George Soros says EU may not survive crisis 'tragedy'

George Soros: "You are facing long-lasting stagnation and unfortunately the European Union may not survive it"

Related Stories

Billionaire George Soros has told the BBC that the European Union may not survive its "long-lasting stagnation".

He says that Germany is responsible for many of Europe's problems because it has not taken on a leadership role.

Talking to the Today programme, he said; "My hope is that Germany is going to change and realise that the policy of austerity is counter-productive.

"Their memory is inflation, so they continue fighting inflation when the threat is deflation."

He added: "The only people who can change it are the Germans, because they are in charge. They don't want to be in charge, in fact they are determined not to be in charge. And that's the tragedy."

Mr Soros, an investor and philanthropist, is famous for speculating against the pound in 1992, contributing to its collapse and exit from the EU exchange rate mechanism (ERM), the forerunner of the euro.

Start Quote

This euro crisis has converted what was meant to be a voluntary association of equal sovereign states that sacrificed part of their sovereignty for a common benefit into a relationship between debtors and creditors”

End Quote George Soros
Debtors and creditors

He told the Today programme: "There are many nations that go through long periods of stagnation, but they survive.

"Japan has just had 25 years of it and is desperately trying to get out of exactly the situation that Europe is moving into.

"But the European Union is not a nation. It is just an association of sovereign states, a very incomplete association, and it may not survive.

"This euro crisis has converted what was meant to be a voluntary association of equal sovereign states that sacrificed part of their sovereignty for a common benefit into a relationship between debtors and creditors.

"The debtors can't pay their debts and are dependent on their creditors' mercy, and that creates a two-class system. It's not voluntary and it's not equal."

He said that although the International Monetary Fund had improved its understanding of the financial sector since the 2008 crisis, many other organisations had not.

"There is a group of people around the Bundesbank," he said, "who go by the law [whereby] the Maastricht treaty defines the role of the central bank.

"That definition was a bad one and actually doesn't allow the central bank to function as a lender of last resort, and without it there is a danger we will have some kind of financial crisis again."

'Parasite'

In his book, The Tragedy of the European Union, published in the UK on Tuesday, Mr Soros also writes that he believes the banking sector is a "parasite" holding back the economic recovery and that little has been done to resolve the issues behind the 2008 crisis.

He told Today: "Their first task is self-preservation, not servicing the economy, so small and medium enterprises, which are the lifeline of the economy, are not being served.

"Italy is the worst case - so these enterprises are going bust."

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

BBC Business Live

  1.  
    BSKYB PROFITS 09:56:
    Rupert Murdoch

    BSkyB has also announced it will pay around £4.9bn in cash to Rupert Murdoch's 21st Century Fox to buy out Sky Italia and Sky Deutschland. Under the deal BSkyB will pay £2.45bn for 100% of Sky Italia, part of which will be by handing over a share of National Geographic, and £2.9bn for Fox's 57% stake in Sky Deutschland to create a combined group with nearly 20 million customers.

     
  2.  
  3.  
    GDP FIGURES 09:45:
    chart showing contributions to GDP

    It looks like things are not all rosy in the garden. The UK's dominant services sector has expanded past its previous 2008 peak - that's the green line. It's dragged GDP above the previous peak as a result (don't forget services account for almost 80% of GDP). But everything else - construction,, industrial production and manufacturing - remains well below the 2008 peak.

     
  4.  
    GDP FIGURES 09:38:

    More from the Office of National Statistics (ONS). Economic output was estimated to be 0.2% above the peak recorded in the first quarter of 2008. From peak to trough, which was in 2009, the economy shrank by 7.2%, the ONS adds. We'll bring you reaction as it comes in.

     
  5.  
    GDP FIGURES 09:35:

    GDP was in-line with the 0.8% estimate for the three months to the end of June. As an aside, here is a feature worth a read, asking whether we should be interested in gross domestic product at all. Bobby Kennedy said GDP "does not allow for the health of our children... or the joy of their play."

