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A protester holds a poster of a euro sign during an anti-Merkel demonstration in Madrid Sept. 6, 2012.

SUSANA VERA/REUTERS

It now looks like the euro stands a good chance of surviving, now that German Chancellor Angela Merkel has pledged to use any means possible to rescue the 17-nation currency. But by tying the debt-burdened countries of southern Europe to a German-enforced rescue scheme, is Berlin setting the continent up for a political catastrophe?

That dire warning was given its strongest argument this weekend by billionaire financier George Soros, who echoes other observers in recent months in warning that if the currency rescue succeeds, the Mediterranean states of southern Europe could become a "permanently depressed" region whose main function is to provide cheap labour to the continent's north.

In a much-discussed essay published this weekend in the New York Review of Books, Mr. Soros notes that Ms. Merkel has now broken with her country's central banker, Jens Weidmann – and thus with the German consensus view that unlimited EU funds should not be devoted to rescuing the failed economies of southern Europe.

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Over the summer, Ms. Merkel shifted her allegiances to European Central Bank president Mario Draghi, who believes that the strong economies of northern Europe should do "whatever it takes to preserve the euro as a stable currency." By cutting out Mr. Weidmann, this means that Europe's strongest economy is now solidly behind Mr. Draghi's approach.

"This was a game-changing event," Mr. Soros notes. "It committed Germany to the preservation of the euro." Mr. Draghi has pledged to purchase unlimited quantities of government debt from Greece, Italy, Spain, Portugal and Ireland – so long as they agree to austerity programs under the supervision of the "Troika" of the European Union, the ECB and the International Monetary Fund.

With this, Mr. Soros says, "the survival of the euro is assured," as the plan is sure to save the euro from collapsing or losing member states – but in the process, it turns an economic crisis into an equally serious pending political crisis.

"The European Union that will emerge from this process will be diametrically opposed to the idea of a European Union that is the embodiment of an open society," he writes. "It will be a hierarchical system built on debt obligations instead of a voluntary association of equals. There will be two classes of states, creditors and debtors, and the creditors will be in charge."

Germany, as the main healthy export-driven economy in Europe (and the world's second-largest exporter, after China), will emerge as an all-powerful "hegemon," able to control the financial and political fates of the lesser member states – and because those states won't be able to use monetary instruments to improve their export standings, this inequality is likely to remain permanent.

"The divergence in economic performance, instead of narrowing, will become wider," he concludes. "Both human and financial resources will be attracted to the centre and the periphery will become permanently depressed. Germany will even enjoy some relief from its demographic problems by the immigration of well-educated people from the Iberian Peninsula and Italy instead of less qualified Gastarbeiter from Turkey or Ukraine. But the periphery will be seething with resentment."

There are only two ways out of this political catastrophe, Mr. Soros writes: Either Germany has to leave the euro, and thus end the dependency of southern Europe on German exports and the constant balance-of-payments inequalities that plague the euro zone.

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The other, he says, is for Germany to become a "benign hegemon," and set up a Europe-wide fiscal regulation body devoted not to austerity and debt payment, but to the development of the export capacities of the southern states. This would be both expensive and extremely politically unpopular with increasingly isolationist German voters – but it would guarantee a more stable and prosperous long-term future for Mediterraneans and Germans alike.

"We can hope Germany, when put to the choice, will choose to exercise benevolent leadership rather than to suffer the losses connected with leaving the euro," he concludes. And we can hope that Angela Merkel reads the New York Review of Books.

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