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Project Syndicate: An Agenda to Save the Euro

Author: Joseph E. Stiglitz
December 4, 2013

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"If the eurozone adopts the program outlined above, there should be no need for Germany to pick up any tab. But under the perverse policies that Europe has adopted, one debt restructuring has been followed by another. If Germany and the other northern European countries continue to insist on pursuing current policies, they, together with their southern neighbors, will wind up paying a high price."

It has been three years since the outbreak of the euro crisis, and only an inveterate optimist would say that the worst is definitely over. Some, noting that the eurozone's double-dip recession has ended, conclude that the austerity medicine has worked. But try telling that to those in countries that are still in depression, with per capita GDP still below pre-2008 levels, unemployment rates above 20%, and youth unemployment at more than 50%. At the current pace of "recovery," no return to normality can be expected until well into the next decade.

A recent study by Federal Reserve economists concluded that America's protracted high unemployment will have serious adverse effects on GDP growth for years to come. If that is true in the United States, where unemployment is 40% lower than in Europe, the prospects for European growth appear bleak indeed.

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