Austerity not the way to go for Europe

By Joseph Stiglitz
Monday, 3 October 2011
BBC NEWS

Most economists thought that when the euro was put together, it was an incomplete task. They’d taken out too many adjustment mechanisms and had not put anything in its place.

One of the things that makes the American common currency work across the country is we have a common fiscal authority and high migration – we’re willing to allow North Dakota to become empty.

In Europe, there’s no fiscal authority, migration is more difficult and most of the countries are not willing to let themselves become empty. So the framework for allowing for an effective common currency is not there.

Now you might be able to make up for the deficiencies in one part by strengthening another part, for instance by having a stronger fiscal authority. But they don’t have that.

What they did fiscally was tie themselves to the stability and growth pact, which was a pact for recession rather than for growth because limiting deficits when you have a shock is a recipe for recession, which is what is happening in Greece.

So the question was always: when a crisis occurred would they be able to finish the task? And I think the jury is still out.

Read More

  • Share/Bookmark
This entry was posted in Articles, Featured. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • About AP

    Atlantic Partnership exists to educate the public in national and international political and economic issues, including those values and ideals of good governance and constructive relations between countries, particularly but not exclusively those in the transatlantic community embracing Europe and North America. It is a non-partisan organisation and does not seek to inculcate or promote a particular point of view.
  • Stay Up to Date

    Follow Atlantic Partnership on Twitter @AtlanticPARTN or Facebook to read selected articles on issues of transatlantic importance, read partner articles, and view AP events.

  • Disclaimer

    Atlantic Partnership is not a membership organisation, does not charge any fees for participation in its events or remunerate its speakers. Its resources are correspondingly modest. But within them it aims to bring together diverse audiences whom it believes will benefit from the opportunity to listen and debate with its invited speakers and apply the lessons learned to their own particular challenges in the broad areas of public policy and international relations. Atlantic Partnership (whose registered name is the Atlantic Education Project) is a registered charity in England and Wales. It cooperates closely with its sister organisation, Friends of Atlantic Partnership Inc, an American not-for-profit (501/C/3) organisation, exchanging information and passing on experiences, while retaining its independence and separate governance.