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Soros: 'EU fulfilling my worst expectations'

Germany should have quit the euro zone to help boost its indebted counterparts in the currency union, according to billionaire investor George Soros, who discussed the future of Europe at an event in London on Wednesday.

The exit of Europe's largest economy from the 18-country currency bloc would likely have weakened the euro, potentially helping the region's struggling economies to recover from the recent sovereign debt crisis.

(Read more: Russia's Putin acting out of weakness: Soros)

George Soros
Chris Ratcliffe | Bloomberg | Getty Images

With regards to Germany's decision to remain in the zone, Soros said: "This has fulfilled my worst expectations." Before German elections last year, Soros said he was an advocate of the country leaving the single currency. This, he said, would have created a difficult but "quick fix" that would have allowed the region to rebalance. Now the chances of this happening are almost none, he added, saying Europe will likely face a prolonged period of painful readjustment and stagnation.

"(This is) endangering the European Union from what it is meant to be, namely a voluntary association," he said. "(It's changed into) something that is radically different, into a creditor debtor relationship."

Soros trade is 'yesterday's news'
Soros trade is 'yesterday's news'

He added that as a result the European Union (EU) now has two-tiers - or two classes - of members. "Currently the power is in the hands of the creditors," he said with Germany's government holding most of that power.

A crisis of ignorance

Soros viewed the euro zone crisis as "a crisis of ignorance" - a very complicated situation which neither markets nor government authorities had fully understood.

There was some optimism on the Union though. Soros said a new public debate was now beginning. "The understanding of the issues is now catching up with reality...it gives me hope," he said.

Following the global financial crash of 2008, a sovereign debt crisis raged across the continent in 2011 with bailouts needed for several euro zone nations. Austerity followed with tough fiscal tightening required of some of the more indebted countries. Despite opposition and a rise in fringe politics, the underlying fundamental data in many euro zone countries have improved. These flickering signs of growth have helped the bloc manage to exit a prolonged recession. Meanwhile, the euro has strengthened significantly - since the middle of 2012, it has risen around 13 percent against the dollar.

UK membership of EU 'essential': Labour's Umunna
UK membership of EU 'essential': Labour's Umunna

Soros also criticized Germany's leadership, saying that it should never insist on austerity policies in a deflationary environment.

'QE saved the world'

His comments follow the launch of his book "The Tragedy of the European Union," in which Soros questions whether it is too late to preserve the EU.

If the 28-country economic and political union collapsed, the effects would be felt way beyond Europe, according to a press release on Thursday, with "serious economic and political consequences" for both the U.S. and the rest of the world.

(Read more: Why Soros and Paulson's bet on Spain could pay off)

The founder of Soros Fund Management called on European politicians to react to these "unusual circumstances" quickly – and not to cling to old rules for the union that have proved inadequate. He heaped praise on the U.S. Federal's Reserve's quantitative easing program (QE), which saw it buy up bonds to lower interest rates and boost money supply. "Quantitative easing has saved the world from a repeat of The Great Depression," he added.

With regards to the ongoing trouble in Ukraine, Soros stressed that it should be a "wake-up call" to the EU that "people are willing to sacrifice their lives to move closer to Europe." Gun battles between police and protesters last month resulted in the ousting of former president Viktor Yanukovich but also claimed many lives.

By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81.