Soros Says a Euro Exit Mechanism Is ‘Probably Inevitable’ Amid Debt Crisis

Billionaire investor George Soros said it’s “probably inevitable” that a mechanism will have to be put in place to allow weaker euro-region economies to exit the single currency.

“We are on the verge of an economic collapse which starts, let’s say, in Greece, but it could easily spread,” Soros, 80, said at a panel discussion in Vienna today on whether liberal democracy is at risk in Europe. “The financial system remains extremely vulnerable.”

Concern Greek lawmakers will fail to pass austerity measures to ensure the next installment of the nation’s bailout is roiling global markets and pushed the euro to a record-low against the Swiss franc last week. Greece is one of three euro- region members to have sought international bailouts amid the sovereign debt crisis.

“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.

The euro was created in 1999, with 11 member states -- Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Finland, Austria, Portugal, Spain and Ireland. Greece was the 12th country to adopt the shared currency in 2001, while Estonia is the newest member of the euro region, joining this January.
Davos Concerns

Soros also expressed concern the currency union would dissolve at the World Economic Forum in Davos, Switzerland on Jan. 26. He said European policy makers must address their two- speed economy or risk the euro collapsing, though he said then that this was unlikely to occur.

Soros is chairman of Soros Fund Management LLC, which has about $28 billion in assets. He’s best known for reportedly making $1 billion in 1992 on a bet that the U.K. would fail to keep the pound in the European exchange-rate system that pre- dated the euro.

European Union leaders have vowed to stave off a Greek default as long as Prime Minister George Papandreou, who won a confidence vote last week, pushes through his 78 billion-euro ($111 billion) package of budget cuts and asset sales. Investors are concerned Greece’s failure would trigger contagion that would engulf other euro-region members including Ireland, Portugal and Spain.

To contact the reporter on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net