greece will collapse within three months...

Greek debt agreement will collapse within three months:

Soros
BY KAMAL AHMED, IN LONDON
31 Oct, 2011 04:00 AM

Veteran investor George Soros has attacked the lack of leadership at the top of the eurozone and said that the new Brussels ''deal'' to solve the debt crisis will last only between ''one day and three months''.

Mr Soros, who achieved worldwide fame when he bet against sterling remaining within the Exchange Rate Mechanism in the 1990s, said the 50per cent ''haircut'' on private bond holders would reduce Greek debt by only 20per cent.

He said that was insufficient to stop an economic decline in Greece which would lead to greater social unrest.

His words came as the eurozone appeared to be heading for further economic trouble as investors started to express scepticism about the rescue deal announced on Thursday. This weekend Goldman Sachs said the eurozone countries were heading for a ''mild recession'' as confidence waned.

''Given the magnitude of the crisis, it is again too little too late,'' Mr Soros said of the Brussels deal at a dinner organised by Pi Capital investor network.

''It will bring relief partly because the markets were so obsessed by the lack of leadership. The mere fact that something was achieved was a major relief and it will be good for any time from one day to three months.

''Unfortunately it is not the last crisis because the fundamental issues have not been settled. It is clear that the amount of debt that Greece has accumulated and is accumulating is untenable and the country is effectively insolvent.''

Mr Soros argued that many banks might not voluntarily join the deal as they would want to wait for the insurance offered by the credit default swaps they hold against the debt to be triggered. At present because the haircut is voluntary, European leaders have said the Greek default is not considered a ''credit event'' which would spark credit default swap payouts and possibly a new financial crisis.

''Unfortunately, the 50per cent haircut is effectively less than a 20per cent reduction in the overall debt [for Greece] because it only involves the private sector and excludes all the debt that is held by the ECB [European Central Bank] and the other public authorities and also the debt held by Greece because the banks, of course, will now be insolvent and the pension funds also,'' Mr Soros said.