George Soros: The Future of Europe 3/6
George Soros changed his mind on how the European Union should fund its spending on the coronavirus pandemic, warning that investors have lost faith in the survival of the political bloc.
The billionaire investor previously stated that the EU should issue «perpetual bonds», which means that the principal amount of the borrowed money will never be returned, but only annual interest payments will be paid on it. His assumption is based on the fact that the EU will exist forever and therefore will continue to pay interest to the creditor. Perpetual bonds are also designed to enable the region to finance projects at very low prices..
However, the recent dispute between Poland and Hungary and the rest of the EU has put the bloc in «very difficult situation», according to George soros (George Soros).
«It would be impossible for the EU to issue perpetual bonds right now because the member states are too divided», – wrote Soros in his author’s article on Monday.
«Investors will only buy perpetual bonds from an institution that they believe will continue to exist for the foreseeable future… Unfortunately, this is not the case today.», – he said.
This is due to the fact that the governments of Hungary and Poland vetoed the actual EU plan to overcome the economic crisis. They oppose linking payments from EU funds with respect to the rule of law mechanism that checks whether countries are in line with European values.
The confrontation has no end in sight, and this casts doubt on the future of the European Union itself, where many important decisions must be made by consensus.
This deadlock also threatens payments under the EU stimulus package under economic aid to prevent the fallout from the coronavirus pandemic. According to the European Commission, the EU will shrink more than 7% this year, and heavily indebted countries rely heavily on European funds to support their economies..
To overcome challenges at the EU level, Soros proposed that individual countries issue perpetual bonds on their own..
«They will be issued by member countries whose continued existence will be easily accepted by long-term investors such as life insurance companies», – he wrote.
«If one country issued perpetual bonds, it would have the added advantage that other European countries would see it as a role model.», – said Soros.
He argued that the idea would allow countries to save money, calling it a particularly important issue for countries like the Netherlands and Finland..
«Over time, the EU may become strong enough to also issue perpetual bonds on its own behalf. This is a goal worth striving for.», – said Soros.