Soros thinks Germany is leading the Euro into dissolution (excerpt):
International financier George Soros has called for Germany to "lead or leave the euro" days before a crucial ruling on the eurozone's bailout fund by Germany's constitutional court.
Mr Soros argued that the eurozone should target 5% economic growth.
That would require the bloc to abandon German-backed austerity measures and accept higher inflation, he says.
He also backed a new European Fiscal Authority financed by VAT receipts to oversee eurozone government finances.
In an article published in Monday's New York Review of Books, Mr Soros said that Germany should become a more "benevolent" leading country or exit the single currency: "Either alternative would be better than to persist on the current course." …
…The ESM is an integral part of the European Central Bank's bond-buying scheme, announced on Thursday.
Debtor governments would have to make a formal request for help - a bailout - from the ESM or its sister fund the EFSF.
But, Mr Soros said that the ECB plan to ease the pressure on indebted nations such as Spain and Italy could deepen divisions within the eurozone.
The ECB's bond-buying programme may save the euro but it is also a step towards the permanent division of Europe into debtors and creditors, he said…
…Germany's central bank is also likely to oppose Mr Soros' 5% economic growth target. For the region's wealth to grow so strongly, prices and wages are also likely to rise sharply leading to inflation above the ECB's 2% target for several years.
Mr Soros said the strong expansion in European wealth would allow the eurozone "to grow its way out of its excessive debt burden."
Mr Soros insists that "if the members of the euro cannot live together without pushing their union into a lasting, they would be better off separating."
Although, he pointed out, it matters who leaves the euro. He advocates a German exit instead of a departure by Greece and weaker economies.
"A German exit would be a disruptive but manageable one-time event, instead of the chaotic and protracted domino effect of one debtor country after another being forced out of the euro by speculation and capital flight."
By leaving, the euro is likely to fall in value making eurozone-made goods cheaper for consumers overseas and also in Germany.
However, a return to the Deutschmark would make German-made goods more expensive overseas and within the eurozone which could hurt German exporters.
Germany is also the home to the European Central Bank and the biggest national creditor to indebted nations within the eurozone such as Greece, Portugal and Ireland all of which would make Germany's exit from the eurozone logistically difficult.
As far as the growth target and the idea of Germany making the exit instead of Greece or Portugal or any of the other PIIGS, I find myself fully in agreement with Mr Soros (though I think I made these same points almost a year ago). The growth target is essentially another version of NGDP targeting, which quite a few prominent economics bloggers have been advocating.
To bring down Europe’s debt burden without a multi-year depression and all that entails in lost output and physical and human capital deterioration, you either need expansive fiscal or monetary expansion to generate growth (to maintain nominal incomes and thus tax yields) and higher inflation (which subdues money demand, while reducing the real burden of debt).
The former isn’t possible without busting already overburdened government balance sheets, which means at heart this is a call for the ECB to take a far more aggressive stance than it has already done. Sterilised bond buying, unlimited though it may be, just doesn’t cut the mustard.
For Germany to leave the Euro area also makes sense because it’s German economic fundamentals that are out of line with the rest of Europe, and not really Greece’s or Portugal’s or Spain’s (and yes, that includes France).
As it stands, what we’re seeing is a succession of band-aids while the patient bleeds to death. Germany’s strategy is really to attempt to fix the missing institutional arrangements that would make the Euro viable in the long term – but the success of this approach depends on the individual countries in the Euro eventually giving up fiscal autonomy. and I don’t think that’s politically doable, even in the crisis climate that Europe is in right now.