George Soros. Picture: REUTERS
George Soros. Picture: REUTERS

London — Billionaire financier George Soros has said the EU could break apart in the wake of the new coronavirus pandemic unless the bloc issues perpetual bonds to help weak members, such as Italy.

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

Soros said the damage to the eurozone economy from Covid-19  will last “longer than most people think”, adding that the rapid evolution of the virus means that a reliable vaccine will be hard to develop.

The hedge fund veteran and chair of Soros Fund Management 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 2 — to survive.

“If the EU is unable to consider it now, it may not be able to survive the challenges it now confronts,” Soros said in a transcript of a question and answer session e-mailed 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 spokesperson 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 is 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 fled Hungary when the communists consolidated power in 1947 and attended the London School of Economics. His Quantum Fund made huge profits in 1992 betting that sterling was overvalued against the German mark, forcing the British to pull the pound out of the European Exchange Rate Mechanism.

Reuters