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George Soros: European Crisis Has Entered 'Potentially More Lethal Phase'

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George Soros, Chairman of Soros Fund Management, deliver his speech to journalists on January 25, 2012 at the Swiss resort of Davos. (Getty Images)
George Soros, Chairman of Soros Fund Management, deliver his speech to journalists on January 25, 2012 at the Swiss resort of Davos. (Getty Images)

Belt-tightening in the Eurozone is putting the region on life support, at least according to one famous billionaire.

The European debt crisis "has entered what may be a less volatile but potentially more lethal phase," Billionaire investor George Soros wrote in an op-ed piece published on Project Syndicate Wednesday. Soros, who has been warning of the dangers of austerity in Europe for months, wrote that current European economic policies will likely lead to the breakup of the European Union.

Soros recommended that the Eurozone become more deeply fiscally integrated and share its debt burden.

This isn't the first time that Soros has criticized the eurozone's response to its government debt and financial crisis. He said in January at the World Economic Forum, located in Davos, Switzerland, that European leaders "had little understanding of how financial markets really work and did everything wrong." He also said that Germany's "tough fiscal discipline" would create tensions "that could destroy the European Union."

"The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system," Soros told Newsweek in January. And in December, Soros said that developed countries are falling into a "deflationary debt trap" and the global financial system is in a "self-reinforcing process of disintegration."

Soros' latest comments come as the crisis in Europe begins to again flare up. Although Italy and Spain have been paying more reasonable interest rates on government bonds over the past few months, those same interest rates have spiked over the past few days as investors panicked over the countries' long-term economic and budget outlook, with the eurozone plunging into recession because of government budget cuts.

Italy is currently paying a 5.42 percent interest rate on 10-year government bonds, and Spain is paying a 5.83 percent interest rate, according to Thomson Reuters.

Spain and Italy need interest rates on their long-term government debt to fall to about 4 percent in order for reach sustainable debt level, according to a report released last year.

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