Euro Collapse Warning

Soros says Germany could cause euro collapse

(Reuters) - Germany's budget savings policy risks destroying the European project and a collapse of the euro cannot be ruled out, billionaire investor George Soros said in a newspaper interview released on Wednesday.

"German policy is a danger for Europe, it could destroy the European project," he told German weekly Die Zeit.

Soros, who earned $1 billion in 1992 by betting against the British pound, added that he "could not rule out a collapse of the euro."

"If the Germans don't change their policy, their exit from the currency union would be helpful for the rest of Europe," he said.

Chancellor Angela Merkel unveiled plans earlier this month for 80 billion euros ($107 billion) in budget cuts over the next four years -- a package she hopes will bring Germany's structural deficit within European Union limits by 2013.

"Right now the Germans are dragging their neighbors into deflation, which threatens a long phase of stagnation. And that leads to nationalism, social unrest and xenophobia. Democracy itself could be at risk," he said.


George Soros is in the news.  Once again I must dispute some of his views. 

Earlier this month (see my post here) he seemed to be arguing for austerity, as he was concerned that the bond market would lose confidence in sovereign debt.  Today he seems to be arguing the opposite, that spending restraint will result in deflation which will lead to social unrest and even threaten democracy itself.

The socialist Soros seems to be fear mongering, in my view.  Deflation did not result in national socialism in Germany in the 1920s, First World War reparations lead to Germany dropping the gold standard which quickly lead to the Wiemar hyperinflation as the chart from Wikipedia shows. 

What seems particularly strange in his comments, is the reference to the "European project".

A currency should be is a medium of exchange and a store of value, not a "project".

Does this mean that the Euro was the brainchild of a group of billionaire socialists and other collectivists?

I know little about the origins of the Euro prior to the Maastricht treaty so if anyone has knowledge of this please sent me a note.