Soros Warns That Germany's Austerity Policy Endangers Europe


The business community has no shortage of people who love to cause a stir with their comments. From Alan Greenspan to Nouriel Roubini to Paul Krugman, these gurus say what's on their minds, often engendering no small amount of controversy. George Soros is one such prominent commenter, and his latest remarks that Germany's fiscal policy could cause the euro to fail and undermine the European Union have more than struck a nerve.

The billionaire investor made his fortune speculating on currencies, most famously betting against the British pound in 1992, a gamble that made him $1 billion and forced the Bank of England to withdraw from the European Exchange Rate Mechanism. Over the past couple of years, as the world has undergone a financial crisis and economic recession, Soros has often been quoted in the media.

He added his share of gloomy predictions at the height of the financial crisis but also quickly announced the turnaround, saying the worst was behind us. . .only to warn us again not long ago that the next stage of the crisis had arrived.

Now, ahead of the G-20 summit in Toronto this weekend, his attention has turned to Germany. "The German policy is a danger for Europe, it could destroy the European project," Soros told German newspaper Die Zeit.

Soros was quoted as saying the collapse of the euro cannot be ruled out. "That would be tragic, because then Europe would be threatened by the sort of conflicts between states that have shaped European history," he added. But if Germany isn't going to change its policy, the eurozone would be better off without it in the common currency, he said.

"Democracy Itself Could Be At Risk"

Already, Soros said he was seeing the "disintegration" of the European Union.

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

Further, Germany has isolated itself economically with Chancellor Angela Merkel's plan for a four-year budget savings program to bring Germany's structural deficit within European Union limits by 2013. Germany's differences with France are deeper than they've been in a decade over the European debt crisis, and its many differences with other nations are becoming apparent ahead of the summit.

Indeed, the question of whether to shift toward fiscal restraint or maintain (or even increase) stimulus spending has been a sore issue ahead of the G-20. Obama has called for more spending, and on Tuesday, the German government was said to have played down reports of a clash with the U.S. over the issue. Berlin is now calling for a coordinated exit strategy from stimulus programs among all the major world economies.