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Soros Accuses Top German Economist of 'Distorting' His Words

George Soros
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George Soros

Billionaire investor George Soros has struck back at one of Germany's top economists for distorting his arguments on Germany's role in the euro zone.

Hans-Werner Sinn, president of the influential Ifo Institute for Economic Research and a member of the German economic ministry's Advisory Council, said last week that George Soros was "playing with fire" by calling on Germany to exit the euro zone if it continues to block the introduction of Eurobonds.

(Read More: Soros Tells Germany It Should Leave Euro)

Sinn said mutualization of euro zone sovereign debt would boost support for the newly founded euro-skeptic "Alternative for Germany" party and could spell the end of the single currency.

"If Soros were right, and Germany had to choose between Eurobonds and the euro, many Germans would surely prefer to leave the euro. The new German political party would attract much more support, and sentiment might shift. The euro itself would be finished," Sinn wrote in a column published by Project Syndicate last week.

"Many investors echo Soros. They want to cut and run – to unload their toxic paper onto intergovernmental rescuers, who should pay for it with the proceeds of Eurobond sales, and put their money in safer havens," Sinn added.

Soros responded to Sinn by publishing an 815-word rebuttal in the comments section of Sinn's article.

"Hans-Werner Sinn has deliberately distorted and obfuscated my argument. I was arguing that the current state of integration within the euro zone is inadequate: the euro will work only if the bulk of the national debts are financed by Eurobonds and the banking system is regulated by institutions that create a level playing field within the euro zone," he wrote.

"Allowing the bulk of outstanding national debts to be converted into Eurobonds would work wonders. It would greatly facilitate the creation of an effective banking union, and it would allow member states to undertake their own structural reforms in a more benign environment," he added.

The introduction of Eurobonds has been hotly debated since at least May 2012 when Greece's crisis worsened. The German government and the Bundesbank have vehemently opposed the idea because they fear that as Europe's strongest economy, Germany would be forced to bail out profligate southern European nations.

"The public already is being misused in an effort to mop up junk securities and support feeble banks, with taxpayer-funded institutions such as the ECB and the bailout programs having by now provided 1.2 trillion euros ($1.6 trillion) in international credit," Sinn said.

-- By CNBC's Deep Bagchee; Follow him on twitter: @DeepBagchee