Internationally acclaimed Nobel Prize-winning (2001) US economist and former economic advisor to Bill Clinton Joseph Stiglitz, told a panel discussion in Vienna Thursday that Greece can no longer borrow money from its lenders and “its hands are practically tied.” Everything depends now on whether the ECB will invest money in the debt-ridden country and on whether growth in Germany will positively affect the Greek economy as well.
According to the former World Bank chief economist, the problems of the capital and financial markets remain unsolved to date. The danger of a new crisis is eminent and although the Greece situation was a small-scale one, should Spain or Italy go down the same path, then the financial “earthquake” could have an unprecedented dramatic impact on the Euro Zone and the markets.
The “debt brake” economic model advocated by German Chancellor Merkel and French President Sarkozy is completely insufficient, according to the US economist. The harsh austerity measures introduced by the European politicians are heading Europe towards suicide.
“There has never been any successful austerity program in any large country,” said Stiglitz, according to Reuters. To him, growth is the antidote to an increasing deficit, and thus, he called on rich European countries to invest in infrastructure, education and technology rather than imposing severe cuts.
Even if the monetary union falls into pieces and the common currency dissolves as we know it today, the American Nobel laureate believes that the Euro will continue to exist within a smaller sized Eurozone, including the economically strongest countries of the Continent.
However, Stiglitz underlined that the scenario of the Euro failing to survive the crisis is highly possible. Europe needs to come up with new policies and plans that will boost development and growth in the crisis-hit countries. Since 2008, Europe has been in the midst of a great recession, similar to the one of 1929.
In his speech addressing Thursday’s ceremony, the US analyst suggested the enhancement of the role of the ECB, the increase of growth-orientated investments, the return of the banks to more conservative financial models and the restructuring of the banking sector.
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