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Soros damns German handling of euro crisis

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Soros damns German handling of euro crisis
Photo: DPA
15:54 CET+01:00
Prominent US investor George Soros launched a devastating broadside against the Germany's handling of the European debt crisis, saying the eurozone was on a “self-destructive” course.

Speaking at the World Economic Forum in Davos, Switzerland on Wednesday, Soros said that Chancellor Angela Merkel's government was “dictating” European policy.

“The trouble is that the austerity that Germany wants to impose will push Europe into a deflationary spiral,” Soros said on Wednesday. “To be sure, I am not accusing Germany of acting in bad faith. Germans genuinely believe in the policies they are advocating.”

The investor said that beleaguered eurozone countries like Italy and Spain should have access to a lender of last resort composed of the European Central Bank (ECB), plus two rescue funds: the temporary European Financial Stability Facility (EFSF), and the future European Stability Mechanism (ESM).

Backed by these guarantors, Soros said countries would be able to refinance their economies cheaply.

Soros sharply criticized Germany strategy of imposing austerity measures on debt-ridden countries and for forcing financial penalties on Greece as a condition for receiving its bailout packages.

“The rest of Europe is not like the rest of Germany. The fact that an unattainable target is being imposed creates a very dangerous political dynamic,” he said. “Instead of bringing the member countries closer together it will drive them to mutual recriminations.”

Soros also said that Germany was traumatized by its experiences with massive inflation, which was leading the country to underestimate the threat of deflation. He said deflation can lead to a permanent decline in prices and a decline in consumer spending that can hurt a recovery.

The Local/bk

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