What's the Latest Development?

The severity of the European financial crisis is largely a result of a continent-wide political crisis, says billionaire hedge fund investor George Soros. The lack of a central European treasury has too often made state-by-state solutions to the crisis a day late and dollar short. "No concessional [borrowing] rates for Italy or Spain and no preparation for a possible default and defection from the eurozone by Greece" have made the crisis increasingly intractable. Added to that, the Germans have declared the European Financial Stability Facility to be unconstitutional. 

What's the Big Idea?

Soros argues that a solution to the European debt crisis might include a Greek default and temporary exit from the eurozone. He outlines four guiding principles: "First, bank deposits have to be protected. ... Second, some banks in the defaulting countries have to be kept functioning in order to keep the economy from breaking down. Third, the European banking system would have to be recapitalized and put under European, as distinct from national, supervision. Fourth, the government bonds of the other deficit countries would have to be protected from contagion."

Read it at The New York Review of Books

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