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George Soros, The Future of Europe

October 1, 2013

With this press release we provide the complete text of the remarks US investor George Soros delivered on the occasion of the 6th Global Economic Symposium in Kiel, Germany, on the “The Future of Europe”. At the end of his remarks Soros formulated what he expects the German government to do.

The corresponding paragraphs are:

“… On the economic front the austerity policy advocated by Germany proved to be counterproductive. Every euro of reduction in the fiscal deficit caused more than a euro of reduction in GDP – in other words the fiscal multiplier turned out to be more than one. The German public found that difficult to understand. The fiscal reforms introduced by the Schroeder government were successful; why should a policy that worked for Germany not work for Europe?
The reason is that the Schroeder government operated in an inflationary environment and the current environment is deflationary. It took a long time for the European authorities to recognize this fact but eventually they did and they stopped imposing additional austerity measures. That relieved the downward pressure and allowed the Eurozone to hit bottom and the financial crisis to abate. The Eurozone is now in a mild rebound led by Germany but the heavily indebted countries are lagging behind. The divergence is largely due to their higher debt burden and the higher cost of money. Since these are recurrent, the divergence is bound to get wider with the passage of time.”

“What needs to be done follows directly from this analysis of what has happened. Recognizing the mistakes and identifying the misconceptions that have created the current situation is the first step; correcting them is the second. Only Germany can initiate the process because, as the country with the highest credit standing, it is in the driver’s seat. If a debtor country tried to do it would merely aggravate its own position. Admitting and correcting mistakes is never easy. In this case there is no shame attached to it because the situation was so complicated that it boggled every mind.

Doing it would earn Germany the long lasting gratitude of the rest of Europe. Failure to do is much worse. It has created a nightmare in which the victims of the current policies have to live in their waking lives. Now that the euro crisis has ended, Germany has emerged victorious. But it is a Pyrrhic victory that would be better to avoid.  I’m glad that this conference, which is almost unique in recognizing the severity of the problems that continue to confront Europe is exploring the possibilities.”

Download the complete speach as PDF (1 MB)

The Global Economic Symposium (GES) 2013 is being organized by the Kiel Institute for the World Economy (IfW) in cooperation with the German National Library of Economics – Leibniz Information Centre for Economics (ZBW).

Further information is available at http://www.global-economic-symposium.org and on the official GES Blog at blog.global-economic-symposium.org.

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