George Soros has decided to lend a hand in rescuing Europe from the impending crisis. The well-known financial speculator and 95 politicians, economists and businesspeople from the European Union have sent an open letter to EU leaders offering their own recipe for restoring the Old World to economic health. True, the recipe, experts believe, is not original and contains technical solutions that amount to palliative care, rather than anything that can stop the disease in its tracks.
Soros method
The "concerned Europeans" call for the establishment of a common treasury that can raise funds for the eurozone, speak of the need to tighten fiscal discipline among EU member-countries, introduce better deposit regulation and insurance, and develop a sustainable economic growth strategy for eurozone countries. Unless prompt measures are taken, write these concerned Europeans, the world's financial system may collapse.
Russian and foreign economists fully agree that the current fiscal system is on the brink of collapse and may crumble if no immediate steps are taken. It is less clear, however, what exactly should be done.
"The challenges are enormous, the eurozone is practically powerless, we cannot enact reasonable measures. It is only now that eurozone leaders are beginning to understand what the problems really are," Stijn Verhelst, an expert from Belgium's Royal Institute for International Relations, said in a RIA Novosti video conference.
Over recent weeks perhaps only the most bone idle have failed to criticize the European Union for its inability to respond quickly to crises.
"When creating their monetary union, [the Europeans] did not bother to create a fiscal mechanism," says Yevgeny Gavrilenkov, managing director at Troika Dialog group of companies. "The problem is rooted in the imperfection of their governance model."
The truth is that European executives take too long and use overly complex procedures to decide, for example, on whether or not to bail out problem economies.
Gavrilenkov believes that eurozone authorities will in the near future focus their efforts on finding a more acceptable model for administering finances, one that does not threaten to infringe on EU member-states' sovereignty.
Birth defect
Suppose the eurozone authorities manage to work out an acceptable mechanism of decision-making when it comes to injecting liquidity into the fiscal system or problem economies. But will this solve the broader economic problems?
"It is clear that the problem is too deep and too complex to be resolved by any such measure, any organizational mechanism," says Igor Nikolayev, FBK's strategic development department director. "We may succeed in extending the agony of the old fiscal system for a time - but what's next?"
What happens next is indeed unclear. Experts acknowledge that anti-crisis measures will only succeed in pulling the European and global economies out of immediate danger, but that they will be unable to boost economic development. Even if only because these problems are not limited to the eurozone.
Gavrilenkov stresses that all major economies - America, China, Europe - are all distorted. The EU's economic woes are due to the excessive redistribution (not necessarily budgetary) of revenue between the various economies and an artificial "leveling-up" of per capita incomes between the EU member states. The United States suffers from overconsumption, which has been fueled by loans for numerous years and lead finally to the debt crisis. China's troubles are rooted in overinvestment backed by the state. It is just impossible to address all these problems in one fell swoop on a supra-national level.
"He's lost it"
On the other hand, some experts believe Soros, in signing the letter, was more concerned about his own interests than the fate of Europe or indeed the world. Yelena Matrosova, director of the macro-economic research center at the consulting firm BDO Unicon, says that big-time speculators are particularly interested in seeing the fiscal authorities adopt a centralized and easy-to-understand policy, and in the injection of fresh liquidity into the economy.
"He makes money in many ways, especially on the certainty of the monetary authorities' policy," Matrosova explains. "In order to launch transactions with gold, silver and stock market instruments, you need to get money. While he is spinning billions, Europe neither reacts nor responds. No one really knows how things are going to work out, and how he can bet on various speculative trends." As Matrosova sees it, the billionaire "has just lost it."
Bearing in mind Soros' reputation, we must take that into account," Nikolayev agrees. "But I do not believe Soros is playing any game here or is eager to make money."
What motivated these 96 signatories to send their letter was, the expert believes, a last ditch attempt to preserve the existing fiscal system at all costs. But the system is deeply flawed, Nikolayev argues, and the best that can be done is to dismantle it and build a new one in its place. But this process is going to be highly painful.
"It will be a full-blown crisis with all the inevitable consequences of that - money loss and bankruptcies. It is tough," Nikolayev says. "I think all the signatories understand that."
The views expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
