Bangalore, January 10: INDIA along with other developing economies will be ‘ less affected’ by the global financial crisis, said legendary US investor George Soros on Monday and warned that the European crisis may lead to an economic ‘ meltdown worse than 2008’. “ The financial crisis will largely hit Europe and the developed countries ( this time). There has been a rise of the developing economies and they have seen a tremendous shift. So, the developing economies would be less affected,” said Soros, adding that the rate of growth may decline in these economies.
“ India is an important country in the entire world as one of the developing economies,” he added. “ It’s really interesting to see that the developing countries are not only increasing financially, but making a mark in global politics as well,” he said.
“ I find solace in the improvement of the developing world,” said the philanthropist- investor.
Speaking at a public lecture session organised by Azim Premji University in Bangalore, he said the crisis in 2012 is going to be way more serious than the one that disrupted the global economy in 2008.
Soros also pointed out that there were flaws in designing the Euro zone: the Maastricht Treaty on European Union, which was signed on February 7, 1992, by the 12 European nations in Maastricht, Netherlands which paved the way for the birth of the euro.
“ Europe doesn’t have a treasury, treasury, it has only the European Central Bank ( ECB) to deal with the ongoing crisis. The architects knew the ( economic) structure was incomplete and it is politically impossible to create such an institution in time of a crisis,” Soros said.
With such Euro zone crisis, the chances are that the global economy would soon be facing a ‘ potential meltdown’, the chairman of the Soros Fund Management, said.
The impractical austerity measures imposed by nations like Germany would lead to bigger uncertainty, said Soros.
“ If the crisis is brought under control, then the austerity programmes should be started,” he said. Soros also pointed out that Germany is dictating the rules that are to be followed by the European Union. “ It is bribing the government for a draconian austerity programme,” he said.
On the global economic situation, he said, “ Most of the economies are politically deregulated.” There has been tightening of regulations and it is stricter in the case of US, he added.
“ The economic structure is an esoteric construction and unlike the structure of the real world.
We really have to rethink the very fundamentals of economics,” Soros said.
He said financial markets are not yet close to a situation of equilibrium. “ Markets are left to their own biases. People’s views on reality are never identified.
There is always an interplay between regulators and participants,” he said.
While the economists are busy providing determinate results, the ‘ unquantifiable uncertainties’ of the markets are ignored, Soros pointed out. “ And, that is what created the unexpected financial crisis,” he said.