Lisbon: The 2001
Economy Nobel Prize winner Joseph Stieglitz warned Wednesday that
the European governments' economic policies are likely to deepen
the crisis instead of solving it.
"The European Central Bank focus is on inflation and not on the
other issues that are central to economic growth. Europe will not
recover from the crisis without growth and austerity will not
bring growth," Stieglitz said at a Portuguese supermarkets
Stieglitz added that there has been an excessive focus on the
deficit, and held that the problem of the eurozone is political,
He stressed that the European Union did not go far enough on the
"Euro was originally a political project and governments were not
strong enough to create a finished project to make the euro work."
Blaming the austerity as a path to worsen the situation, he
compared the current situation with the 1928 crash.
Citing the historical example of the 1930's depression, he
suggested "spending money on high return public investments that
might improve the balance sheet as technology, infrastructures and
education", adding that this policy has been effective in the US
over the last 15 years.
In terms of the current situation, he said that there should be no
fear of restructuring the debt.
"Argentina and Russia had strong growth after restructuring. When
Iceland did not pay for the banking system debts everyone said
that it would take 10 to 12 years until they could achieve
economic growth. They are growing and they have a 8 percent
unemployment rate, which is not the ideal situation, but better
than predicted," he said.