LONDON (Reuters) – Billionaire financier George Soros said the European Union could break apart after the new coronavirus pandemic if the bloc doesn't issue perpetual bonds to help weak members like Italy.
FILE PHOTO: The billionaire George Soros speaks to the audience at the Schumpeter Award in Vienna on June 21, 2019. REUTERS / Lisi Niesner
The novel corona virus that hit China last year has brought parts of the global economy to a standstill, while governments have raised borrowing to levels never seen in peace history.
Soros, 89, said the damage to the eurozone economy from the new corona virus would "last longer than most people think," adding that the rapid development of the virus would make a reliable vaccine difficult to develop .
The hedge fund veteran and chairman of Soros Fund Management LLC said perpetual bonds used by the British to finance wars against Napoleon would enable the European Union to survive, even from the ashes of World War II.
"If the EU is now unable to think about it, it may not be able to overcome the challenges it is currently facing," Soros said in a transcript of a question-and-answer session sent by email was sent to reporters. "This is not a theoretical possibility; it can be the tragic reality. "
The comments have been approved by Soros for publication on Friday, a spokesman said.
Soros, who became famous in 1992 against the pound, said that with large countries like Germany selling bonds with negative yields, perpetual bonds would alleviate an impending budget crisis across the block.
He said the EU had to maintain its AAA credit rating in order to issue such debt – and therefore have tax raising powers to cover the cost of the bonds – and therefore proposed simply approving the tax rather than levying it.
"There is a solution," said Soros. “The taxes just have to be approved. They don't have to be implemented. "
When asked about the Brexit, Soros said he was particularly concerned about Italy: "What would be left of Europe without Italy?"
"The easing of state aid rules that favor Germany was particularly unfair to Italy, which was already the sick man in Europe and was then the most affected by COVID-19," said Soros.
Soros fled Hungary when the Communists strengthened power in 1947 and ended up at the London School of Economics. His Quantum Fund made huge profits in 1992 by betting that the pound was overvalued against the German mark, forcing the British to pull the pound out of the European exchange rate mechanism.
Edited by Michael Holden and Hugh Lawson
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