an accident.

    19. CommentedS K Modi

      I beg to differ from Mr. Soros. I think the profligates would have been even more profligate, had they had the option to print money, though perhaps they would have realised the folly by now since they would have already paid the price. Best thing would if Greece walks, suffers and comes back. Euro must survive for the good of the world at large.

        CommentedLukasz Stankiewicz

        @S K Modi
        Correct but the only 'profligates' were the Greeks - with large debt before the crisis struck. The difference is their debt would not be as big if it wasn't priced so low (because they were in the Euro); and they would not be so uncompetitive vis-a-vis Germany if they could devalue their currency (conversly Germany would not be booming now).