Billionaire financier George Soros said Thursday the European Union is in an "existential crisis" and needs to be reinvented in the face of growing threats. "The reinvention would have to revive the support that the European Union used to enjoy," the Hungarian-born Soros said at the Brussels Economic Forum. Such reinvention would have to review the past and explain to European citizens what went wrong and then make proposals to make things right. Soros welcomed a German idea to cut European funds aimed at reducing income inequalities at the regional level for those countries disrespecting the rule of law. Both Hungary and Poland, which are net recipients of the so-called cohesion funds, have been criticized by European institution for their weak standards with regards to the rule of law.

Hostile powers

Soros said Europe needs to overcome the current "existential crisis" by fighting together against the rise of anti-European sentiment, xenophobic feelings and surrounding "hostile powers." "Putin's Russia, Erdogan's Turkey, Sisi's Egypt and the America that Trump would like to create if he could, but can't," the U.S. financier added when talking about hostile powers. He called for an update of European treaties to make the EU work better and allow a "multitrack" bloc where countries would have a wider variety of choices when it comes to integration.

George Soros Joshua Roberts | Bloomberg | Getty Images

Don't get distracted by Brexit

European politicians should not get distracted with the upcoming EU exit negotiations with the U.K. and continue their work to regain the trust of EU citizens, Soros told the audience. "Brexit will be an immensely damaging process, harmful to both sides. Most of the damage is felt right now, when the European Union is in an existential crisis, but its attention is diverted to negotiating the separation from Britain," he said. "The European Union must resist temptation to punish Britain and approach the negotiations in a constructive spirit. It should use Brexit as a catalyst for introducing far-reaching reforms," Soros said. The investor believes that the divorce process could take as long as five years to but during that time the EU has the chance "to transform itself into an organization that other countries like Britain would want to join." Follow CNBC International on Twitter and Facebook.

WATCH: Bottom-up pressure from EU citizens can save the bloc: Soros