Greece is back in the headlines after its central bank released a statement saying Greece is faced with the choice of staying in or exiting the Euro, right now. Germany’s failed bond auction today showed that investors are even doubting Europe’s bulwark.
In a new interview with Bloomberg TV, economist Joseph Stiglitz said there is a “significant likelihood that Europe will face a recession” and that its crisis can be traced back to the design of the euro:
“At the beginning, they took away two important mechanisms of adjustment — the interest rate and exchange rate — they didn’t put anything in its place. There was hope that in January 2010 that when the Greek crisis broke out that they would finish the task, they haven’t.
…The issue is the following. European leaders say they are committed to saving the euro but they are reluctant to do what is necessary. All that they think is necessary is countries maintain low debt and deficit to GDP…There has to be a creation of new fiscal frameworks, a solidarity fund for growth and stability, European bonds, something along those lines has to be done.“
Watch the interview at Bloomberg TV: