Advertisement

We need your help now

Support from readers like you keeps The Journal open.

You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.

If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.

Manuel Balce Ceneta/AP

George Soros: The eurozone crisis is all Merkel’s fault – and this is why

One of the world’s wealthiest traders – and one of its most-respected philanthropists – has an interesting theory.

BILLIONAIRE GEORGE SOROS delivered a speech in Trento, Italy yesterday on the Eurozone crisis and it’s an absolute dynamo.

You really ought to read the whole speech, which is on his personal webpage, as it starts off with an overview of his economic theories (which revolve around the idea that markets are deeply imperfect and prone to turn into bubbles based on human fallibility and lack of knowledge) and then nicely explains how all of this explains the current crisis in Europe.

What’s fantastic is that he really gets it from all angles.

This is a really killer characterisation of the Eurozone:

I contend that the European Union itself is like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a “fantastic object” – unreal but immensely attractive. The EU was the embodiment of an open society –an association of nations founded on the principles of democracy, human rights, and rule of law in which no nation or nationality would have a dominant position.

The process of integration was spearheaded by a small group of far sighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognised that perfection is unattainable; so they set limited objectives and firm timelines and then mobilised the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.

Germany used to be in the forefront of the effort. When the Soviet empire started to disintegrate, Germany’s leaders realised that reunification was possible only in the context of a more united Europe and they were willing to make considerable sacrifices to achieve it.  When it came to bargaining they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement.  At that time, German statesmen used to assert that Germany has no independent foreign policy, only a European one.

And then came the moment that German, formerly at the forefront of a federated Europe, stopped the progress dead in its tracks…

The process culminated with the Maastricht Treaty and the introduction of the euro. It was followed by a period of stagnation which, after the crash of 2008, turned into a process of disintegration. The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. It took financial markets more than a year to realise the implication of that declaration, showing that they are not perfect.

This is a really huge point to grasp, because a nagging question has been: Why did the market think of Greece, Ireland, Portugal, Spain, etc, as being risk-free sovereigns at one point, and then decide that they were not risk free and subject to credit risk?

Soros’ answer: because they were essentially risk-free so long as the arc was always towards more integration. That ended when Merkel made the declaration he says above. This is key.

Despite the fact that the Euro crisis has been happening for at least three years now, there are still many who can’t articulate the roots of it as well as Soros does in these two paragraphs:

The Maastricht Treaty was fundamentally flawed, demonstrating the fallibility of the authorities. Its main weakness was well known to its architects: it established a monetary union without a political union. The architects believed however, that when the need arose the political will could be generated to take the necessary steps towards a political union.

But the euro also had some other defects of which the architects were unaware and which are not fully understood even today. In retrospect it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank their rights to create fiat money. They did not realise what that entails – and neither did the European authorities. When the euro was introduced the regulators allowed banks to buy unlimited amounts of government bonds without setting aside any equity capital; and the central bank accepted all government bonds at its discount window on equal terms. Commercial banks found it advantageous to accumulate the bonds of the weaker euro members in order to earn a few extra basis points. That is what caused interest rates to converge which in turn caused competitiveness to diverge. Germany, struggling with the burdens of reunification, undertook structural reforms and became more competitive. Other countries enjoyed housing and consumption booms on the back of cheap credit, making them less competitive. Then came the crash of 2008 which created conditions that were far removed from those prescribed by the Maastricht Treaty. Many governments had to shift bank liabilities on to their own balance sheets and engage in massive deficit spending. These countries found themselves in the position of a third world country that had become heavily indebted in a currency that it did not control. Due to the divergence in economic performance Europe became divided between creditor and debtor countries. This is having far reaching political implications to which I will revert.

His key warning:

In my judgment the authorities have a three months’ window during which they could still correct their mistakes and reverse the current trends. By the authorities I mean mainly the German government and the Bundesbank because in a crisis the creditors are in the driver’s seat and nothing can be done without German support.

He ends with a plea:

We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it.

In full: Read Soros’ whole speech on his personal website >

Krugman: Ireland voted for a ‘bad idea’ – and euro could collapse in two years

Readers like you are keeping these stories free for everyone...
A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation.

