Soros: Europe at risk of deflation

Billionaire investor George Soros has warned Europe could see a bout of deflation if harsh austerity measures wanted by Germany are implemented.

Soros, the chairman of Soros Fund Management and the man who famously bet against the pound in the early '90's, said the eurozone nations would have to deal with deflation if plans to impose severe austerity across member states were brought in.

According to Dow Jones, he said: "The austerity that Germany wants to impose will push Europe into a deflationary debt spiral."

His warning comes as european nations hold further talks to tackle the problem of sovereign debt burdens across the region. Markets have already reacted to the sovereign crisis, with yields on government debt across Europe soaring.

Soros, speaking at the World Economic Forum in Davos, called on the authorities to adopt a plan pioneered by the late Italian central banker Tommaso Padoa-Schioppa to tackle the crisis.

It would see the European Financial Stability Facility buy short-dated US treasuries at low interest rates from european countries with unsustainable debt burdens.

Soros also warned the outlook for the eurozone was bleak, although he did at least expect the euro to hold together.

"To expect a rebound (in growth) is unrealistic. The EU is undemocratic to the point where the electorate is disaffected and ungovernable," he said.

Soros added the eurozone nations had so far only managed to relieve funding pressures on banks by providing more liquidity, and needed another solution to aid overly indebted countries.