Obsession with austerity pushing EU into crisis warns Stiglitz
- 8 years ago
‘The main problem of the eurozone is the single currency itself’ ; so says Jozeph Stiglitz . The Nobel prize-winning economist insists that the monetary union shouldn’t have been created the way it was and now we see that this experiment was flawed from the start.
However the World Bank’s ex-chief economist believes it can still be fixed.
Oleksandra Vakulina, euronews:
“Mr, Stiglitz, thank you for being part of the Global Conversation on euronews. Your latest book is called : ‘The Euro; how a common currency threatens the future of Europe’. Is there a way to save the monetary union and to make it prosper?”
Joseph Stiglitz:
“Yes, I think there is. But it requires creating certain institutions, like common deposit insurance and a common way of resolving problems in banks that face difficulty. It requires some kind of mutualisation of debt, we call it something like a eurobond and it requires changing the rules of the European Central Bank so it doesn’t just focus on inflation, it also focuses on growth and employment and financial stability.
It also requires creating a common solidarity fund for financing unemployment and other cyclical needs within the eurozone. So there are these reforms; they are not – in some sense – huge, the question is: are they too huge for the politics? What is particularly important is that the reforms have to be done really quickly.”
Oleksandra Vakulina:
“How much time do we have for that?”
Joseph Stiglitz:
“There is no magic number. But what has been clear is that Europe is playing a game of brinkmanship. And the problem with brinkmanship is that there is a chance each time that you go over the brink. You had
a Greek crisis a year ago, but the way that crisis was fixed actually led Greece to continue to decline.”
Oleksandra Vakulina:
“There was a referendum last year and we saw a majority voted to reject those austerity measures.”
Joseph Stiglitz:
“Sixty-two percent!”
Oleksandra Vakulina:
“One year after the referendum and the crisis in Greece is still far from being over.”
Joseph Stiglitz:
“It’s worse! It’s worse than it was a year ago! And that’s because they insisted on another dose of austerity and predictably that next dose of austerity led the economy to continue to go down.
Oleksandra Vakulina:
“Do you think that austerity is still needed?”
Joseph Stiglitz:
“I think austerity is dangerous. It’s not only not needed, I think it’s really hurting the countries of Europe. Austerity has almost never worked.”
Oleksandra Vakulina:
“Last year’s referendum was seen by many as a ‘no’ to the eurozone and to Europe in general. Do you think that Greece would have more chances to overcome the crisis outside the eurozone?”
Joseph Stiglitz:
“Yes, I do. As time goes on, it will become clear that unless Germany and the Troika relent, unless there is a debt restructuring, that even the IMF says is absolutely necessary, unless there are these changes in the policy framework, then I thin
However the World Bank’s ex-chief economist believes it can still be fixed.
Oleksandra Vakulina, euronews:
“Mr, Stiglitz, thank you for being part of the Global Conversation on euronews. Your latest book is called : ‘The Euro; how a common currency threatens the future of Europe’. Is there a way to save the monetary union and to make it prosper?”
Joseph Stiglitz:
“Yes, I think there is. But it requires creating certain institutions, like common deposit insurance and a common way of resolving problems in banks that face difficulty. It requires some kind of mutualisation of debt, we call it something like a eurobond and it requires changing the rules of the European Central Bank so it doesn’t just focus on inflation, it also focuses on growth and employment and financial stability.
It also requires creating a common solidarity fund for financing unemployment and other cyclical needs within the eurozone. So there are these reforms; they are not – in some sense – huge, the question is: are they too huge for the politics? What is particularly important is that the reforms have to be done really quickly.”
Oleksandra Vakulina:
“How much time do we have for that?”
Joseph Stiglitz:
“There is no magic number. But what has been clear is that Europe is playing a game of brinkmanship. And the problem with brinkmanship is that there is a chance each time that you go over the brink. You had
a Greek crisis a year ago, but the way that crisis was fixed actually led Greece to continue to decline.”
Oleksandra Vakulina:
“There was a referendum last year and we saw a majority voted to reject those austerity measures.”
Joseph Stiglitz:
“Sixty-two percent!”
Oleksandra Vakulina:
“One year after the referendum and the crisis in Greece is still far from being over.”
Joseph Stiglitz:
“It’s worse! It’s worse than it was a year ago! And that’s because they insisted on another dose of austerity and predictably that next dose of austerity led the economy to continue to go down.
Oleksandra Vakulina:
“Do you think that austerity is still needed?”
Joseph Stiglitz:
“I think austerity is dangerous. It’s not only not needed, I think it’s really hurting the countries of Europe. Austerity has almost never worked.”
Oleksandra Vakulina:
“Last year’s referendum was seen by many as a ‘no’ to the eurozone and to Europe in general. Do you think that Greece would have more chances to overcome the crisis outside the eurozone?”
Joseph Stiglitz:
“Yes, I do. As time goes on, it will become clear that unless Germany and the Troika relent, unless there is a debt restructuring, that even the IMF says is absolutely necessary, unless there are these changes in the policy framework, then I thin