The European Union’s banking system needs to be bolstered to protect it from a potential bankruptcy of a European nation, billionaire investor George Soros said in an interview with De Tijd.
“Together with an expansion of the European bailout fund, the banking system should be protected in the short term against a bankruptcy of a European country,” the newspaper quoted Soros as saying. “The banking system must effectively come under the guardianship of the European Central Bank. They must take care that banks don’t drastically begin to cut their bond portfolios,” Soros told De Tijd.
In an open letter to European leaders published today in De Tijd, Soros urged action to stem the euro crisis because current measures are insufficient, adding that the ECB and the European Financial Stability Facility should be empowered to work together to bring the crisis under control.
“Our political leaders still don’t understand what’s wrong with the financial system,” Soros said in the interview with the newspaper. “We stand on the edge of a catastrophe.”
An uncontrolled bankruptcy of a country such as Greece would lead “without a doubt” to the collapse of the financial system and a worldwide depression, Soros said.
“We must take two important decisions to avoid that,” Soros said. “Euro-zone leaders must conclude a new treaty to become a budget union. This union must be able to issue euro bonds and urge budgetary discipline among governments.”
“But, we are not there yet,” Soros told the newspaper. “How are we going to take care that the economy continues to grow? Without growth, there is no solution, the debt load cannot be worked away unless there is a revival in the economy.”