Nobel prize winners: Eurozone recovery is ‘dismal failure’

Data from earlier this month shows that
economies have broken down, and growth has come to a standstill.
The three largest economies- Germany, France, and Italy- all
failed to grow.

Nobel laureate and Princeton University economist Christopher
Sims warns that the euro countries hit worst by the crisis may be
looking for an exit from the failed currency experiment.

“If I were advising Greece, Portugal, and Spain, I would tell
them to prepare contingency plans to leave the euro,” the
2011 Nobel Prize winner said.

Economist and Professor at Columbia University Joseph Stiglitz
called the eurozone’s efforts to recover from the debt crisis a
“dismal failure” in an interview with Bloomberg TV on
the sidelines of a conference in Lindau, Germany

“Now we see the enormous price that Europe is paying,”
Stiglitz said, adding, “hopefully the reality of this failed
policy will strike.”

Stiglitz is especially critical of the European Central Bank’s
monetary policy which has done little to tackle deflation and
continues to dither on changing interest rates.

In June, the central bank
cut its main refinancing rate to 0.15 percent from 0.25
percent, and the deposit rate from zero to -.10 percent, the
first time the ECB has seen a negative rate and the first time a
major central bank has crossed the zero threshold.

Stiglitz also suggests the eurozone needs to speed up its
creation of its banking
union so debt can be borrowed on a mutual, and not
individual, basis.

As early as 2014, over 6,000 banks across the eurozone will be
united under the supervision of the Frankfurst-based European
Central Bank.

Inflation has dropped dangerously low to 0.4 percent sparking
fears about deflation, or falling prices. The European Central
Bank’s goal is to have 2 percent inflation. Unemployment in the
eurozone is down slightly, but at 11.5 percent still near the
record 12 percent figure from last year.

MIT Economics Professor Peter Diamond, who won the Nobel Prize in
2010 – warns that work may be more and more difficult to come by.

“It is a terrible outcome, and it is surprising how little
uproar there has been over policies that are so stunningly
destructive,” Diamond said.

The stagnation is attributed to the failed recovery from the
eurozone crisis, and is also in part affected by the local
Ukraine-Russia crisis.

Sanctions and trade wars between Russia and the EU could cut 2
percent off eurozone GDP in the next two years, according to
Gabriel Sterne at Oxford Economics.

Article source: http://rt.com/business/182112-eurozone-recovery-failure-nobel/