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George Soros Says the Euro Will Survive
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The eurozone may be in turmoil but the investing maestro says the currency will survive.

As someone who exchanged some Japanese yen for the euro recently, I have been watching the latter’s gyrations with more than usual interest. My purpose was not to speculate but to finance a real estate transaction, but it is still a bit chastening to have taken a 10 percent haircut in a matter of a month.

Will the euro survive? My guess is it will and that indeed a year from now it will have moved strongly upward vis-a-vis the U.S. dollar. But I cannot claim to be privy to German Chancellor Angela Merkel’s agenda. In common with the larger German establishment, she seems to be engaging in brinkmanship with the intention of getting the weaker eurozone members to comply with new rules for a German-led European currency order. “Seems,” however, is the operative word as press coverage is conflicting and generally uninformed.

For me the most persuasive evidence that the euro’s goose is not entirely cooked has been a speech by financier George Soros in Trento, Italy. Soros not only predicts the euro will survive but that the Greeks will elect some compromise government that will give enough ground to satisfy the Germans and thus forestall a Greek exit from the euro.

One paragraph in particular struck me as on the money:

But the likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also for Germany. It would leave Germany with large unenforceable claims against the periphery countries. The Bundesbank alone will have over a trillion euros of claims arising out of Target2 by the end of this year, in addition to all the intergovernmental obligations. And a return to the Deutschemark would likely price Germany out of its export markets – not to mention the political consequences. So Germany is likely to do what is necessary to preserve the euro – but nothing more. That would result in a eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer of payments. That would turn the European Union into something very different from what it was when it was a “fantastic object” that fired peoples imagination. It would be a German empire with the periphery as the hinterland.

For Soros’s speech, click here.

(Republished from Forbes by permission of author or representative)
• Category: Economics • Tags: Eurozone, George Soros 
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