Soros Says Europe Debt Restructuring Can't Wait Until 2011 as Irish Clamor

Billionaire investor George Soros said the European Union shouldn’t delay a restructuring of sovereign debt and it would be “unjust” if Irish citizens absorbed the cost without losses to bondholders.

“There is this unresolved problem,” Soros said in a Bloomberg Television interview with Erik Schatzker at the World Economic Forum in Davos, Switzerland today. “You can’t wait until 2013 to start restructuring the debt. Ireland is putting Europe on notice that they will want to renegotiate the settlement that the current government did.”

Ireland led losses by bonds from Europe’s high-deficit nations today as Standard & Poor’s said it sees Spain, Ireland, Greece and Portugal “stuck in recession.” European Union policy makers are scrambling to contain the sovereign-debt crisis afflicting the region as they struggle to agree on how much of the bill for rescuing such economies should hit taxpayers.

“It’s patently unjust that the Irish people should absorb all the losses made by the banks and that the bondholders should be totally free, and that I think will have to be modified,” Soros said. “Greece in due course, maybe sooner rather than later, will also have to be restructured. Portugal also probably needs it, and that’s about it.”

Discussions on a permanent mechanism to address crises have centered on a retooling of the 440 billion-euro ($604 billion) so-called European Financial Stability Facility before a summit of leaders in March. European Central Bank President Jean-Claude Trichet said on Bloomberg Television yesterday that governments could empower the region’s bailout fund to buy bonds.

Emergency Fund
A restructuring of debts “can be absorbed,” Soros said. “It will cause losses, and if there are any losses then this emergency fund should be able to provide equity to replace missing equity in the banks.”
The Irish government won an initial vote in parliament on a bill yesterday, paving the way to fully implement the 2011 budget, after bowing to pressure from independent lawmakers to impose a tax on bankers’ bonuses.

Soros said that Europe now faces a “divergence which actually was caused by the euro” which is “a political threat for the cohesion of Europe.”

Still, “the euro is here to stay,” he said. “There’s a commitment for it to be here.”
Soros is chairman of Soros Fund Management LLC. He reportedly made $1 billion in a successful bet in 1992 that Britain would fail to keep its currency in a European exchange- rate system that pre-dated the euro. Other successful trades included a bet that the deutsche mark would rise after the collapse of the Berlin wall and a wager that Japanese stocks would start to tumble in 1989.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net Erik Schatzker in Davos at eschatzker@bloomberg.net