Billionaire hedge fund manager George Soros warned on Thursday morning that the European Union is in the midst of an “existential crisis.”
Speaking at the Brussels Economic Forum, Soros pointed to the 2008 global financial crisis, which he notes hit the European banking system “much harder” than others. He said that crisis was the “tipping point” of the EU moving from a mindset of integration to disintegration.
“Most Europeans of my generation were supporters of further integration,” he said. “Subsequent generations came to regard the EU as an enemy that deprives them of a secure and promising future.”
The values on which the EU was established are currently being challenged by the rise of “anti-European, xenophobic parties,” he said.
“Externally, the EU is surrounded by hostile powers – Putin’s Russia, Erdogan’s Turkey, Sisi’s Egypt and the America that Trump would like to create but can’t,” Soros said. “Internally, the European Union has been governed by outdated treaties ever since the financial crisis of 2008. These treaties have become less and less relevant to prevailing conditions.”
He added that the functioning of European institutions has become “increasingly complicated” and has rendered the EU “dysfunctional” in some ways.
“The eurozone in particular became the exact opposite of what was originally intended,” Soros said. “The European Union was meant to be a voluntary association of like-minded states that were willing to surrender part of their sovereignty for the common good.”
That all changed following the financial crisis, he said, with the eurozone being “transformed into a creditor/debtor relationship” among countries.
Brexit as a catalyst for change
“If the European Union carries on with business as usual, there is little hope for an improvement. That is why the European Union needs to be radically reinvented,” Soros said.
Soros has been an opponent and vocal critic of “Brexit,” Britain’s decision to leave the EU. In his speech, he outlined a plan for Britain to come back within five years.
“The European Union must resist temptation to punish Britain and approach the negotiations in a constructive spirit,” he said. “It should use Brexit as a catalyst for introducing far-reaching reforms.”
He noted that the “divorce” will be a “long process” that could take up to five years. In that time, the decision could be reversed.
“Five years seems like eternity in politics, especially in revolutionary times like the present. During that time, the European Union could transform itself into an organization that other countries like Britain would want to join,” Soros said. “If that happened, the two sides may want to be reunited even before the divorce is completed. That would be a wonderful outcome, worth striving for.”
He explained that Britain is a parliamentary democracy and within five years it has to hold another general election. That next parliament may vote to be reunited with Europe.
“Such a Europe would differ from the current arrangements in two key respects. First, it would clearly distinguish between the European Union and the Eurozone. Second, it would recognize that the euro has many unsolved problems and they must not be allowed to destroy the European Union.”
Julia La Roche is a finance reporter at Yahoo Finance.