- REUTERS/Christian Hartmann
Hedge fund legend George Soros thinks the vote for a British exit from the European Union is bringing calamity to the world’s financial markets.
“Unfortunately, Brexit has not only created an opening to reinvent the European Union – it has also aggravated two looming dangers,” Soros said Thursday in a speech to the European Parliament that was obtained by ValueWalk.
“First,” he said, “it unleashed a crisis in the financial markets, comparable in severity only to 2007/8. This has been unfolding in slow motion, but Brexit will accelerate it. It is likely to reinforce the deflationary trends that were already prevalent.”
Soros, who is known for his massive bet against the British pound in 1992, said before the UK voted to leave the EU that a Brexit would cause serious problems. Now, he said, those problems are coming to pass.
He said that all the consequences he feared leading up to the Brexit – a collapse in the pound, the possibility of Scotland leaving the UK, and economic worries – had already led to “buyer’s remorse” for British voters.
Soros also said the economic tribulations that have befallen the UK after the vote could, in fact, lead to a more unified EU rather than its end, as some have warned.
“The referendum has highlighted for people in Britain just what they stand to lose by leaving the EU,” he said.
“If this sentiment spreads to the rest of Europe, what seemed like the inevitable disintegration of the EU could be instead creating positive momentum for a stronger and better Europe.”
Soros also advocated more expansive fiscal stimulus on the part of the EU’s member governments, eschewing “the orthodoxy of German policymakers” that have called for austerity over spending. He advised the EU to lean on debt issuance to spend and get the wheels of the continent’s economy spinning again.
He also criticized the EU’s response to the refugee crisis, saying that it was an example of the economic and political failures of the organization. After praising German Chancellor Angela Merkel’s willingness to open her country’s doors to refugees, Soros maintained that issuing debt to help deal with the crisis was necessary and the EU had to do more.
“To sum up, the refugee crisis poses an existential threat to Europe,” Soros said.
“As I said before, it is the height of irresponsibility to allow the EU to disintegrate without utilizing all its resources. Throughout history, governments have issued bonds in response to national emergencies. When should the triple-A credit of the EU be put to use if not at a moment when the European Union is in mortal danger?”