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Legendary hedge fund manager George Soros has a plan to solve the ongoing euro zone debt crisis.”To resolve a crisis in which the impossible becomes possible it is necessary to think about the unthinkable,” Soros wrote in an excerpt from his book.
But first, Soros says it’s important to be prepared for possible default from the eurozone in the case of Greece, Portugal and maybe even Ireland.
Here’s the four measures that Soros says need to be taken to avert a meltdown.
- Bank deposits have to be protected.
- Some banks in the defaulting countries have to be kept functioning in order to keep the economy from breaking down.
- European banking system would have to be recapitalized and put under European, as distinct from national, supervision.
- The government bonds of the other deficit countries would have to be protected from contagion. (The last two measures would apply even if no country defaults, according to Soros)
The problem is Europe is missing the key ingredient — a common treasury.
Soros says his four measures would cost money and the only alternative is to create a European treasury with the authority to tax and subsequently borrow.
In order to do this, Soros writes, there would have to be a new treaty that would transform the European Financial Stability Facility (EFSF) into a “full-fledged treasury.”
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