Soros: Coronavirus damage to last 'longer than most people think'

Hungary-born billionaire warns European unity under threat if EU members do not work together to support weaker states.

Soros says the EU must come together during the pandemic to support weaker members such as Italy, in order to avoid future friction

Billionaire financier George Soros has said the European Union could break apart in the wake of the new coronavirus pandemic unless the bloc issued perpetual bonds to help weak members such as Italy.

The novel coronavirus, which emerged in China last year, has stalled swaths of the global economy while governments have ramped up borrowing to levels not seen in peacetime history.

Soros, 89, said the damage to the eurozone economy from the new coronavirus would last "longer than most people think", adding that the rapid evolution of the virus meant that a reliable vaccine would be hard 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 allow the EU - itself created out of the ashes of World War II - to survive.

"If the EU is unable to consider it now, it may not be able to survive the challenges it currently confronts," Soros said in a transcript of a question-and-answer session emailed to reporters. "This is not a theoretical possibility; it may be the tragic reality."

The comments were approved by Soros for publication on Friday, a spokesman said.

Soros, who earned fame by betting against the pound in 1992, said that with major countries such as Germany selling bonds with a negative yield, perpetual bonds would ease a looming budget crunch across the bloc.

He said the EU would have to maintain its "AAA" credit rating to issue such debt - and thus have to have tax-raising powers to cover the cost of the bonds - so suggested it could simply authorise the taxes rather than imposing them.

"There is a solution," said Soros. "The taxes only have to be authorised; they don't need to be implemented."

Asked about Brexit, Soros said he was particularly worried about Italy: "What would be left of Europe without Italy?"

"The relaxation of state aid rules, which favour Germany, has been particularly unfair to Italy, which was already the sick man of Europe and then the hardest hit by COVID-19," Soros said.

Soros fled Hungary when the communists consolidated power in 1947 and ended up at the London School of Economics.

His Quantum Fund made huge profits in 1992 betting that sterling was overvalued against the Deutsche Mark, forcing the British to pull the pound out of the European Exchange Rate Mechanism. 

SOURCE: REUTERS NEWS AGENCY