25th June 2012
The Guardian reports that Soros has called for the EU to set up a European Fiscal Authority that would buy underperforming debts from distressed eurozone members. The EFA would issue bonds backed by all EU countries. Soros envisages that the two main beneficiaries would be Spain and Italy which are having to pay a very high price to attract investors to their ten year bonds.
The bonds would be bought in return for restructuring in the countries concerned, but would fall short of the creation of Eurobonds issued by one eurozone country but backed by all of them.
Soros believes would then buy time for other reforms including the eventual issuance of full Eurobonds – a measure backed by, among others, France and Spain.
He says that the political union being called for by Germany before it supports many other economic measures will take a very long time to construct by which time it may be too late to save the currency.
Soros himself is gloomy, but Business Insider thinks the idea might have a chance. It writes: "Soros doesn't say it specifically, but just taking this step would probably massively improve peripheral borrowing costs (in Spain and Italy) simply thanks to the expectation that there was a path in place to take the worst-case scenario (a sovereign blowup in either of those two countries) totally off the table.
"Would the Germans ever go along with Soros' scheme? It's possible. The fact of the matter is that noises out of Merkel and Finance Minister Schauble lately have been along the lines of: If you're willing to give up fiscal control, burden sharing is possible. A big question remains on order and timeline and whether it can all be done at once."
Meanwhile the crisis elsewhere continues. Spain has made a formal request for a bailout for its banks.
However there is speculation is that rather than euro 60 billion suggested last week, Spain might need to access to euro 100 bn.
Commentators remain cynical about whether any radical action will be taken. With yet another political summit on the banking situation scheduled for later this week, Forbes magazine's Haydn Shaughnessy predicts a long week of euro bluffing amid fundamental divisions among member states.
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