Austerity ’Wrong’ Way to Fight EU Crisis: Stiglitz

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http://www.bloomberg.com/news/2012-01-17/austerity-wrong-way-to-fight-eu-crisis-stiglitz.html

The European push for fiscal austerity isn’t the way to fight the region’s sovereign-debt crisis and may hurt confidence, Nobel Prize-winning economist Joseph Stiglitz said.

“Austerity as the solution is just wrong,” Stiglitz, a Columbia University economics professor, said in a Bloomberg Television interview in Hong Kong today. “There won’t be a return to confidence -- quite the contrary. So the direction Europe is going is unfortunately I think the wrong direction.”

European leaders have said they may complete a new rulebook for fiscal discipline by Jan. 30 as they try to contain a crisis that’s already forced Greece, Ireland and Portugal into bailouts. Standard & Poor’s stripped the European Financial Stability Facility, the region’s rescue fund, of its top credit rating yesterday after earlier downgrading France and Austria.

There could be a “very serious” downturn in Europe, which needs to bolster growth, Stiglitz said. The region’s leaders “don’t seem to get what needs to be done,” he said.