Interview With George Soros: 'Greece Can Never Pay Back Its Debt'

By in Brussels

Billionaire investor George Soros Zoom
REUTERS

Billionaire investor George Soros

Should Greece have a large part of its debt waived? Absolutely, says George Soros, otherwise the country will never recover. The billionaire investor also warns about the rise of extremist parties if Germany does not change its policies towards Europe.

Legendary US investor George Soros has called for comprehensive debt relief for Greece. "Everyone knows that it can never pay back its debt," he said in an interview with SPIEGEL ONLINE. Greece is close to a primary budget surplus after a lot of pain and suffering, says Soros, whose speculation against the pound forced the UK to withdraw from the Exchange Rate Mechanism in 1992.

"If the official sector could forgo repayment as long as Greece meets the conditions imposed by the troika [of the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission]," Soros added, "private capital would return and Greece could rapidly recover. I can testify from personal experience that investors would flock to Greece once the debt overhang is removed."

Greek Prime Minister Antonis Samaras has also recently called for a new round of debt relief for his country. "What is important to me is not to procrastinate too much for a solution," he said. But the German government in particular rejects a writedown of Greek government debt. At most, it wants to discuss lower interest rates and longer loan maturities -- measures that many economists do not regard as being sufficient to solve the problems.

In addition, the German head of the European Stability Mechanism (ESM) permanent bailout fund, Klaus Regling, pointed out that debt write-downs are prohibited under ESM rules. The majority of Greece's debt is now held by public institutions, i.e. the IMF, the ECB and other EU member states. If these debts have to be written off, the cost wil be met by taxypayers.

German Leadership Can Surmount Issues

Soros recognizes this problem: "The official sector cannot write down its debt because that would violate a number of taboos, particularly for the ECB." These issues, however, could be surmounted under German leadership.

And if any country were to recognize how such an approach could work, he argued, it was Germany, which "ought to remember that it has benefited from debt writedowns three times, with the Dawes Plan, the Young Plan and in connection with the Marshall Plan."

On the other hand, French insistence on war reparation payments after World War I led to the rise of Adolf Hitler and the Nazis: "The Golden Dawn in Greece is a similar development."

If German Chancellor Angela Merkel does not change her policies towards Europe, Soros said, then her victory in last month's election would be a mere "Pyrrhic victory".

He added: "The situation that emerged from the crisis is neither tolerable nor stable...The current situation is not the result of an evil German plot. But Germany cannot escape the responsibilities and liabilities that go with that role. Germany must learn to act as a benign hegemon. Doing so would earn Germany the lasting gratitude of the other countries that are currently subordinated to it, just as the United States earned the lasting alliance of Europe with the Marshall Plan." Failure to do so, he warned, would lead to the disintegration and eventual breakdown of the European Union.

"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."

Soros, who with an estimated fortune of $20 billion (€14.7 billion) is one of the world's richest people, is rather more optimistic about the current political crisis in Washington. "The government shutdown and the threat of default is an elaborate political theater but markets can anticipate the outcome: no default and a defeat for extremists in the Republican party. That said, changes in US monetary policy have far-reaching effects on the developing world."

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1. Absurd
phinico 10/07/2013
Mr Soros' proposition is absurd. Without changing the corrupt governance of the country, Greece will soon accumulate additional debt (with the support of hedge funds like Soros!) Greece should not miss opportunity provided by this crisis to creat real industry/economy base in order to prosper. Otherwise the country will always be troubled, exploited by international financial sharks.
2. optional
peskyvera 10/07/2013
The entire world's financial set-up is based on debt - one big Ponzi scheme.
3. optional
arkopec 10/07/2013
"investors would flock to Greece once the debt overhang is removed." To offer new loans?
4. Why Would Soros Care?
spon-facebook-10000148785 10/07/2013
Given George Soros' investment history, and his lack of regard for any countries financial well-being coming ahead of his own personal financial gains; why would George Soros give any useful insight into the woes of Greece and its obligations under economic austerity.
5. optional
danm 10/07/2013
Mr Soros is a dogged advocate for redistributing other people's wealth but never his own. Soros could erase the Greek debt by writing a check if he really felt that strongly about it. Instead he wants the German taxpayers to passively pay down Greek debt and not make a fuss about it. The naked opportunism in this man's statements make it difficult for me to digest my lunch. Anyone stupid enough to listen to this man deserves exactly whatever happens to them.
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