George Soros, chairman of Soros Fund Management and popularly known as “The Man Who Broke the Bank of England,” said Greece needs a comprehensive debt relief to recover from the economic crisis in an interview with Spiegel Online.
George Soros On Greece
The legendary investor pointed out the fact that Greece will “never pay back its debt,” and the country was able to achieve a primary surplus amid difficulties. Last month, Greece reported that its primary surplus in the first eight months of the year was €1.5 billion instead of an estimated €2.5 billion budget deficit.
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Panagiotis Petrakis, economy professor at the University of Athens commented that the situation in Greece is under control with the primary surplus, but it does not point to a vigorous economy. Greece Prime Minister Antonio Samaras is confident that his government will return to growth next year after enduring a severe recession for six years.
During the interview, Soros said investors will return to Greece and the country would be able to recover rapidly if the troika [International Monetary Fund (IMF), European Central Bank (ECB), and the European Commission (EC)] forgo the repayment of debt as long as it meets the conditions imposed by the official sector. “I can testify from personal experience that investors would flock to Greece once the debt overhang is removed,” added Soros.
Klaus Regling, head of the European Stability Mechanism (ESM), the permanent rescue fund in the region, explained that a permanent write-down is against the rules of the organization. According to him, the majority of the bailout money provided to Greece came from public institutions such as the IMF, ECB, and other EU member states. He emphasized that taxpayers will shoulder the burden if the Greek government’s debt is written down.
Germany refused and rejected such an idea, and its plan is to negotiate lower interest rates and longer loan maturities for Greece. However, economists believe that it is not enough to resolve the issue.
Soros acknowledged that the troika, particularly the ECB, cannot write down the Greek government’s debt, but he opined that the German leadership had such problems.
Soros reminded that Germany “benefited from debt write-downs three times, with the Dawes Plan, the Young Plan and in connection with the Marshall Plan.” He encouraged German Chancellor Angela Merkel to reconsider her austerity policy towards the Greek government. According to him, the existing policies could lead to more right-wing extremism.
Furthermore, the legendary investor said the crisis in southern Europe is neither tolerable nor stable, and he thinks a break-up of the European Union is possible. “Many nations have lived through nightmares and survived. However, the European Union is not a nation; it is an incomplete association of sovereign states that will not survive a decade or more of stagnation. That is not in Germany’s interest. It would leave Europe worse off than it was when it embarked on the European Union,” said Soros.