Soros speaks on Euro

 

Can European leaders escape from the mess they've got themselves into? It's the first question I was asked by John Humphreys this morning on the Today programme, as part of a lively discussion of the crisis with Martin Wolf, of the Financial Times.

Stephanie Flanders and the FT's Martin Wolf examine the significance of the outcome of this week's eurozone summit

I happened to draw a comparison with the 1992 ERM (Exchange Rate Mechanism) crisis - that the writing was on the wall, not when politicians run out of things to do, but when they run out of things to do that investors believe they can actually carry out. (That was 15% interest rates in the middle of a recession, in the case of the UK in 1992).

The question was whether eurozone leaders have now reached that point.

As luck would have it, I later found myself interviewing George Soros, the global financier-turned-activist who is still best known in Britain as the man who bet against the pound in the 1992 crisis - and came out the process a great deal richer.

George Soros says the European Union has become "ungovernable"

I asked Mr Soros whether this did now feel like a similar crunch-point to 1992. Not to put too fine a point on it - was he selling the Euro? He said no, European governments would find a way to hold the single currency intact, if only because the alternative was too ghastly to contemplate.

You hear the same thing again and again: people insist that the Euro cannot fail, just after explaining why it's going to be so difficult for it to carry on.

So, there was a vote of confidence for the euro, of sorts, from Mr Soros. But the rest of the interview would not make happy listening for President Sarkozy - or Jean- Claude Trichet.

Mr Soros actually compared the Eurozone crisis to the collapse of the USSR - he said both cases had the same air of disintegration. He also said that the "plan", as we understand it, might get the single currency through the next three months, but it would not tackle the underlying problems. Growth was a massive problem. And they were going to have to write off a lot more Greek sovereign debt - not just the bonds held by private investors.

Food for thought. Incidentally, Mr Soros also had some very interesting things to say on my second Stephanomics programnme on BBC Radio 4. We debated who deserves the most blame for the financial crises of the past few years - including the travails of the eurozone: financiers, economists, or politicians?

The other participants in this week's show were Deanne Julius, Chairman of Chatham House and Sir Howard Davies, the former Director of the FSA and a former deputy governor of the Bank of England.

Fascinating discussion of how we got into this mess - and whether the right lessons had any chance of being learned. You'll not be surprised to hear, there was plenty of blame to go around.

 
Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

So it's goodbye from me

After 11 years at the BBC, I'm leaving for a new role in the City.

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  • rate this
    0

    Comment number 24.

    When is a default not a default? When it's a Greek default.
    So as bondholders must now realise...50% of soverign debt is now uninsurable against default because governments wont allow it to be declared a default when it is indeed, a default.
    Wonder what conversasions are going on at the ratings agencies right now?

  • rate this
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    Comment number 23.

    Remember we thought property was rock solid 1995-2007 and it kept growing?
    Well we did, it was and it did.Then it didn't.
    Now Europe crashes, inexorably.
    I heard about this disaster from Mr John Kay this week and how right he has been .
    But he won't always be right.
    And already the Treasury Select Committee think this too.
    Maybe the crash is unsustainable.

  • rate this
    0

    Comment number 22.

    We all know the euro is totally stuffed.

    The only interest now, the sole reason for observing, is to see how far these people go before they admit defeat.

    euro-stalingrad.
    you were there when it happened folks
    This-is-history

    The decade when the euro bureaucrats with continent sized egos found out that monetary Darwinism cannot be managed.

  • rate this
    0

    Comment number 21.

    The zero hour has arrived. The silence is deafening. Yesterday BBC reported that the US had disarmed its last B53 thermonuclear weapon. The implosion of the EU could cause an even bigger bang. I think if there had been anything hopeful we would already have heard it.

  • rate this
    0

    Comment number 20.

    17 OD

    Too true

    Debt is simply money from the future, which is why the salesman call if credit, it sounds more positive

    Huge amounts of money are being taken from the future to shore up a status quo that favours a minority. When we get to the future - which is not that far away - we will find we are poorer, unsurprisingly.

    And politicians parade and casually say the are saving

  • rate this
    0

    Comment number 19.

