Soros Says Europe Faces 25 Years of Stagnation Without Overhaul

By Jesse Westbrook  Mar 12, 2014 12:45 PM GMT+0200

Bloomberg

Billionaire investor George Soros said Europe faces 25 years of Japanese-style stagnation unless politicians pursue further integration of the currency bloc and change policies that have discouraged banks from lending.

While the immediate financial crisis that has plagued Europe since 2010 “is over,” it still faces a political crisis that has divided the region between creditor and debtor nations, Soros, 83, said in a Bloomberg Television interview in London today. At the same time, banks have been encouraged to pass stress tests, rather than boost the economy by providing capital to businesses, he said.

Europe “may not survive 25 years of stagnation,” Soros said in the interview with Francine Lacqua. “You have to go further with the integration. You have to solve the banking problem, because Europe is lagging behind the rest of the world in sorting out its banks.”

Soros, whose hedge-fund firm gained about 20 percent a year on average from 1969 to 2011, has been a constant critic of how the European currency bloc was designed and of budget cuts imposed on indebted nations such as Greece and Spain at the height of the crisis. He said more “radical” policies are required to avoid a “long period” of stagnation.

European bank shares are “very depressed,” making it an “attractive time” to invest, Soros said. Still, he said it is going to be a “very tough year” for lenders as they try to shrink balance sheets and boost their capital to pass the European Central Bank’s stress tests, he said.

Soros Fund Management LLC, the hedge-fund firm that Soros turned into a family office three years ago to manage only his personal wealth, made $5.5 billion of investment gains last year, according to LCH Investments NV. The profits were more than any other hedge-fund manager, according to LCH, a firm overseen by the Edmond de Rothschild Group that invests in hedge funds.

To contact the reporter on this story: Jesse Westbrook in London at jwestbrook1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net