Published with permission from
View 38 comments
Close
38 Comments
    Install the app to use these features.
    Mute Eoin Roche
    Favourite Eoin Roche
    Report
    Jan 26th 2022, 7:07 PM

    That’s it lads, keep depleting and overlooking the capacity and the resources of the Defence Forces and keep facing the kind of humiliation heaped on the Government this week for being unable to exert the sovereignty of the State. Another useful 1d10t moment from Eamon Ryan there.

    555
    Install the app to use these features.
    Mute Radioska
    Favourite Radioska
    Report
    Jan 26th 2022, 7:15 PM

    @Eoin Roche: I’m with you Eoin….. buy a jet and a boat rather that build 1000 homes in the middle of a housing crisis.

    253
    Install the app to use these features.
    Mute Roy Dowling
    Favourite Roy Dowling
    Report
    Jan 26th 2022, 7:19 PM

    @Eoin Roche: How many Barracks do the Defence forces need in the capital? As far as I’m aware there is 3 active barracks and a military hospital all in the capital do you honestly believe thats needed. Closing the barracks and redeploying the troops to others barracks also frees up finances for the defence force and it’s less upkeep. Also it’s a prime location for houses that’s badly needed. If there not built there where to you purpose building them?

    239
    See 8 more replies ▾
    Install the app to use these features.
    Mute Noel O'Neill
    Favourite Noel O'Neill
    Report
    Jan 26th 2022, 8:01 PM

    @Roy Dowling: they sold off the old married quarters there in 1986 to a developer who sold the houses that were built at unbelievable prices that people couldn’t afford in return for building 12 maisonettes that were structured wrong and DCC had to take them over, I’m not against it as I grew up there but a proper facility or proper infrastructure on the ones outside Dublin should have been done at the same time and they wouldn’t be looking for it now, consultants getting money for old rope and it’s still going on

    66
    Install the app to use these features.
    Mute Eoin Roche
    Favourite Eoin Roche
    Report
    Jan 26th 2022, 8:14 PM

    @Radioska: I don’t think you understand at all what this is about.

    37
    Install the app to use these features.
    Mute Ash O'Toole
    Favourite Ash O'Toole
    Report
    Jan 26th 2022, 8:31 PM

    @Radioska @Roy Dowling: Like most of the Irish public, you clearly know sƒa about the Defence Forces. You probably mean well but it is reductive to use the housing crisis as an excuse for the continued defunding of the DF and the disgraceful treatment of its members.

    The two issues are not mutually exclusive, although the likes of Eamon Ryan would like you to think they are.

    91
    Install the app to use these features.
    Mute John Moylan
    Favourite John Moylan
    Report
    Jan 26th 2022, 9:55 PM

    @Radioska: too right: watching the news at all this week ?

    8
    Install the app to use these features.
    Mute Radioska
    Favourite Radioska
    Report
    Jan 26th 2022, 10:39 PM

    @Eoin Roche: it’s about building houses for people. It says it at the top!

    12
    Install the app to use these features.
    Mute Radioska
    Favourite Radioska
    Report
    Jan 26th 2022, 10:54 PM

    @John Moylan: Yes I noted that Russia has 100,000 of their 900,000 troops on the Ukrainian border. I understand we have approx 9,000 military personnel. We are not in a position to finance a comprehensive defence from the Atlantic on behalf of or European brothers either, nor should we.

    21
    Install the app to use these features.
    Mute KalEll
    Favourite KalEll
    Report
    Jan 27th 2022, 6:28 AM

    @Eoin Roche: Exert the sovereignty of the State? Over international waters?

    10
    Install the app to use these features.
    Mute Mark Healy
    Favourite Mark Healy
    Report
    Jan 27th 2022, 8:11 PM

    @Radioska: No of course not. We should expect someone else to defend us….like we always have!

    1
    Install the app to use these features.
    Mute Mark Dawson
    Favourite Mark Dawson
    Report
    Jan 26th 2022, 7:20 PM

    The only proper operational barracks in Dublin, Home to our much overworked Bomb disposal teams , Infantry Batallion , Cav squadron , Stand too troops on 24 hr stand by to assist gardai or as requested to name a few that’s a ridiculous idea to strip the city of our protection in event of an emergency such as a terror attack. No wonder moral in our forces is at all time low , they cleared out mckee barracks to make room for the top brass and they could have easily operated out of an office block or part of 1 in the Dept of Defence

    319
    Install the app to use these features.
    Mute Traxedo
    Favourite Traxedo
    Report
    Jan 27th 2022, 7:53 AM

    @Mark Dawson: a we’ll be grand. Build the gaffs.