    Ricardo
    I agree this does feel like the titanic and the politicans are rearranging the deck chairs as we speak. And the captain is saying this ship is unsinkable you know. The worst thing is I can't get that dame song out of my head...
    "And this farce will go on and on and on and on and on.......

  • rate this
    +1

    Comment number 18.

    The more they feed the problem the greater it is going to get. There is only one route forward considered and a choice of one is not a choice.

    BTW just how does Soros square the idea - the euro must survive - with - the unmanageable nature of the underlying economic problems - which in essence are due to the inflexibility of the euro. You cannot take his argument seriously - EZ has to contract.

  • rate this
    0

    Comment number 17.

    When are the people going to realise that recapitalising the banks means stealing from their futures?

  • rate this
    +1

    Comment number 16.

    11. leftie


    Nobody challenged. So we're all to blame.
    ==
    So the local lollipop lady on minimum wage has the same level of responsibility for the financial crisis as Fred Goodwin, Mervyn King, or dare I say it, Stephanie Flanders? Yeah, right. I really wonder sometimes what planet some of you people inhabit. It must be a pretty ugly place.

  • rate this
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    Comment number 15.

    Yes an interesting discussion where it was plain Mr Sorros was not impressed with the austerity way of doing business.

  • rate this
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    Comment number 14.

    Sorry to be gross, but when I'm feeling nauseous I instinctively try to stop myself vomiting as I hate that experience. The result is that I feel nauseous for even longer. When I do eventually vomit, I usually feel a great deal better very quickly afterwards...

    That's essentially what needs to be done in the Eurozone.
    Greece, Spain, Ireland and Italy need to be allowed to go bust...

  • rate this
    -1

    Comment number 13.

    Observations show that there is no "growth" and this is making it impossible for any of the states or institutions to deal with debt.
    The population has to go on and feed itself -prosperity without growth,
    We have the wrong management in place to handle this situation.
    Any expert who mentions increased resources should be re-employed as unskilled labour

  • rate this
    0

    Comment number 12.

    9. prudeboy

    Excellent post, very very true, they are ALL at it!

  • rate this
    +2

    Comment number 11.

    Alan Greenspan took part of the blame because he didn't foresee that bankers would lend cheap Chinese deposits to people who couldn't afford them.
    Credit raters awarded AAA ratings to dud US mortgage Bonds that Lehman sold worldwide.
    Lack of EU data deceived banks who believed all its sovereigns were good.
    Nobody challenged. So we're all to blame.

  • rate this
    +1

    Comment number 10.

    Steph, Soros is now in his 90's I think, did you consider that perhaps he is not the same man who beguiled you 20 years ago?

  • rate this
    +2

    Comment number 9.

    The problem with Humphreys is that he is acting as if he doesn't know the nature of money. That is - he is perpetuating the sanctity of money in the minds of his listeners.

    Does he need educating or is he simply brainwashing his listeners?

    Stephanie, you must have gained an insight into the BBC presenters beliefs. Are they for real? If so please educate them.

  • rate this
    0

    Comment number 8.

    Does it suprise we mere mortals that the masters of the universe with their ineffectual so called masters or should I say paid lackeys could'nt run a brothel in the middle of the desert with an unlimited supply of birds and booze ? it should'nt

  • rate this
    +2

    Comment number 7.

    This all feels like being on the Titanic, the officers looking down at the huge rent on the side and claiming that the problem is the water coming in (rather that the huge hole) and that we just need to pump water out a little faster (when it's plain the pumps can't do it) when they should be sending people to the lifeboats.

    The problem is not a liquidity crisis, it's the debt cycle turning.

  • rate this
    0

    Comment number 6.

    You fail to identify the real villains... Speculators!

    The others are mere bystanders, along with Taxpayers.

  • rate this
    +1

    Comment number 5.

    Mr Soros simplifies the EuroZone problem to 'unmanageable', but that is a product of incompetent financial controls, omitted as a very convenient device to avoid political accountability.

    Anger is the sight of taxpayer funded EuroCrats from the 'olive oil republics' parading on a red carpet like global financial heros when the state of the Eurzone reveals them as idiots having a eureka moment.

 

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