Blog / From the Archive

Europa befindet sich in einer Doppelmühle zwischen einem noch unzulänglich sanierten Bankensystem und einer immer brisanter werdenden Staatsschuldenkrise. Gewonnen werden kann dieser Kampf nur bei gleichzeitiger Nachadjustierung bisheriger Konstruktionsdefizite des Euro und konsequenter Sanierung des Finanzsystems. Die Arbeiten an beiden Fronten benötigen Zeit zur Umsetzung. Jeder Versuch radikaler Sofortheilung wäre mit unermesslichen Folgekosten eines unkontrollierten Zusammenbruchs des Euro und des globalen Finanzsystems verbunden.

George Soros offers an excellent analysis of the causes and consequences of the current Euro crisis. Particularly fruitful – not only in terms of explanatory power, but also with a view to possible solutions for the current crisis – is the fact that Soros simultaneously addresses political as well as economic aspects instead of exclusively focusing on the economy. It is this predominant focus on the economic dimension of the current crisis shared by the majority of recent analyses and the recommendations derived from them which severely limits their acceptance as well as their chances of success.

Misdiagnosing the causes of any crisis is costly. To give the right medicine, it is critically important to distinguish between the symptoms and the root causes of the crisis. Following the argument of George Soros, the transfer of monetary policy competencies to the ECB without establishing a true fiscal union lies at the heart of the crisis in Europe. Thus, sovereign credit of the (weaker) member states that are lacking an implicit guarantee from their central banks that cash will always be available to pay out the creditors is exposed to the risk of liquidity runs, contagion and self-fulfilling default. Many other design flaws add to the complexity of the current situation.

Georg Soros condenses the problems of the euro with his remarkable ability to boil down a complex issue to its essential components. I would like to comment on two points. The first one connects the fate of the euro with that of the European project as such, and the second one is that there are two, and only two, alternatives for rescuing Europe.