Austerity Could Push Europe Back into Recession, Stiglitz Says

Joseph Stiglitz, a Nobel Prize-winning economist, said Europe risks falling back into recession as governments slash spending in a bid to narrow their budget deficits.

"Cutting back willy-nilly on high-return investments just to make the picture of the deficit look better is really foolish," Stiglitz said today, according to Bloomberg News.

Governments that use the euro currency are cutting spending in a bid to bring their deficits below the 3% of GDP limit imposed by the European Union. Earlier this year, the Greek crisis eroded investor confidence in the 16-member currency union.

"Because so many in Europe are focusing on the 3 percent artificial number, which has no reality and is just looking at one side of a balance sheet, Europe is at risk of going into a double-dip," Stiglitz said.

The euro zone's average budget deficit will grow to 6.6% of GDP this year, the European Commission predicts. Ireland currently has the euro zone's largest deficit, at 14.3% of GDP. That will narrow to 11.7% this year, excluding the costs of bank bailouts.


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Jeff

Im sure Europe is doing a much better job running their economies than we are. Geitner the boob and Obama the bigger boob. Germany along with the Scandinavian countries are in much better shape. Lets continue to spend into oblivion on borrowed and printed useless money.

August 25 2010 at 1:51 PM Report abuse rate up rate down Reply
woodies123

if you think i am gonna take this writers word on a recession in europe, knowing ful well they are in recession now, travel folks find out yourself, this writer has nothing but mis information to offer. so do the folks who also think they KNOW, as one of the STUPID people i can tell you, the recession is real, shut the tv off and spend the year asking business, small ones for sure, and folks you do not know. after all you don't know thepeople you are replying to at this web site.

August 25 2010 at 1:33 PM Report abuse +3 rate up rate down Reply
jmarsh0066

I just hope that the liberals (change) of this country are taking note on what is happening in Europe. Lets face it, we are headed towrds becoming a socilaist country along the same lines. Question................How many tax payers does it take to support one Federal employee?........Answers please... You, me, no one can satisfy everyones needs. You can not take out risk, if you wish to progress. We can not take care of everyones needs. Bad decisions at a young age dedicate what course many of us will take. Ok....if you have read this far, how about this. Make mandatory military or civil service for all youth. No one is exempt. No one.. If the families can't educate, train, and instill basic values.............then maybe (yes, I know this means getting the gov't involved) something else has to happen. We can not keep pouring money we don't have down the rat holes the gov't has created. Thank you I feel better now.

August 25 2010 at 1:21 PM Report abuse +1 rate up rate down Reply
tjdwil

The World's Biggest Debtor Nations 20. United States - 96.5% External debt (as % of GDP): 96.5% 

Gross external debt: $13.77 trillion (2009 Q3) 
2009 GDP (est): $14.26 trillion 19. Hungary - 121.9% External debt (as % of GDP): 121.9% 

Gross external debt: $225.56 billion (2009 Q2) 
2009 GDP (est): $184.9 billion 18. Australia - 124.3% External debt (as % of GDP): 124.3% 

Gross external debt: $1.025 trillion (2009 Q2) 
2009 GDP (est): $824.3 billion 17. Italy - 147.4% External debt (as % of GDP): 147.4% 

Gross external debt: $2.594 trillion (2009 Q3) 
2009 GDP (est): $1.76 trillion 16. Greece - 170.5% External debt (as % of GDP): 170.5% 

Gross external debt: $581.68 billion 
2009 GDP (est): $341 billion 15. Germany - 182.5% External debt (as % of GDP): 182.5% 

Gross external debt: $5.13 trillion 
2009 GDP (est): $2.81 trillion 14. Spain - 186.1% External debt (as % of GDP): 186.1% 

Gross external debt: $2.55 trillion (2009 Q3) 
2009 GDP (est): $1.37 trillion 13. Norway - 202.6% External debt (as % of GDP): 202.6% 

Gross external debt: $553.4 billion 
2009 GDP (est): $273.1 billion 13. Norway - 202.6% External debt (as % of GDP): 202.6% 

Gross external debt: $553.4 billion 
2009 GDP (est): $273.1 billion 12. Finland - 220.2% External debt (as % of GDP): 220.2% 

Gross external debt: $402.24 billion 
2009 GDP (est): $182.6 billion 11. Hong Kong - 223.1% External debt (as % of GDP): 223.1% 

Gross external debt: $672.9 billion 
2009 GDP (est): $301.6 billion 10. Portugal - 235.9% External debt (as % of GDP): 235.9% 

