The Nobel Laureate in Economics Prof. Joseph E. Stiglitz speak out about EU’s economic governance and fiscal rules on the occasion of the talk “The 20 Years of the Euro”
The NextGenEu Eurobonds issuance by the European Commission «Was a very important step forward», the Nobel Laureate in Economics Prof. Joseph E. Stiglitz said in an interview held in the framework of the wider academic talk “The 20 Years of the Euro”.
«It was historic, recognising that the individual countries could not borrow on their own that amount without significant adverse economic financial effects», Prof. Stiglitz said.
According to Stiglitz, the Next Generation EU plan «It's going to be very important not only for the recovery from the pandemic, mitigating the economic downturn, but also dealing with the necessity of addressing climate change».
However, «The minimum change that you need is clearly saying you need more flexibility», Prof. Stiglitz added later in the conversation, replying to a question on the reform of EU fiscal rules.
On the same topic, he also contested the famous 3% deficit-to-GDP ratio fiscal limit: «There was no economic analysis saying that if you exceeded that, there was going to be some adverse effects».
«The investment is future-oriented and cannot in any logical way be related to current GDP. It needs to be related to the returns on those investments», Prof. Stiglitz’s said: «So the basic framework of the Growth and Stability Pact, I think, was fundamentally, economically flawed».
«What has undermined the euro was the kind of rigidity, the austerity that was imposed in the euro crisis», Prof. Stiglitz said. In a precedent passage of the conversation, he had even labelled the euro crisis’ management through austerity “a disaster”.
The interview, recorded in Paris on 16 March 2022 and released today, was held in the framework of the talk co-organised by FEPS, the Initiative for Policy Dialogue (IPD) at Columbia University, and the Jean-Jaurès Foundation “The 20 years of the Euro”.
Photo Credits: Gabriela Plump, 2021
ℹ️ About Prof. Joseph E. Stiglitz
Prof. Stiglitz was awarded the Nobel Memorial Prize in Economic Sciences in 2001 together with George A. Akerlof and A. Michael Spence “for their analyses of markets with asymmetric information”.
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1⃣ NextGenEu €750 billion eurobond issuance was a historic step forward, Stiglitz says
2⃣ Euro crisis, Stiglitz: the austerity was a disaster
3⃣ Europe needs more flexibility, Nobel Laureate Stiglitz says
4⃣ Stiglitz: the Stability and Growth Pact’s basic framework was economically flawed