Europe’s attempt to save its way back to health is tantamount to economic suicide that could wreck the euro currency block, Nobel Prize-winning U.S. economist Joseph Stiglitz said, calling for the continent to focus instead on fostering growth.
“I think Europe is headed to a suicide...There has never been any successful austerity program in any large country,” the former World Bank economist told a panel discussion in Vienna late on Thursday.
Austrian radio on Friday broadcast some of his comments, which chime with a growing backlash in Europe against the German-led push for more fiscal discipline as the way to end the debt crisis.
“Decreasing growth is causing the deficit, not the other way around. I think that austerity approach is going to lead to high levels of unemployment that will be politically unacceptable and make deficits get worse,” Stiglitz said.
He urged rich European countries like Germany to invest more in infrastructure, education and technology, arguing that “the returns on those investments are an order of magnitude greater than the cost of capital.”
Insisting on cutting debt and deficits as the way to shore up confidence in euro zone countries - as agreed by the currency bloc’s leaders late last year - could end up having the opposite impact, Stiglitz said.
“What they have agreed to do last December is a recipe to make sure that (the euro zone) dies as we know it,” he said, although he imagined a “core euro” shared among a handful of countries with the strongest economies could survive.
“I hope...the debate will be what are the things we can do to promote growth rather than how do we strangle each other together.”