Billionaire financier George Soros, also known as the man who broke the Bank of England after raking in more than $1 billion during the 1992 Black Wednesday U.K. currency crisis, thinks the euro and the European Union itself are at risk of total disintegration if Germany refuses to play its traditional role and make concessions.
CNBC: “The Germans have always made the concessions needed to advance the European Union, when people were looking for a deal. Not any more. That’s why the European project is stalled,” Soros told Italian newspaper ‘Corriere della Sera’ in an interview published on Thursday.
“And if it can’t go ahead from here, it will go backwards. It’s important to understand that if you don’t make the next steps forward for the euro, the euro will go to pieces and the European Union too,” he added.
Soros’ comments echo those made by Morgan Stanley’s (MS) economists who say that there is now a very real chance of both the euro and the EU falling apart.
So is the euro doomed? If one country leaves (Greece is a strong candidate since it faces long-term solvency risks) the euro zone by reintroducing its national currency, will others follow?
“More broadly, and more worryingly, recent developments significantly raise the (long-term) risk of a euro break-up, in our view,” Morgan Stanley wrote in a note.
“The bail-out and the ECB’s softer collateral stance set a bad precedent for other euro area member states and make it more likely that the euro area degenerates into a zone of fiscal profligacy, currency weakness and higher inflationary pressures over time,” they added.
“Countries with a high preference for price stability, such as Germany, might conclude that they would be better off with a harder but smaller currency union…And because the Maastricht Treaty does not provide for the possibility of expelling euro area members, the only way Germany could achieve this would be by leaving the euro to introduce a stronger currency,” Morgan Stanley concluded.