Mega-billionaire, philanthropist and political activist Geore Soros writes in “Does the Euro Have a Future?”:
“…an orderly default and temporary withdrawal from the eurozone may be preferable to a drawn-out agony. A disorderly default could precipitate a meltdown similar to the one that followed the bankruptcy of Lehman Brothers…”
“…the possibility of an orderly default – paid for by the other euerozone countries and the IMF – would offer Greece and Portugal policy choices. “
“Leaving the euro would make it easier for them to regain competitiveness; but if they are willing to make the necessary sacrifices they could also stay in. In both cases the EFSF would protect bank deposits and the IMF would help to recapitalize the banking system. That would help these countries to escape from the trap in which they currently find themselves,. It would be against the best interests of the European Union to allow these countries to collapse and drag down the global banking system with them.”
WATCHDOG: We are not quite sure whether Soros simply wants the more prosperous euro countries to safeguard euro deposits in Greek banks and to re-capitalize the banks in the more prosperous nations after they suffer heavy losses due to repudiation of portions of the sovereign bonds they hold, or if he expects the Euro countries to make good all losses to prevent default. We think it is the former.
Making the banks take a “haircut” by forgiving debt or writing down the value of a portion of the bonds they hold would be chastening to all lenders and justifiable, considering they made the loans and made bad business decisions. Recapitalizing them banks taking the losses (as was done in a way by TARP here in the USA and, for the most part, subsequently repaid) would enable them to remain in business, albeit with a far lower net worth.
This is weighty stuff, admittedly above the Watchdog’s pay grade. But what happens to the euro has sober implications for the USA. So it is worth the effort to try to understand.
There is a delay between publication of the issue and when its articles are put up on the the website of the New York Review of Books.
