George Soros has apparently had a change of heart over the European Union's financial portfolio and how the bloc should cover the costs of the raging coronavirus pandemic, suggesting in an op-ed for The Guardian, that in the wake of the latest budget-related developments, investors have strong doubts that the political bloc will ever pay off the bonds.
The Hungarian-born billionaire previously argued that the EU should opt for "perpetual bonds", with the practice largely meaning that the lion's share of borrowed sums would never be repaid, only the annual interest rates would.
The underlying concept is that the EU would stay and last forever, and thus continue fulfilling its financial obligations before its lenders, thereby allowing for low-price schemes for the regions to fund a variety of local projects.
Now, however, the situation has drastically changed, Soros went on, apparently referring to a recent dispute between Poland and Hungary and the rest of the 27-strong bloc, which is supposed to take decisions collectively over the budget.
"Right now, it would be impossible for the EU to issue perpetual bonds, because the member states are too divided", Soros said in his opinion piece.
Further explaining his stance, he wrote that investors will buy perpetual bonds "only from an entity that they believe will continue to exist for the foreseeable future".
"Sadly, it is not true of the EU today", the billionaire philanthropist concluded, suggesting that instead, individual countries should produce and release their own perpetual bonds.
"They would be issued by member states whose continued existence would be readily accepted by long-term investors such as life-insurance companies", he wrote, arguing the "additional advantage" in this scenario is that other member states would be motivated to follow suit.
Soros did reserve a bit of optimism for the bloc's financial future, saying that as time passes, the EU could have great clout to likewise issue perpetual bonds "in its own name". "That is a goal worth striving for", Soros said.
Budget Row in Corona-Struck EU
The impasse, which has intensified since the Hungarian and Polish governments vetoed the EU's actual plan to rein in the economic crisis, risks the payments under the EU's coronavirus stimulus package.
As the bloc's economy is projected to contract by over 7% before the end of the year, according to data released by the European Commission, highly indebted nations are expectedly relying on other member states' financial assistance to support their economies - something economically strong countries like Germany vehemently oppose.
Hungary and Poland vetoed the EU's hefty 1.8 trillion euro ($2.1 trillion) seven-year budget and COVID-19 recovery plan due to their disagreement with a "conditional mechanism" of allocating funds, whereby actual funding is linked to the observation of centrally agreed democratic norms.
Rule of Law Principle
Hungary and Poland are deemed as the two primary targets of the rule of law mechanism, especially in the wake of the European central authorities launching proceedings against Warsaw in 2017 and Budapest in 2018 over doubts about the independence of judges in the two countries.
Hungarian Prime Minister Viktor Orban said that his country rejected the budget plans because Brussels was attempting to make supporting immigration a crucial part of the rule of law mechanism, with his Polish counterpart, Mateusz Morawiecki, having previously called the rule of law initiative a "discretionary" mechanism relying on solely "arbitrary, politically motivated criteria".