Maastricht Treaty to Blame for Crisis in EU...

May 25, 2012 4:03 PM EDT
George Soros is often known as the man who broke the bank of England. He earned the title in 1992 when he made huge bets against the British pound as the U.K attempted to peg the currency to other European currencies through the Exchange Rate Mechanism (ERM), an exchange rate tool that later lead to the creation of the Euro.

Thanks to Soros, England’s attempts ended in complete failure on Sept. 16th, 1992. The BoE’s failure netted billions for the investor and his hedge fund. At the time, many in England considered Soros a scourged, although given the crisis in the EU, I doubt the BOE is holding a grudge.

In a speech in Berlin this past April, Soros warned the euro crisis threatens to destroy the European Union and damage the entire global system. According to Soros, the Maastricht Treaty itself is to blame for the crisis in the EU because it created imbalances that lead banks in Europe to mistakenly overvalue the debt of peripheral counties.

“At the onset of the crisis a breakup of the euro was inconceivable”, said Soros, “but as the crisis progressed the financial system has been progressively reoriented along national lines.”

This trend has gathered momentum in recent months, and to many, a break-up seems inevitable.

If Soros is right and the Maastricht treaty is to blame, the correct solution is not just a Greek exit, it is a break up of the European Union or a complete redesign of the treaty. Frankly, neither solution is one leaders there are willing to accept - for now, but that could change any day...

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