George Soros: Greece Default Inevitable, Europe Needs a Plan B

George Soros is concerned about Europe and argues that Europe must urgently introduce deposit insurance and sell Eurobonds to save Italy and Spain. He thinks it may be too late to save Greece, Portugal and Ireland (See here who holds the Greek debt). Here is an excerpt from his article:

Yet Europe’s political establishment continues to argue that there is no alternative to the status quo. Financial authorities resort to increasingly desperate measures in order to buy time. But time is working against them: two-speed Europe is driving member countries further apart. Greece is heading towards disorderly default and/or devaluation with incalculable consequences.

If this seemingly inexorable process is to be arrested and reversed, both Greece and the eurozone must urgently adopt a Plan B. A Greek default may be inevitable, but it need not be disorderly. And, while some contagion will be unavoidable – whatever happens to Greece is likely to spread to Portugal, and Ireland’s financial position, too, could become unsustainable – the rest of the eurozone needs to be ring-fenced. That means strengthening the eurozone, which would probably require wider use of Eurobonds and a eurozone-wide deposit-insurance scheme of some kind.

Generating the political will would require a Plan B for the EU itself. The European elite needs to revert to the principles that guided the Union’s creation, recognizing that our understanding of reality is inherently imperfect, and that perceptions are bound to be biased and institutions flawed. An open society does not treat prevailing arrangements as sacrosanct; it allows for alternatives when those arrangements fail.

It should be possible to mobilize a pro-European silent majority behind the idea that when the status quo becomes untenable, we should look for a European solution rather than national ones. “True Europeans” ought to outnumber true Finns and other anti-Europeans in Germany and elsewhere.