Soros warns globalisation at risk

Difficult times for Wall Street traders

By Mike Verdin BBC News Online business reporter in Davos

The worldwide stock market slump, which has seen US tech shares fall by two-thirds and sent UK stocks to seven-year lows, threatens the future of globalisation, billionaire financier George Soros has said.

George Soros: Global economic system "flawed"

Mr Soros said that 20 years of strong capital flows, backed by rising stock markets, had hidden "deficiencies" within countries' financial systems.

"A rising tide lifts all boats," he told BBC News Online, after a debate at the World Economic Forum's annual summit in Davos, Switzerland.

But the current "ebbing tide" on stock markets was exposing flaws, and isolating weaker countries.

Mr Soros, chairman of Soros Fund Management, urged nations to "pull together" to ensure the global financial market remained intact.

"Unless we fix it, it is not going to survive."

Policy vacuum

Efforts to repair the damage were being undermined by US policymakers' neglect, he said.

"The real threat is that the people in charge - I am talking about the US Treasury, not just the International Monetary Fund - [are not] there," he said.

We are teetering on the edge of deflation

George Soros

"The Bush administration has its attention on other things. The problem is not being addressed."

The comments came amid widespread unease over the extent, and direction, of US efforts to disarm Iraq.

Earlier on Sunday, US Secretary of State Colin Powell told the summit that time was running out for Iraq to disarm peacefully.

China threat

Mr Soros warned that the world was threatened by deflation, in which prices fall, and which many economists believe would severely exacerbate the global economic downturn.

With China, economically the world's most "dynamic" country, producing goods at well below the cost of other states, Western firms would be forced to impose price cuts to survive.

"We are teetering on the edge of deflation," he said.

But while many observers have warned that deflation could undermine economic growth, as consumers delay spending to take advantage of lower future prices, Mr Soros said it was "not all bad".

"People actually get goods cheaper," he said.

Mr Soros in 1992 made a reported $1bn in one day through currency speculation which forced down the value of the UK pound, and earned him the nickname "the man who broke the Bank of England".