George Soros said at a panel discussion in Vienna today that it’s “probably inevitable” that a system will have to be implemented to permit weaker euro-region economies to exit the single currency.[From Bloomberg]: “We are on the verge of an economic collapse which starts…in Greece, but it could easily spread,” Soros said during a speech on whether liberal democracy is at risk in Europe. According to the billionaire hedge fund manager, whose massive 1992 short position on the British pound earned him 1.1 billion dollars, “the financial system remains extremely vulnerable.”
“I think most of us actually agree that” Europe’s crisis “is actually centered around the euro,” said Soros. “It’s a kind of financial crisis that is really developing. It’s foreseen. Most people realize it. It’s still developing. The authorities are actually engaged in buying time. And yet time is working against them,” he said.
Of course Soros is talking about authorities’ efforts to prevent insolvent Greece from descending further into economic chaos. As the debt-ridden country keeps consistently missing its targets – the EU is growing increasingly desperate to avoid a restructuring (read: default) due to the fact that that would trigger a much larger and more risky defaults in Spain, Portugal, Ireland and possibly Italy. Over the past 21 months, Greece, Ireland, and Portugal alone have received nearly $260 billion in aid to avoid default, but outlook remains pessimistic.
Soros, notes Bloomberg, also expressed concern the currency union would dissolve at the World Economic Forum annual meeting in Davos, Switzerland on Jan. 26. He said European policy makers must deal with their two- speed economy or risk the euro falling apart, though he was quoted as saying that this was not likely to happen, Bberg said.