Soros calls for EU to issue ‘perpetual bonds’ through enhanced co-operation

In an opinion piece in Project Syndicate, George Soros outlined his idea of how the current impasse with Poland and Hungary over rule of law conditionality can be surmounted. 

Soros attributes Hungary’s veto of the EU budget and COVID-19 recovery fund to Prime Minister Viktor Orbán’s concerns that the EU’s new rule of law conditionality linked to the budget would “impose practical limits on his personal and political corruption [...] He [Orbán] is so worried that he has concluded a binding cooperation agreement with Poland, dragging that country down with him”.

Soros says the “enhanced cooperation” procedure introduced in the Lisbon Treaty to “provide a legal basis for further eurozone integration” could be used. 

Enhanced cooperation allows a group of at least nine nations to implement measures if all member states fail to reach agreement, other countries can join later if they want. The procedure is designed to overcome paralysis. Soros argues that a “sub-group of member states” could set a budget and agree on a way to fund it – such as through a “joint bond”.

Soros has previously argued that the EU should issue perpetual bonds, but now regards this as impossible, “because of a lack of faith among investors that the EU will survive.” He says these bonds would be “readily accepted by long-term investors such as life-insurance companies”. 

Soros also places some of the blame at the door of the so-called Frugal Five (Austria, Denmark, Germany, the Netherlands and Sweden) who are “more interested in saving money than in contributing to the common good”. 

Italy, according to Soros, needs the benefits from perpetual bonds more than other countries, but “is not fortunate enough” to be able to issue them in its own name. It would be a “wonderful gesture of solidarity”, adding that Italy is also the EU’s third largest economy: “Where would the EU be without Italy?” 

Providing health care and resuscitating the economy, says Soros, will require much more than the €1.8 trillion ($2.2 trillion) earmarked in the new Next Generation EU budget and recovery fund.

George Soros is Chairman of Soros Fund Management and the Open Society Foundations. A pioneer of the hedge-fund industry, he is the author of The Alchemy of Finance, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means, and, most recently, In Defense of Open Society.

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