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Soros: The road from depression

Friday 30 September 2011 – by George Soros / Project Syndicate

Financial markets are driving the world towards another Great Depression with incalculable political consequences.

The authorities, particularly in Europe, have lost control of the situation. They need to regain control, and they need to do so now.

Three bold steps are needed. First, the governments of the eurozone must agree in principle on a new treaty creating a common treasury for the eurozone.

In the meantime, the major banks must be put under the direction of the European Central Bank in exchange for a temporary guarantee and permanent recapitalisation.

Third, the ECB would enable countries such as Italy and Spain temporarily to refinance their debt at a very low cost.

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These steps would calm the markets and give Europe time to develop a growth strategy without which the debt problem cannot be solved.

Indeed, the importance of developing a growth strategy cannot be overstated, because the debt burden – the ratio of debt to annual GDP – rises and falls in part as a function of the rate of economic growth.

To read this article in full, please visit our partner site, Project Syndicate, by clicking here.

Copyright: Project Syndicate, 2011. www.project-syndicate.org

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