Soros Tells Germany It Should Leave Euro

George Soros
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George Soros

As the backlash against austerity and bailouts increases in the euro zone, billionaire investor George Soros is the latest person to criticize Germany's role, telling the country on Tuesday that austerity "does not work" and that it should even consider leaving the euro itself.

"The financial problem is that Germany is imposing the wrong policies on the euro zone. Austerity doesn't work. You can't shrink the debt burden by shrinking the budget deficit," Soros, the founder and chairman of Soros Fund Management,said during a speech in Germany's financial center of Frankfurt on Tuesday.

Soros, who is known as "the man who broke the Bank of England" for betting against the pound in the early 1990s, told Europe's paymaster and largest economy that it had made mistakes on Cyprus' 10 billion euro ($13.07 billion) bailout, which forced some savers to share in the cost.

"In the bailout of Cyprus, Germany went too far, what happened in Cyprus undermined the business model of the European banks which relies heavily on deposits," he said.

(Read More: Mystery Deepens: Has Cyprus Extended Capital Controls?)

In a lecture entitled "How to save the European Union from the euro crisis," Soros said that he was attributing "a large share of the responsibility [for the crisis] to Germany."

"I want to make it clear in advance that I am not blaming Germany. Whoever was in charge would have made similar mistakes…I realize that I risk antagonizing you by putting the responsibility on Germany. But only Germany can put things right," he added.

He said that Germany should either drop its opposition to "Eurobonds" – the mutualization of European debt – or should leave the euro.

"My first preference is eurobonds; my second is Germany leaving the euro…It is up to Germany to decide whether it is willing to authorize eurobonds or not. But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing Eurobonds," he said.

"In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting others introduce them," he said, adding that another dimension to the crisis was Germany's unwillingness to take responsibility for its policies.

"Germany did not seek the dominant position into which it has been thrust and it is unwilling to accept the obligations and liabilities that go with it. Germany understandably doesn't want to be the "deep pocket" for the euro. So it extends just enough support to avoid default but nothing more," he added.

Soros' comments come against a backdrop of anti-austerity feelings in Europe as Portugal's constitutional court rejected reform measures and Slovenia becomes the latest country to resist pressure to request a bailout.

(Read More: Portugal Fires Warning Shot for Austerity in Europe)

His comments also follow criticism of austerity from the U.S. Treasury Secretary Jack Lew. During his visit to Europe this week, Lew called on his European counterparts to strike a balance between growth and austerity and to boost demand.

Lew met French and German finance ministers on Tuesday and his pro-growth message may have struck a chord in France, which is grappling with slow growth and high unemployment. Germany, however, has the biggest trade surplus in the euro zone and is the driving force behind austerity measures.

-By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt