Soros Says Brexit May Last 5 Years and Cause `Immense Damage'

(Bloomberg) -- It may take the U.K. as long as five years to leave the European Union, with the process set to do major harm to both parties, billionaire investor George Soros said, urging the world's biggest trading bloc to avoid penalizing Britain and instead focus on reforming itself.

The EU should capitalize on the momentum from election victories for pro-European candidates in The Netherlands and France, and the likelihood of a repeat in Germany in September, Soros said in a Project Syndicate op-ed published Thursday. It can use this to push through long-delayed overhauls, shore up support for the bloc, boost economic growth and overcome the “biggest threat” of all -- a banking and migration crisis in Italy, he said.

Brexit “is certain to be immensely damaging to both sides,” Soros said. “Negotiating the separation with Britain will divert the EU's attention from its own existential crisis, and the talks are bound to last longer than the two years allotted to them. Five years seem more likely.”

Formal Brexit negotiations are due to begin this month following the U.K.'s June 8 election. Prime Minister Theresa May's Conservative party, which called the ballot to strengthen her negotiating hand with the EU, has pledged to take the country out of the single market to restrict migration. Before beginning talks on future relations, a spat is looming over the U.K.'s exit bill, which could stretch to as much as 100 billion euros ($112 billion).

‘Constructive' Spirit

If the EU adopts a “constructive spirit” in talks and simultaneously revamps itself to boost its allure, British voters may then even reconsider their choice of leaving during the “prolonged ‘divorce' process,” Soros said. But the chances of this are “slim,” he said.

The EU must clarify the status of euro and non-euro countries within the bloc and avoid creating a core Europe along the lines of the euro area, which would relegate those without the common currency -- including eastern European countries such as Poland and Hungary, and Scandinavian ones such as Denmark and Sweden -- to an “inferior” status, Soros said.

The EU should also allow a “wider variety of democratic choices” to members and relax its concept of an “ever-closer union,” which presupposes that all states are “headed toward the same destination” and are willing to surrender sovereignty.

“As it stands, member states want to reassert their sovereignty, rather than surrendering more of it,” Soros said. “But if cooperation produced positive results, attitudes might improve and objectives pursued by coalitions of the willing might attract universal participation.”

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net.

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Andrew Langley, Michael Winfrey