Brexit is ‘lose-lose’ for UK and Europe, says Soros
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GEORGE Soros, the billionaire who earned fame by betting against the pound in 1992, said Britain was approaching a tipping point that would see the economy slow to such an extent that Brexit might even be reversed.
Soros used Quantum Fund in 1992 to bet successfully that sterling was overvalued against Germany’s mark currency, forcing then-Prime Minister John Major to pull the pound out of the European Exchange Rate Mechanism.
Soros, who was born in Hungary but made his way to London as Communists consolidated power in Budapest, said economic reality was starting to catch up with a United Kingdom that voted 52 to 48 percent to leave the European Union in a June 23 referendum.
“The moment of truth is fast approaching,” Soros said in an article e-mailed to reporters.
“The fact is that Brexit is a lose-lose proposition, harmful both to Britain and the European Union. It cannot be undone, but people can change their minds.”
Britain’s US$2.5 trillion economy has shown resilience since last year’s referendum although sterling fell 25 cents against the dollar in the hours immediately after the shock vote.
But Britain went from being one of the fastest-growing economies of the Group of Seven leading economic nations in 2016 to the slowest in early 2017, as the fall in the value of the pound after the Brexit referendum pushed up inflation and hit consumer spending.
The combination of rising prices and slowing wage growth represents a challenge for the Bank of England and its top policy-makers, three of whom voted last week to raise interest rates to head off the acceleration of inflation.
Soros said the Bank had underestimated the impact of inflation and was now catching up.
“Households will realize that their living standards are falling and they will have to adjust their spending habits,” Soros said. “To make matters worse, they will also realize that they have become overindebted and they will have to pay back their debts.”
Britain has less than two years to negotiate the terms of the divorce and the outlines of the future relationship before it is due to leave in March 2019. Both sides need an agreement to keep trade flowing between the world’s biggest trading bloc and the fifth-largest global economy.
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