Image via WikipediaLONDON (Dow Jones)--The euro zone's fiscal crisis could eventually lead to the disintegration of the European Union, billionaire investor and philanthropist George Soros said Thursday in an interview with BBC Radio from Davos, Switzerland.
Soros said that while "the euro crisis is on the way to being solved" through closer cooperation on fiscal policy and the establishment of a permanent emergency support fund, the political consequences of the crisis could be more long-lasting.
In particular, countries such as Greece and Ireland that must repay huge debts are likely to grow much more slowly than other parts of the currency area.
"You now have two Europes, the haves and the have-nots," Soros said. "You will have a two-speed Europe and that isn't politically sustainable. There is a real danger that the common currency could lead to the political disturbance of the EU. The crisis could inflict such hardship on slow-speed Europe that it may lead to disintegration."
Soros said the agreements to provide help to Greece and Ireland are "flawed" because they do nothing to reduce the size of their debts. Irish voters want to see the debts of the nation's banks rescheduled, but Soros said that would damage banks in France and Germany, which own those bonds.
"The existing debt will be left as a burden on the debtor countries," Soros said. "You already have Ireland wanting to renege on that agreement because it is very unjust."
Later, in an interview with Bloomberg TV, Soros said the euro was here to stay, but the currency area shouldn't wait until 2013 to start restructuring debt.
"In the case of Ireland it's completely unjust that the Irish people should absorb all the losses made by the banks and the bondholders should be totally free," he said.
"I think Greece...better sooner than later, should be restructured. Portugal probably also," Soros said. "And that can be absorbed. It will cause losses, and if there are any losses then this emergency fund should be able to provide equity to replace the missing equity in the banks."
Commenting on the rising price of commodities, which has led to a resurgence of inflation in many advanced economies in recent months, Soros said there may be a couple of years left in the rally.
"Commodities are traditionally very, very cyclical, so it's a matter of where you are in the cycle--I think we're pretty advanced," he said.
Soros was also downbeat on the prospects for the U.S. economic recovery.
"I think it is temporary, because once the economy picks up a little momentum...then interest rates are going to go up and choke off the recovery. So we are destined for stop-go," he said, although he acknowledged that was better than "no-go at all."
Problems with budgets in U.S. states and local governments were also likely to pose a very serious risk to the recovery, particularly because it involved political disagreement.
"I would say it's probably the most serious risk in the next year...for the Unites States," he said.