German Chancellor Angela Merkel defends eurozone and says it is hard to manage a currency for 18 states
An array of Nobel economists have launched a blistering attack on the eurozone’s economic strategy, warning that contractionary policies risk years of depression and a fresh eruption of the debt crisis.
“Historians are going to tar and feather Europe’s central bankers,” said Professor Peter Diamond, the world’s leading expert on unemployment.
“Young people in Spain and Italy who hit the job market in this recession are going to be affected for decades. It is a terrible outcome, and it is surprising how little uproar there has been over policies that are so stunningly destructive,” he told The Telegraph at a gathering of Nobel laureates at Lake Constance.
“It could be avoided with better use of stimulus, and spending on infrastructure. That would boost growth and helped the debt to GDP ratio,” Mr Diamond said, echoing a widely-heard critique among the Nobel elites that Europe’s policies have been self-defeating.
Professor Joseph Stiglitz said austerity policies had been a “disastrous failure” and are directly responsible for the failed recovery over the first half of this year, with Italy falling into a triple-dip recession, France registering zero growth and even Germany contracting in the second quarter.
“There is a risk of a depression lasting years, leaving even Japan’s Lost Decade in the shade. The eurozone economy is 20pc below its trend growth rate,” he said.
Mr Stiglitz said the eurozone authorities had massively underestimated the contractionary effects of austerity and continue to persist in error despite claims that the crisis is over. “I am very concerned about the future of monetary union, and they haven’t yet felt the impact of geopolitical tensions.”
He said the eurozone needs joint debt issuance to repair the structural flaws of EMU, but almost no progress has been made. “Europe suffers from fatal politics,” he said.
German Chancellor Angela Merkel told the forum that it was hard to manage a currency for 18 states, when sovereign parliaments refuse to follow polices agreed by the EU institutions. Yet she insisted that the crisis countries had slashed current account deficits and the “first fruits” of durable recovery are in sight….
Sellise valuuta juhtimine ei ole mitte raske, vaid tundub võimatu olevat praeguse institutsionaalse korralduse juures.