The current state of the global economy points clearly to a second depression, but billionaire George Soros says that we can avoid another “great depression” if we follow three steps.
According to Forbes, the economic situation in Europe could lead to a depression around the globe. Both America and China are dependent on exporting goods to Europe. If Greece defaults and the purchase power of Europe drops, the effects could hit the United States hard.
Soros writes at the Financial Times:
“Three bold steps are needed. First, the governments of the eurozone must agree in principle on a new treaty creating a common treasury for the eurozone. In the meantime, the major banks must be put under the direction of the European Central Bank in exchange for a temporary guarantee and permanent recapitalization. Third, the ECB would enable countries such as Italy and Spain temporarily to refinance their debt at a very low cost.”
According to Soros, these three steps would not solve the global economy, but they would “calm the markets” and give Europe some time to solve the debt problem. Soros writes that we’ve been “kicking the can down the road” for a long time now, and we are finally out of road.
I believe that these steps would bring the acute phase of the euro crisis to an end by staunching its two main sources (weak banks and vulnerable sovereigns) and reassuring the markets that a longer-term solution is in sight.”
What do you think of Soros plan? Is another depression avoidable?