Investor George Soros recently gave a speech regarding economic markets theory and how they tie into the future of Europe at the Festival of Economics in Trento, Italy. The speech addresses some of the principal holes which Soros finds in common market theory, including the idea of perfect information amongst market participants. He equates the Euro crisis to “like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a “fantastic object” – unreal but immensely attractive.” His incorporation of the political atmosphere in Europe into his prediction leads him to believe that the Euro has about a “three-month window” to resolve the issues which afflict the Eurozone.
Soros postures that the key to a continued Euro will lie, like many believe, with the Germans. He finds that “it would require an extraordinary effort by the German government to convince the German public to embrace the extraordinary measures that would be necessary to reverse the current trend. And they have only a three months’ window in which to do it.” Soros notes that over the past year, many countries have begun reordering their debt along national lines, and have begun for the first time, openly discussing the possibility of a breakup that seemed impossible just 2 years ago. The results of the June 17th Greek elections, along with the many election cycles coming in the fall, will largely indicate the willingness of Europeans to sacrifice national sovereignty for the common currency. Without Germany leading the way, Soros finds the Euro has little chance of surviving.
Soros’ discussion does an effective job of covering much of the continuing European issues and offers an educated and detailed prediction at where the Euro is headed. It is a speech which I highly recommend reading.