Billionaire investor George Soros repeated his support for euro bonds to fight Europe’s sovereign crisis, saying joint debt liability would lower the cost of borrowing for individual euro member states.
Common euro-area bonds alone can’t solve the crisis, now in its fourth year he said at the Global Economic Symposium in Kiel, North Germany.
“We need both, euro bonds and structural reform in individual countries,” said Soros.
German Chancellor Angela Merkel, whose Christian Democratic bloc last month recorded its best election result in 23 years, repeatedly rejected the notion of debt mutualization in the euro area, arguing that these would create the wrong incentives for debt-laden states and damp their appetite for economic-policy changes.
“Euro bonds are a powerful taboo,” said Soros. A guarantee to borrow at a fixed euro-bond rate would reduce the need to transfer aid to debt-laden southern European states because the guarantee would never be called, he said.
“The danger of default would disappear,” he said. “That’s the free lunch you don’t have” at the moment. Transfer payments create “a disequilibrium” that is “unacceptable in the long term,” he said.
Soros, who has been one of the most outspoken critics of Germany’s austerity policies for the euro area, made $1 billion betting against the British pound in 1992.
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