1 July, AtoZForex – Before the Brexit votes, George Soros warned of the dismal effect an exit from the union would have on the pound (a 15% to 20% plunge) and the UK economy at large. A close call, considering that the initial plunge on the pound was about 10 percent, and the currency remains susceptible to further fall. Now, he has warned that Brexit to cause financial crisis bigger than 2008.
Brexit to cause financial crisis bigger than 2008
In a speech to the European Parliament, the legendary investor has further reiterated that the vote to for UK to exit the EU is bringing turmoil to global financial markets. He said:
“Unfortunately, Brexit has not only created an opening to reinvent the European Union — it has also aggravated two looming dangers.” It unleashed a crisis in the financial markets, comparable in severity only to 2007/8. This has been unfolding in slow motion, but Brexit will accelerate it. It is likely to reinforce the deflationary trends that were already prevalent.”
Apparently, all the dangers Soros warned about prior to the referendum are indeed coming to pass. Ranging from the possibility of Scotland leaving the UK, a collapse in the pound, economic worries amongst others. All of which have started resulting in “buyer’s remorse” for British voters. However, Soros said the economic tribulations that have hit the UK will, in fact, lead to a stronger bond within the European union, contrary to popular belief.
“The referendum has highlighted for people in Britain just what they stand to lose by leaving the EU,” he said.
“If this sentiment spreads to the rest of Europe, what seemed like the inevitable disintegration of the EU could be instead creating positive momentum for a stronger and better Europe.”
As a response to the situation, Soros suggests further expansive fiscal stimulus from the EU’s member governments, contrary to “the orthodoxy of German policymakers” that have called for austerity over spending.
Criticism and Kudos
He also criticized the EU’s handling of the refugee crisis, depicting it as evidence of the organization’s economic and political failures. He, however, praised German Chancellor Angela Merkel for her willingness to allow for entry to refugees amid stiff opposition. While maintaining that issuing debt to help deal with the crisis was necessary and the EU had to do more.
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