    4
    Install the app to use these features.
    Mute Patrick Corr
    Favourite Patrick Corr
    Report
    Jan 26th 2022, 7:28 PM

    I would have thought that the structures in Cathal Brugha barracks would be listed. Tralee and Kilkenny barracks were built to a similar design.

    182
    Install the app to use these features.
    Mute Niall Mchugh
    Favourite Niall Mchugh
    Report
    Jan 26th 2022, 7:43 PM

    I am sure there will be a feasibility study on where to locate over 1000 soldiers and they will be consulted all the way and their considerations will be taken into account? It will be like every other time a large barracks has closed, the Department of Defence will try and cram them into a not fit for purpose location. Only took 10 years plus to get reasonable (not proper) living accommodation in Cathal Brugha at the cost of millions.
    If Eamon Ryan at least came up with some sort of plan to house 1000 plus soldiers and their required work spaces including numerous technical workshops and training facilities and living accommodation and EOD teams then by all means build lovely houses and playgrounds but don’t treat members of the DF with such contempt and disrespect.

    183
    Install the app to use these features.
    Mute Gavin Tobin
    Favourite Gavin Tobin
    Report
    Jan 26th 2022, 7:47 PM

    @Niall Mchugh: Sure they can commute to Athlone and if they cant afford the diesel they can sleep in their cars…sorted.

    120
    Install the app to use these features.
    Mute Mark Dawson
    Favourite Mark Dawson
    Report
    Jan 26th 2022, 8:07 PM

    @Gavin Tobin: the way the Defence forces is going they won’t have to worry about moving any regiments as there won’t be any troops in them to move, you have officers who live in their own homes and yet hold a room in barracks for themselves and the poor troops who have to live in have substandard rooms and shared toilet and shower facilities that the PRTB would not allow to be rented, I love to know where they intend to move the troops to this time and what consideration they have given to the need for accommodation for them, they will just push more out the door with this plan why not use the unused land around the city suburbs or take developer’s land by forced purchase and build on that why they need to build on prime city locations, plenty of big farm fields beside Dublin Airport

    93
    Install the app to use these features.
    Mute Maryrose Lyons
    Favourite Maryrose Lyons
    Report
    Jan 26th 2022, 7:10 PM

    Love the idea of this but I can’t help thinking it’s been done with an eye to an election coming up

    140
    Install the app to use these features.
    Mute Eoin Roche
    Favourite Eoin Roche
    Report
    Jan 26th 2022, 8:13 PM

    @Maryrose Lyons: In 3 years and 1 month?

    38
    Install the app to use these features.
    Mute Mick Hannigan
    Favourite Mick Hannigan
    Report
    Jan 26th 2022, 7:17 PM

    Can’t wait to see the price of a gaff there if they build 1000 homes

    134
    Install the app to use these features.
    Mute Hugh Mc Donnell
    Favourite Hugh Mc Donnell
    Report
    Jan 26th 2022, 8:19 PM

    This seems to be the go to solution for every government. Honestly are really serious about the defence forces. Are they going to hollow out the defence forces until it can’t function or doesn’t have the assets to function anymore.

    82
    Install the app to use these features.
    Mute Niall Mchugh
    Favourite Niall Mchugh
    Report
    Jan 26th 2022, 8:29 PM

    @Hugh Mc Donnell: plenty of lovely shiny assets but no personnel to keep them that way and getting worse by the day. Already paying contractors huge money in IT and Aer Corps because of a lack of trained technicians. Loyalty by Defence Forces personnel is treated with utter contempt by all governments over the past 20 years. Thankfully personnel are now voting with their feet. What can you do when we have had woeful Chief’s of Staff and Ministers over that time period too

    87
    Install the app to use these features.
    Mute White Chapel
    Favourite White Chapel
    Report
    Jan 26th 2022, 9:46 PM

    @Niall Mchugh:
    Have to agree with you about the maintenance of the former barracks.
    A friend of mine was showing a tractor at a vintage show a while back in the former Connolly Barracks in Longford
    The main square is all historic buildings and were always in active use and maintained well over the years.
    Now the whole place is near ready to fall down.

