Hedge fund legend George Soros says bailing out countries alone won’t solve Europe’s sovereign debt crisis and, instead, the region’s bailout fund needs to be used to support its banks.
He believes that if Europe doesn’t take control of its banks then it will “suffer something worse than a lost decade.”
Soros emphasised that allowing Europe’s bailout fund, the European Financial Stability Facility (EFSF), to take care of the banking sector instead of leaving it to national powers would help restore confidence in Europe.
From George Soros from Project Syndicate:
The European Financial Stability Facility must serve to rescue the banking system as well as member states. This would allow sovereign debt to be restructured without precipitating a banking crisis. Despite this added task, the size of the rescue package could remain the same, because any amount used for recapitalising or liquidating banks would reduce the amount needed by governments.
He also argued that peripheral sovereign debt should be converted into Eurobonds in order to help come ot of the crisis. Eurobonds would help to limit the competitiveness between states, he said.
Soros picked on Germany for not taking responsibility for the debt crisis and only bailing out countries in order to save its own banking system.