German's budget-savings policy risks destroying the European project and a collapse of the euro cannot be ruled out, billionaire investor George Soros said in a newspaper interview released on Wednesday.
"German policy is a danger for Europe, it could destroy the European project," he told German weekly Die Zeit.
Soros, who earned $1 billion in 1992 by betting against the British pound, added that he "could not rule out a collapse of the euro."
"If the Germans don't change their policy, their exit from the currency union would be helpful for the rest of Europe," he said.
Chancellor Angela Merkel unveiled plans earlier this month for 80 billion euros ($107 billion) in budget cuts during the next four years — a package she hopes will bring Germany’s structural deficit within European Union limits by 2013.
Merkel said on Tuesday it was important for Europe to fight to keep the euro stable.
Merkel also said in a speech in Berlin that it was in Germany's interests that the euro is stable and that the European Central Bank remains independent.
Soros said that "right now, the Germans are dragging their neighbors into deflation, which threatens a long phase of stagnation. And that leads to nationalism, social unrest and xenophobia. Democracy itself" could be at risk.
"Germany is globally isolated ... Why don't they let their salaries rise? That would help other EU states to pick up."
Merkel on Monday defended her budget cut plans after U.S. President Barack Obama preached patience in clamping down on public spending.
A German government official said on Tuesday Berlin did not expect to come under pressure at a G-20 summit in Toronto this weekend to provide fresh stimulus measures.
Last week, Soros said Europe faces almost inevitable recession next year and years of stagnation as policymakers' response to the euro zone crisis causes a downward spiral.
Flaws built into the euro from the start had become acute, Soros told a seminar, warning that the euro crisis could have the potential to destroy the 27-nation European Union.
The euro's lack of a correction mechanism or of a provision for countries to leave it could be a fatal weakness, he said Tuesday.
Germany had imposed its criteria on how a 750 billion euro ($1 trillion) euro zone rescue mechanism should be used and was imposing its own standards — a trade surplus and a high savings rate — on the rest of Europe, Soros said.
"But you can't be a creditor country, a surplus country, without somebody being in deficit," he said.
"That's the real danger of the present situation — that by imposing fiscal discipline at a time of insufficient demand and a weak banking system, by wanting to have a balanced budget you are actually ... setting in motion a downward spiral," he said.
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