    Worst of all is the fact that the site was bought by the county council and is more or less left derelict.
    A pure disgrace

    66
    See 1 more reply ▾
    Install the app to use these features.
    Mute Niall Mchugh
    Favourite Niall Mchugh
    Report
    Jan 26th 2022, 10:25 PM

    @White Chapel: agree, Magee bks in Kildare left derelict for years until levelled recently, Mullingar bks the same. The Curragh is falling apart too. The Government care about the DF infrastructure nor its employees

    25
    Install the app to use these features.
    Mute Lesidees
    Favourite Lesidees
    Report
    Jan 26th 2022, 8:00 PM

    And if the people living there happen to own cars, where do they park them?

    68
    Install the app to use these features.
    Mute Sue OB
    Favourite Sue OB
    Report
    Jan 26th 2022, 9:18 PM

    @Lesidees: sure why would they need cars they’ll be close to city centre

    28
    Install the app to use these features.
    Mute Sean Boyle
    Favourite Sean Boyle
    Report
    Jan 27th 2022, 8:55 AM

    @Lesidees: which would you prefer, car parking or housing?

    2
    Install the app to use these features.
    Mute Paul Mc
    Favourite Paul Mc
    Report
    Jan 26th 2022, 8:02 PM

    If memory serves me well these beaurocrats ,lackeys and friends of people in power have being selling off state assets for bags of magic beans for decades.
    I wonder why the plan to relocate Mountjoy Jail was postponed?

    70
    Install the app to use these features.
    Mute Scot Tanner Buchholz
    Favourite Scot Tanner Buchholz
    Report
    Jan 26th 2022, 8:32 PM

    My great grandfather served out of here. I will personally fight this proposal. This angers me .

    67
    Install the app to use these features.
    Mute Jeff Nolan
    Favourite Jeff Nolan
    Report
    Jan 26th 2022, 8:44 PM

    Should do wonders for the already congested traffic in the area

    50
    Install the app to use these features.
    Mute Peter O'Hagan
    Favourite Peter O'Hagan
    Report
    Jan 26th 2022, 7:45 PM

    Hopefully money raised can be offset for badly needed defence spend ie cyber security (HSE attack) and primary radar (Russia, don’t mind us Ireland we’re only training) one day we’re going to wake up and Russia will have cut the Internet for Europe in irelands patch and then the real craic will start.. Then again Public Service Salaries are only getting bigger so the money has to come from somewhere I suppose.. don’t worry Brugha is easily relocated to Casement.. McKee is adequate for city centre Dublin..

    47
    Install the app to use these features.
    Mute Paul Maguire
    Favourite Paul Maguire
    Report
    Jan 26th 2022, 10:31 PM

    Ryan an the greens wants to get rid of the defence forces

    41
    Install the app to use these features.
    Mute Scot Tanner Buchholz
    Favourite Scot Tanner Buchholz
    Report
    Jan 26th 2022, 8:32 PM

    My great grandfather served out of here. I will personally fight this proposal. This angers me

    38
    Install the app to use these features.
    Mute alternativefacter
    Favourite alternativefacter
    Report
    Jan 26th 2022, 9:57 PM

    1000 residential units eh…that’s a whole lot of salad and crops to be grown in those window boxes Eamon!!

    32
    Install the app to use these features.
    Mute pat seery
    Favourite pat seery
    Report
    Jan 26th 2022, 8:44 PM

    Will he have Spaces for Bicycles

    22
    Install the app to use these features.
    Mute Moira Connolly
    Favourite Moira Connolly
    Report
    Jan 27th 2022, 11:11 AM

    I live beside it and it has dense housing around it, it should be kept, it is the only large bit of green space in the area, open it to the public but don’t cram in more sky scrapers in an already contested area.

    6
    Install the app to use these features.
    Mute Anthony ledwidge
    Favourite Anthony ledwidge
    Report
    Jan 27th 2022, 7:13 AM

    Wow….not building hotels and offices.

    4
    Install the app to use these features.
    Mute Jason Walsh
    Favourite Jason Walsh
    Report
    Jan 27th 2022, 7:37 PM

    That many new houses will need additional infrastructure such as new schools, sports facilities, public transport increases, playgrounds, etc

    2
Submit a report
Please help us understand how this comment violates our community guidelines.
Thank you for the feedback
Your feedback has been sent to our team for review.
JournalTv
News in 60 seconds