January 6, 2012

Soros Warns Euro Breakup Would Be Worse Than 2008 Crash

Not just Europe would suffer, but global financial system would too, says billionaire

Billionaire investor George Soros. (Photo: AP) Billionaire investor George Soros. (Photo: AP)

George Soros has been speaking out about the euro zone crisis and the potential for the breakup of the euro, and his thoughts on the matter are particularly dire. The billionaire investor said that such an event would be catastrophic, and not just for the euro zone. In his view, its effects would reach far beyond and in fact endanger the global financial system.

Reuters reported that the newspaper Business Line quoted Soros saying in response to questions in the south Indian city of Hyderabad, "Today, the euro is potentially endangering the political cohesion of the European Union. If the common currency were to break down, it will lead to the break up of the European Union itself. And this will be catastrophic not only for Europe but also for the global financial system."

Bloomberg reported that he also said that markets have begun to price in the possibility of the region breaking up, and that at present it isn’t clear whether the crisis will be contained, adding many people “feel” it’s “over the brink” and “insolvable.”

If that isn’t enough gloom and doom, there was this statement in the Economic Times, in which Soros called the euro zone crisis "more serious and more threatening than the crash of 2008."

And in the Mint newspaper, he was quoted saying at a business school event that in the short run, some euro zone countries would have to take on stricter austerity measures because of imbalances between the "creditor and the debtor countries." He added, "Unfortunately, they haven't yet solved the acute financial crisis and that is causing the situation to deteriorate ... and [it] is not at all clear it will have a solution."

He isn’t happy about markets either, saying that they are “far from equilibrium and extremely difficult to predict using the yardsticks or methods that were used in the past.” He added that investors “have to play it safe,” and that “unless you can anticipate events correctly, it’s better to do nothing than to keep on losing money.”

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