Euro crisis more serious than 2008: Soros

The Euro zone debt crisis is much graver than the financial crisis in 2008, said billionaire investor and philanthropist George Soros.

Soros pointed out that when the markets had crashed in 2008, owing to the bankruptcy of Lehman Brothers, US Federal department pumped in money to bail out US banks and companies without addressing the underlying imbalances that led to the situation.

He was speaking at an event organised by the Azim Premji University, on Monday, in Bangalore. “The situation of the present Euro crisis is not being measured on the same plane because then there was the Federal Treasury to help then, whereas in euro zone, despite having the European Central Bank, do not have any treasury to their rescue,” said Soros.

He said the formation of euro zone itself is flawed as there were certain weaknesses in the construction of the euro zone and added that, “The crisis merely revealed the flaws.”
According to Soros, the architects of euro zone always knew that there were certain flaws in it, but they had thought that the problems would be solved with time, which did not happened and their troubles worsened.

There is very little political integration among the euro nations, but a crisis as the present only is the only thing that can bring them together to solve the issue, explained the investor.

“This ongoing euro crisis will hit the US also and even the developing economies in sometime,” added Soros.

The investor, who is mainly known to have predicted the 2008 financial crisis, called it a bubble in the economy which became visible to him much earlier. He is also known for making $1 billion in 1992 on betting that the Bank of England would be forced to devalue the pound.

To a question on how the developing economies are faring, he said that the closing gap between the developed and the developing economies is very much visible and added that it is the developed countries that are facing most of the crises as one can see from examples of 2008 and the euro zone crisis. “India is a democracy with its own share of flaws as the US has, and I’m really optimistic about it in the long run,” he said.

Soros added that India is increasingly becoming important to the rest of the world. Answering a query that if regulatory flaws are causing such crises across the globe, Soros said: “The financial markets have become too big and too powerful and there must be better financial regulations to keep them in bounds.”

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