Legendary hedge fund billionaire George Soros is attending the World Economic Forum in Davos on Wednesday.
“With individual countries under strict fiscal constraints, the stimulus will have to come from the European Union and it will have to be guaranteed jointly and severally,” Mr. Soros said. “There will have to be fiscal stimulus and that fiscal stimulus will have to come from the EU, jointly and severally guaranteed by the member states. Euro bonds are needed in one form or another.”
Soros also mentioned that if Italy and Spain can refinance their debts by issuing treasury bills yielding at 1%, governments can instantly reduce their interest costs.
Regarding Germany’s anti-inflationary, Mr. Soros said: “The austerity that Germany wants to impose will push Europe into a deflationary debt spiral.”
When asked about the impact of the European debt crisis on China, Mr. Soros believes the Chinese economy will also be harmed due to the decrease in demand, and China may not be able to keep its previous growth rate.
“I think that the Chinese government is preparing the Chinese public that they may not able to maintain the 8% growth because of the diminished demand for Chinese exports.” said Mr. Soros. “There is a question of how long the Chinese model of growth can be maintained.” But Soros added that the Chinese government has already prepared itself for the slowdown.