By George Soros
FINANCIAL TIMES: Financial markets are driving the world towards another Great Depression. The authorities, particularly in Europe, have lost control of the situation. They need to regain control and they need to do so now.
Three bold steps are needed. First, the governments of the eurozone must agree in principle on a new treaty creating a common Treasury for the eurozone. In the meantime, the main banks must be put under European Central Bank direction in return for a temporary guarantee and permanent recapitalisation. The ECB would direct banks to maintain credit lines and outstanding loans, while closely monitoring risks taken for their own accounts. Third, the ECB would enable countries such as Italy and Spain to temporarily refinance themselves within limits at a very low cost. These steps would calm markets and give Europe time to develop a growth strategy, without which the debt problem cannot be solved. …
These measures would allow Greece to default without causing a global meltdown. That does not mean that Greece would be forced into default. If it met targets, the EFSF could underwrite a “voluntary” restructuring at, say 50 cents on the euro. The EFSF would have enough money left to guarantee and recapitalise the European banks. It would be left to the International Monetary Fund to recapitalise the Greek banks. How Greece fared then would be up to the Greeks… (more)
EDITOR: This article needs to be read in its entirety. These ideas are not just those of Soros; they seem to be the direction Europe is moving.
