The veteran billionaire speculator and philanthropist, George Soros, has launched an astonishing attack on Donald Trump, accusing the frontrunner for the Republican nomination for the US presidency of “doing the work” of Islamic State.

Speaking at a dinner in Davos, Soros broke off from giving his views on the fragile state of global financial markets and the migration crisis to decry Trump and Ted Cruz, a rival Republican, of driving muslims to terrorism.

“By fear-mongering, he and [Ted] Cruz are doing the work of Isis,” Soros said.

“They want people to turn against the Muslim community and make the Muslim community think there is no alternative to terrorism. It turns the Muslim community into a breeding ground for Isis.”

Trump caused controversy when he said there should be “a complete and total ban” on Muslims entering the US.

Trump’s words brought a strong response from Soros, who said it was “harmful” when people did things out of fear.

The investor, made famous by his attack on the pound that led to Britain’s departure from the European exchange rate mechanism in 1992, said the migration crisis was causing Europe to “fall apart”, adding that refugees had been treated better when he was fleeing totalitarianism in the 1940s and 1950s.

“I was a migrant for 15 years, but migrants were treated better in those days. I could study, get a job, get travel documents, and think about making $100,000 before retiring. All this while I was a displaced person.”

Soros said Vladimir Putin was making the migration crisis worse by authorising Russia’s bombing of civilians in Syria. “He wants the EU to collapse,” he said.

He added that he did not think the Russian president was serious about reaching a political solution to the civil war in Syria.

“The EU is in an existential crisis as a result of migration,” Soros said. “The EU is falling apart.”

Backing the idea of a Marshall Plan for countries neighbouring Syria, Soros said he was thrilled that the German finance minister, Wolfgang Schäuble, a strong supporter of budgetary austerity, had backed the idea.

Soros said: “Most people know that something has gone terribly wrong. It has to be put right.”

Soros said on migration: “We have reached a tipping point where the influx reduces the capacity of receiving countries assimilate or integrate the refugees and we have a panic. It is like a cinema on fire without exit signs.”

On the global economy, he said the same conditions were in place as those that caused the crisis in 2008. “There is a financial crisis and a bear market,” said Soros. “The source of the disequilibrium is different. In 2008 it was US sub-prime housing. Today it is China, where a hard landing is practically unavoidable.”

Soros said 2016 was going to be a difficult year. There would be no further rate rises from the Federal Reserve and the European Central Bank would ease policy in March.