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October 3, 2010    

Leading economist fears for future of euro

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by Kay Murchie
Leading economist fears for future of euro

Nobel prize winner, Joseph Stiglitz, has expressed his concern for the euro and the euro zone’s fragile recovery.

Sixty-seven-year-old Stiglitz, the former chief economist of the World Bank, warned that the future of the single currency is bleak, while the region’s recovery is threatened by a series of austerity measures, which have been introduced by many European Governments.

Stiglitz, who is now a professor at Columbia Business School suggests, “better economic cooperation“, the sort that guarantees help from others.

He also warns that Spain could be subject to an attack by speculators, a country which is currently battling with a large deficit and high unemployment.

Spain’s budget deficit is currently 11% of GDP and the Government has introduced tough austerity measures, like many of its fellow euro zone nations.

However, Spain’s tough measures could push unemployment higher - it has one of the highest unemployment rates within the 16-bloc nation at 20.5%.

Furthermore, credit rating agency Moody’s, last week downgraded Spain’s credit rating from Aaa to Aa1.

Mr Stiglitz’s comments have arisen from an updated edition of his book, Freefall, published in the Sunday Telegraph.

Like many other economists, Mr Stiglitz has also warned that cutting deficits too quickly could pose a threat to the recovery of many economies throughout the world, pushing them into a double dip recession.

Returning to the euro, he believes the currency will be under severe pressure and may not survive, due to the large deficits in many euro zone nations.

In related news, last week the European Union’s statistics agency revealed unemployment in the euro zone remained steady at 10.1% in August.

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