The billionaire finance sage George Soros has told Germany it has three months to save the euro – and prevent the disintegration of the European Union.
Only a German volte face on policy by the end of September could prevent a messy and potentially catastrophic break-up of the single currency, and the EU itself, the financier, pictured, said in a speech to the Festival of Economics, in the Italian city of Trento.
"In my judgement the authorities have a three-month window during which they could still correct their mistakes and reverse the current trends," said Mr Soros, known as the "man who broke the Bank of England" after making a £1bn profit from the UK exit from the Exchange Rate Mechanism in 1992. "By 'the authorities' I mean mainly the German government and the Bundesbank because in a crisis the creditors are in the driver's seat and nothing can be done without German support."
His comments will add to the pressure on Germany to relax controls over the European Central Bank and make growth the top priority.
He said European governments had failed to comprehend the nature of the euro crisis. "They thought it was a fiscal problem while it is more of a banking problem and a problem of competitiveness," he said. "And they applied the wrong remedy: you cannot reduce the debt burden by shrinking the economy; only by growing your way out of it."
He added: "The crisis is liable to come to a climax in the autumn. By that time the German economy will also be weakening so that Chancellor Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities. That is what creates a three-month window." Mr Soros predicted Greece would vote to stay in the euro this month. "I expect that the Greek public will be sufficiently frightened by the prospect of expulsion from the EU that it will give a narrow majority of seats to a coalition that is ready to abide by the current agreement."
He said he believed Germany would ultimately act to maintain the euro in some form in order to prevent "large unenforcable claims against the periphery countries".