The European push for fiscal austerity isn’t the solution to ending the region’s sovereign-debt crisis and may instead hurt confidence, Nobel Prize-winning economist Joseph Stiglitz said. “Austerity as the solution is just wrong,” Stiglitz, a Columbia University economics professor, said in a Bloomberg Television interview in Hong Kong today. “There won’t be a return to confidence — quite the contrary. So the direction Europe is going is unfortunately I think the wrong direction.”
European leaders have said they may complete a new rulebook for fiscal discipline by Jan. 30 as they try to contain a crisis that’s already forced Greece, Ireland and Portugal into bailouts. Standard & Poor’s stripped the European Financial Stability Facility, the region’s rescue fund, of its top credit rating yesterday, after earlier downgrading France and Austria.
There could be a “very serious” downturn in Europe, which needs to bolster growth, Stiglitz said. The region’s leaders “don’t seem to get what needs to be done,” he said.
On China, Stiglitz said an easing in its economic expansion to 7 or 8 percent is in some sense probably a “good thing.” He later told reporters at a Hong Kong briefing, growth in the world’s second-largest economy is now more “sustainable.”
(source: Bloomberg, capital)
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