     
  6.  
    GDP FIGURES 09:30: Breaking News

    It's official. UK economic output was 0.8% in the second quarter of this year. That means the economy has now passed its previous 2008 peak.

     
  7.  
    GDP FIGURES 09:25: BBC Radio 4

    More from Ms Bell on the economy: She says it is typical that output recovers after about four years (following a recession) but this time its taken six "so its been quite a struggle." After Thursday's upgrade to its economic growth forecast for the UK, she adds, the IMF is looking for even stronger growth next year.

     
  8.  
    PEARSON RESULTS 09:19:

    Financial Times owner Pearson Group has reported a pre-tax loss of £36m for the six months to the end of June. That compares with a loss of £16m a year earlier.

     
  9.  
    NO ARGENTINA DEAL 09:06:
    Argentina"s President Cristina Fernandez de Kirchner

    Argentina failed to reach a deal for its debts late on Thursday, with hedge funds demanding full payment on its defaulted bonds, veering closer to what the IMF warned could be a painful new default. There's less than a week to go to either pay up or risk being declared in default. Argentine officials met with the US court-appointed mediator trying to break the impasse, but refused to meet the hedge funds' representatives directly.

     
  10.  
    RBS RESULTS Via Twitter Kamal Ahmed BBC Business editor

    tweets: RBS Ross McEwan says UK recovery "broader than a consumer recovery". Gross lending to businesses up.

     
  11.  
    RBS RESULTS 08:41:

    More market musings on RBS. Chirantan Barua, an analyst at Sanford C. Bernstein, says the reduction in money set aside for bad loans was "extremely strong" compared with City expectations. Sales and capital were better than he expected too, he said. He reckons the shares may be worth 440p apiece.

     
  12.  
    RBS RESULTS Via Twitter Kamal Ahmed BBC Business editor

    tweets: RBS CEO Ross McEwan says there has been a cooling in the mortgage and housing market over the last two months. "That is not a bad thing."

     
  13.  
    MARKET UPDATE 08:24:

    European markets are lower today with investors focused on earnings news and economic data release. The biggest rise on the FTSE 100 is perhaps unsurprisingly RBS - up 10.07% or 33.10p so far to 361.9p after it took everyone by surprise by announcing first-half pre-tax profits of £2.65bn a week early.

    • The FTSE 100 is 0.28% lower at 6806.49
    • The Dax is down 0.22% to 9772.94
    • The Cac-40 has fallen 0.50% at 4138.73
     
  14.  
    RBS RESULTS 08:11:

    Vivek Raja, an analyst at Oriel Securities, is one of the first out of the traps with some insight into what the RBS results mean. "The preannouncement reflects better than expected operating performance on credit performance, in the Bad Bank (RBS Capital Resolution) and on capital ratios," he says. So that means 1) loans are performing better, 2) the worst loans are performing better, and 3) the bank has more capital as a percentage of loans.

     
  15.  
    VODAFONE 07:56:
    People walk past a Vodafone shop

    Vodafone's first quarter trading shows the mobile operator getting no relief from its European market. Group service revenue - that's customers buying handsets and using the Vodafone network to you and me - was £6.4bn in the three months to 30 June, down 7.9% on the same period last year. Competition and regulation "continue to create a challenging operating environment," it says.

     
  16.  
    LLOYDS SETTLEMENT 07:41:
    A general view of a sign for Lloyds Bank

    Lloyds Banking Group has responded to recent stories regarding settlements "with a number of government agencies" regarding rates setting - Libor. It's in "late-stage" discussions, it says.

     
  17.  
     
  18.  
    RBS RESULTS 07:27:
    RBS

    "Asset quality continued to improve in the UK and Ireland," says what was once the world's largest bank. In English, more of their loans are more likely to be repaid in full and on time. The bank has set aside £22.4bn against bad loans, down from £25.2bn in December. Ulster bank posted a modest profit of £55m - that's from a £381m loss a year ago.

     
  19.  
    BSKYB PROFITS 07:20:
    British Sky Broadcasting headquarters

    BSkyB has reported a slight slip in annual pre-tax profit to £1,1bn compared with £1,2bn a year earlier. Tax for the year was £249m compared with £295m in 2013, an effective tax rate of 21% as a result of the reduction in the rate of UK corporation tax.

