Britain’s decision to leave the European Union has “unleashed” a crisis in financial markets - George Soros

Britain’s decision to leave the European Union has “unleashed” a crisis in financial markets similar to the global financial crisis of 2007 and 2008, George Soros told the European Parliament in Brussels on Thursday.

“This has been unfolding in slow motion, but Brexit will accelerate it. It is likely to reinforce the deflationary trends that were already prevalent,” the billionaire investor said.Soros rose to fame as the money manager who broke the Bank of England in 1992, netting a profit of $1 billion with a wager that the U.K. would be forced to devalue the pound and pull it from the European Exchange Rate Mechanism. Soros has warned that a hard landing in China is “practically unavoidable,” arguing that its debt-fueled economy resembles the U.S. at the onset of the financial crisis.

Continental Europe’s banking system hasn’t recovered from the financial crisis and will now be “severely tested.,” Soros said. “We know what needs to be done. Unfortunately, political and ideological disagreements within the euro zone have stood in the way” of using the European Stability Mechanism as a backstop, he said.

The investor warned before the U.K. referendum that the pound may slump more than 20 percent against the dollar if Britain voted to leave. Britain’s currency plunged to the lowest in 31 years after the result.

The decision meant “the hypothetical became very real,” Soros said. “Sterling plunged, Scotland threatened to break away, and some of the working people who supported the ‘Leave’ campaign have started to realize the bleak future that both the country and they personally face. Even the champions of Leave are retracting their dishonest pre-referendum claims about Brexit.”

The euro region has lagged behind other regions in the global recovery, following the last financial crisis, “because of restrictive fiscal policies; now it has to contend with an impending slowdown,” Soros said. “The orthodoxy of German policy makers stands in the way of the only effective response: having a euro-zone budget that could adopt counter-cyclical policies.”