George Soros: Germany botched crisis response and EU may not survive

March 12, 2014, 3:28 PM

Bloomberg

Dear Germany, you’re doing it wrong.

It’s no secret that Geroge Soros thinks Germany has bungled the response to Europe’s debt crisis with its insistence on across-the-board austerity. On Wednesday, the billionaire hedge-fund legend said he feared the European Union was headed for “long-lasting stagnation” and that the pan-European institution might not survive it.

“My hope is that Germany is going to change and realize that that the policy of austerity is counterproductive,” Soros told the BBC. Germany’s collective memory is of inflation, Soros said, referring to the hyperinflation that followed World War I and is often described as sowing the seeds for the rise of the Nazis. As a result, German policy makers “continue fighting inflation when the threat is deflation,” Soros said.

The billionaire, in a separate event in London, said Germany’s decision to remain in the euro zone “fulfilled my worst expectations,” CNBC reported. A German exit, which he had advocated previously, would have resulted in a tough but difficult “quick fix” that would have let the region rebalance.

Instead, the EU has been transformed into a “creditor-debtor relationship” that is endangering the organization.

Soros is promoting his new book, “The Tragedy of the European Union.”

While Soros is echoing past complaints, some of his recent predictions about Germany and Europe haven’t panned out. Soros in September 2012 predicted that the euro-zone recession would intensify and engulf Germany within six months. Instead, the euro zone slowly returned to meager growth in 2013.

That didn’t appear to hold him back much, though. The man who became famous by scoring a cool billion on his bet against the British pound back in 1992 earned an estimated $4 billion in 2013, in part by shorting the Japanese yen, according to Forbes, which put him atop the publication’s list of top earning hedge-fund managers.

–William Watts