Billionaire investor George Soros thinks a country will eventually exit the euro zone and urged policymakers on Sunday to come up with a plan B that could rescue the European Union from looming economic collapse.
Soros, famous for making $1 billion by betting against the British pound in 1992, did not name any country he thought might exit the currency, but speculation is mounting about the fate of Greece as its politicians struggle to agree more austerity measures demanded by international lenders as the price for staving off bankruptcy.
Soros reiterated his view in a panel discussion in Vienna that the euro had a basic flaw from the start in that the currency was not backed by political union or a joint treasury.
The euro had no provision for correction. There was no arrangement for any country leaving the euro, which in the current circumstances is probably inevitable, he said.
While he called survival of the European Union a vital interest to all, he said the EU needed structural changes to halt a process of disintegration.
There is no plan B at the moment. That is why the authorities are sticking to the status quo and insisting on preserving the existing arrangements instead of recognizing there are fundamental flaws that need to be corrected.
With a debt crisis in some peripheral members testing the EU's cohesiveness at a time of popular disquiet in wealthier countries over bailouts, he said leaders had to adopt measures now to remedy the situation.
Let's face it: we are on the verge of an economic collapse which starts, let's say, in Greece but could easily spread. The financial system remains extremely vulnerable...
We are on the edge of collapse and that is the time to recognize the need for change.
Some steps the EU could adopt included creating a larger central budget; directing some of the income from value-added tax or a levy on financial transactions to Brussels; having a European institution guarantee banks, and tripling the size of its bailout fund by topping it up with tax revenue, he said.
(Reporting by Michael Shields; editing by Sophie Walker)