Soros warns euro crisis could destroy the EU

COPENHAGEN Mon Apr 16, 2012 4:44pm EDT

Soros Fund Management Chairman George Soros waits to deliver a speech at the Central European University in Budapest, November 3, 2011. REUTERS/Bernadett Szabo

Soros Fund Management Chairman George Soros waits to deliver a speech at the Central European University in Budapest, November 3, 2011.

Credit: Reuters/Bernadett Szabo

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COPENHAGEN (Reuters) - Billionaire George Soros warned on Monday that the euro crisis is growing deeper, tearing at the fabric of European Union cohesion, because policymakers are prescribing the wrong remedies.

"I'm afraid that the euro crisis is getting worse. It's not over yet, and it is going in the wrong direction," Soros said in discussion with Denmark's economics minister hosted by the daily newspaper Politiken.

"The euro is undermining the political cohesion of the European Union, and if it continues like that could even destroy the European Union," Soros said. "That is due to a misunderstanding of what the problem is."

Soros, the Hungarian born U.S. investor, said that the creators of the single European currency believed that imbalances were created in the public sector without understanding that markets themselves can create imbalances.

He said the euro crisis is being dealt with by policymakers as a fiscal crisis though the crisis began as a collapse of the banking system in the United States and was compounded by a divergence of competitiveness among European countries.

He said that failure to deal with the crisis was creating tremendous tensions because people, who see that policy is failing, are driven into anti-European positions and dissent is growing within and between the countries of Europe.

"It could be reversed at any time if only the authorities understood that the box is broken and you need to find some out-of-the-box invention to bring it back inside the box and then put it right, change the rules of cohesion," he said.

Soros said the crux of the problem was that debt reduction was coming at a bad time for the European economy. "You can grow out of excessive debt, you cannot shrink out of excessive debt."

And he warned that the euro zone fiscal compact, an agreement by 25 EU leaders to prevent another debt crisis and restore confidence, was pushing in the wrong direction because it obliged governments to balance budgets and reduce indebtedness at a time of inadequate demand.

He said that because fiscal stimulus was ruled out, monetary policy remained the only tool available.

(editing by Ron Askew)

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Comments (26)
mick68 wrote:
Lemme guess George, reading between the lines; The EU should become a political union, not just a currency union right? He has suggested this before and is likely going to try to use this crisis as an opportunity to prove his point.
So, how do you convince strong countries like Germany and France to give up their statehood, only to be weakened by such a union?

Apr 16, 2012 4:57pm EDT  --  Report as abuse
mec1 wrote:
The crooked bastard himself has undermined national economies with is currency speculation and is working hard to destroy the United States with his leftist causes.

Apr 16, 2012 7:07pm EDT  --  Report as abuse
brickfhouse wrote:
And how much does Soros stand to gain by this?

Apr 16, 2012 7:08pm EDT  --  Report as abuse
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