WASHINGTON—Europe lacks the same mechanisms that the U.S. had to deal with its financial crisis three years ago, making the dangers even greater, billionaire investor and activist George Soros said.
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George Soros
The U.S. Treasury Department in 2008 helped devise and implement the myriad liquidity programs used to recapitalize big banks and reassure investors when questions arose over their stability and integrity of deposits.
But uncertainty over what would happen in a run on European banks has added to the volatility of the European debt crisis.
"The European crisis is more serious than the crisis of 2008," Soros said in an appearance at the meeting here of the World Bank and International Monetary Fund . "The authority needed (in 2008) was in place."
Soros, who has for many years supported various liberal political causes, has called for a number of measures to take on the European Union sovereign debt crisis, including the establishment of a unified Treasury.
"I very much hope the heads of state of the member countries will recognize that," he said. "That will open the way to containing the crisis."
European authorities need to get more creative beyond the establishment of the European Financial Stability Facility, which would be unlikely to be able to provide sufficient liquidity should a Greek debt default set off a series of similar actions in other countries with severe debt burdens.
Soros repeated his call that bank deposits need to be protected, perhaps through creating a type of insurance fund and guaranteeing early portions of bailout payments.
He also has said previously the European banking system should be recapitalized and put under broad European supervision.
"There are a number of options and I'm mad that they're not all being considered, because something needs to be done," he said.
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As for Greece specifically, he suggested that the country could restructure its debt in a way that would not be considered a full default, though ratings agencies have stated otherwise.
"That may not be possible to avoid some form of reorganization (that) if it can be properly managed may be short of default," he said. "It may be a voluntary reorganization. However, it is very important from the point of view of reassuring the markets that the possibility of default is prepared for, that in the rest of Europe arrangements are made to protect the banking system."
Yet he also acknowledged the political perils his ideas present — particularly about the unified Treasury, and specifically from Germany, which has been unwilling to accept a broader debt bailout.
"Creating the common Treasury does not necessarily mean political union," he said. "It certainly is a shotgun wedding, but it doesn't necessarily lead to a happy political union."