     
  20.  
    RBS RESULTS 07:16:

    Pre-tax profit was £2.65bn, up from £1.37bn as impairments dropped like a stone -- down to £269m from £2.15bn. Those reductions in bad loan costs far outweighed a rise in restructuring costs and a drop in sales. £150m was added to provisions for Payment Protection Insurance (PPI) and £100m to interest rate swap provisions.

     
  21.  
    RBS RESULTS 07:08: Breaking News

    A turn up for the books. Royal Bank of Scotland Group has put out its first-half results early. They were due 1 August, according to the bank. Operating profit rose to £2.6bn from £708m in 2013.

     
  22.  
    BALFOUR MERGER 07:02:
    A Balfour Beatty workman on a construction site

    UK construction firm Balfour Beatty is in talks with rival Carillion about a potential £3.05bn merger, it has emerged. The two companies confirmed what they described as "preliminary discussions." In a joint statement they said they believed a "merger of the two groups has the potential to create a market leading services, investments, and construction business of considerable depth and scale."

     
  23.  
    DISCOUNT STORES 06:51: Radio 5 live

    Look out for Hussein Lalani, co-founder and commercial director of the 99p stores, on 5 live. He says before the recession suppliers would just give them their leftovers. Now many brands are making products just for the discount market.

     
  24.  
    GDP FIGURES 06:40: BBC Radio 4

    Marian Bell, economist and former member of the Bank of England's Monetary Policy Committee has been talking to the Today programme about the UK's economic recovery. She says it is "people are expecting a 0.9% rise in output and that would be sufficient to surpass the 2008 level." But it has taken more time to achieve that economic recovery than in the past. In fact, she says, it has been "the longest that output has been below its previously level for more than 100 years."

     
  25.  
    GDP FIGURES 06:27: Radio 5 live

    Elaine Coverley, head of equity research at Brewin Dolphin is on Wake up to Money. "We need other markets to keep that going," she says of growing UK gross domestic product. Markets like the US aren't doing so well. The IMF slashed its US economic growth estimate on Wednesday to 1.7% for 2014.

     
  26.  
    GDP FIGURES 06:11: Radio 5 live

    "The consumer is doing a lot of the heavy lifting," in the economy, says economist Alan Clarke of Scotiabank on 5 live. How, when wages are stagnant? The housing market, of course. As the value of homes rises, people are prepared to save less and spend more without earning more. House prices won't go up at the current rate forever, though, he says.

     
  27.  
    GDP FIGURES 06:03: Radio 5 live

    CBI director-general, John Cridland is still on 5 live. The recovery is currently investment-led rather than export-led. Sterling's strength isn't helping but isn't wholly choking things off either, he says.

     
  28.  
    GDP FIGURES 06:01: Radio 5 live

    Director-General of the Confederation of British Industry John Cridland expects growth of 0.8% in the second quarter, he tells 5 live. "We are getting some balance in the recovery, like a boxer in the boxing ring finding his feet," he says. Companies are investing, finally, he says, and that's crucial. This is what will add to wages.

     
  29.  
    06:00: Howard Mustoe Business reporter

    Good morning! Please get in touch via email on bizlivepage@bbc.co.uk or via twitter @BBCBusiness

     
  30.  
    06:00: Matthew West Business Reporter

    Good morning. So, let's catch up from last night: Amazon had a tough second quarter, as did General Motors. And the International Monetary Fund downgraded its global economic growth forecast. Here at home it's as good as confirmed that the UK is richer than it has ever been (you literally have never had it so good, you lucky, lucky people). Do you feel richer than you did last year? How about last week? Or yesterday even? We'll find out at 09:30 with second quarter GDP, so stay with us.

     

Features

From BBC Capital

Programmes

  • Leader of Hamas Khaled MeshaalHARDtalk Watch

    BBC exclusive: Hamas leader on the eagerness to end bloodshed in Gaza

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.