Joseph Stiglitz: Germany Has It Wrong, Austerity Doesn’t Work

joseph stiglitz

Economic growth has slowed across the Eurozone, and if anyone needed more proof that all isn’t well in the region, Germany’s business confidence index took a nosedive this month.

Many critics have maintained that austerity isn’t the way to go. In an interview with Bloomberg TV, Joseph Stiglitz says the austerity imposed by Germany could have a massive impact on the Euro. Instead he says its the inadequate economic framework that is to blame:

“The basic framework for the Euro was flawed from the start. The conditions that were necessary to be satisfied for a common currency were not satisfied. The project itself was incomplete. In particular, the creation of a fund for solidarity for stabilisation was not there. They are now, 10 years later putting in place that fund. Still seems too small, they haven’t worked out the full institutional arrangements. That is necessary, absolutely necessary if the euro is going to survive.

… These countries have cut back their spending enormously. More than anybody expected. They’ve actually succeeded in putting their own house in order you might say in the short run. But because of that growth is declining, and as a result of that tax revenues are going down, and as a result of that debt-GDP ratio is going up, even though they’re doing everything that everybody said they ought to do.”

Watch the entire interview at Bloomberg TV: