Nobel Prize-winning economist Joseph Stiglitz said Europe is in a “dire” situation, as a focus on austerity pushes the continent towards “suicide.” “There has never been any successful austerity programme in any large country,” Stiglitz, 69, told reporters in Vienna on Thursday. “The European approach definitely is the least promising. I think Europe is headed to a suicide.”
If Greece was the only part of Europe that was having austerity, authorities could ignore it, Stiglitz said, “but if you have UK, France, you know all the countries having austerity, it’s like a joint austerity and the economic consequences of that are going to be dire.”
While euro-area leaders “realised that austerity itself won’t work and that we need growth,” no actions have followed and “what they agreed to do last December is a recipe to ensure that it dies,” he said, referring to the euro. “The problem is that with the euro, you’ve separated out the government from the central bank and the printing presses and you’ve created a big problem,” Stiglitz said, adding that “austerity combined with the constraints of the euro are a lethal combination.”
The economist said he sees a core euro area of “one or two countries” made up of Germany and possibly the Netherlands or Finland as the “likely scenario if Europe maintains the austerity approach,” he said.
“The austerity approach will lead to high levels of unemployment that will be politically unacceptable and will make deficits get worse.”
Politicians across the 27 European Union members are implementing austerity measures totaling euro 450 billion ($600 billion) amid a sovereign-debt crisis. Euro region debt rose last year to the highest since the start of the single currency.