Gross external debt: $548.45 billion 
2009 GDP (est): $232.4 billion 9. France - 248% External debt (as % of GDP): 248% 

Gross external debt: $5.23 trillion (2009 Q3) 
2009 GDP (est): $2.11 trillion 8. Austria - 256.2% External debt (as % of GDP): 256.2% 

Gross external debt: $827.9 billion 
2009 GDP (est): $323.1 billion 7. Sweden - 264.3% External debt (as % of GDP): 264.3% 

Gross external debt: $881.5 billion 
2009 GDP (est): $333.5 billion 6. Denmark - 316% External debt (as % of GDP): 316% 

Gross external debt: $627.6 billion 
2009 GDP (est): $198.6 billion 5. Belgium - 328.7% External debt (as % of GDP): 328.7% 

Gross external debt: $1.25 trillion 
2009 GDP (est): $381 billion 4. Netherlands - 376.6% External debt (as % of GDP): 376.6% 

Gross external debt: $2.46 trillion (2009 Q3) 
2009 GDP (est): $654.9 billion 3. Switzerland - 382.2% External debt (as % of GDP): 382.2% 

Gross external debt: $1.21 trillion (2009 Q3) 
2009 GDP (est): $317 billion 2. United Kingdom - 425.9% External debt (as % of GDP): 425.9% 

Gross external debt: $9.15 trillion 
2009 GDP (est): $2.15 trillion 1. Ireland - 1,312% External debt (as % of GDP): 1,312% 

Gross external debt: $2.32 trillion 
2009 GDP (est): $176.9 billion The US Deficit in Global Perspective | The Big Picture List of countries by external debt - Wikipedia, the free encyclopedia

August 25 2010 at 1:17 PM Report abuse -1 rate up rate down Reply
1 reply to tjdwil's comment
Jeff

do you really think any one read this you dope.

August 25 2010 at 1:54 PM Report abuse +1 rate up rate down Reply
garyrjas

David Stockman, Ronald Reagan's former budget director, and staunch republican, blames the republicans for the mess we are in today. Read the article for yourself at http://www.charlestoncitypaper.com/TheGoodFight/archives/2010/08/18/former-rreagan-aide-regrets-what-reaganomics-has-brought-us I'm sure the tea drinkers out there will have some dumb comment, but the fact is, you can learn from your mistakes if you just try to. Stockman says Reagan started this mess when he made big tax cuts for the rich but failed to either reduce government or bring in enough money to balance the budget. Gee, this sounds familiar, doesn't it. So read the article, it sounds like a guy who is getting older and regrets his role in this mess we have today.

August 25 2010 at 12:54 PM Report abuse -4 rate up rate down Reply
3 replies to garyrjas's comment
mattunited11

and the us is how many gazillions of dollars in debt?

August 25 2010 at 11:58 AM Report abuse +2 rate up rate down Reply
jgriz2000

what a blithering idiot. typical of the "new economist"; spend heavily and don't be prudent or you'll have a recission

August 25 2010 at 11:46 AM Report abuse +2 rate up rate down Reply
czmars

europe did not go around the world like we did offering our junk novelty commercial instruments. this is a made in the u.s.of a product. the smart brains in our financial power investment houses started this trend of, look by this paper and that one it will bring you big profits. this trend started around in the 80's and finally collapsed just prior to prez. bush exit. banks and bros. this and bros. that going belly up. do you people realize the mess and financial doomsday created by these people of crap wisdom during the last 30+ years . no wonder bankers from all over the world came running to the white house to collect and bush had no answers. now europe maybe, will get into their financial nightmare just like we did. thank you.

August 25 2010 at 11:31 AM Report abuse -4 rate up rate down Reply
2 replies to czmars's comment
tjdwil

The World's Biggest Debtor Nations 20. United States - 96.5% External debt (as % of GDP): 96.5% 

Gross external debt: $13.77 trillion (2009 Q3) 
2009 GDP (est): $14.26 trillion 19. Hungary - 121.9% External debt (as % of GDP): 121.9% 

Gross external debt: $225.56 billion (2009 Q2) 
2009 GDP (est): $184.9 billion 18. Australia - 124.3% External debt (as % of GDP): 124.3% 

Gross external debt: $1.025 trillion (2009 Q2) 
2009 GDP (est): $824.3 billion 17. Italy - 147.4% External debt (as % of GDP): 147.4% 

Gross external debt: $2.594 trillion (2009 Q3) 
2009 GDP (est): $1.76 trillion 16. Greece - 170.5% External debt (as % of GDP): 170.5% 

Gross external debt: $581.68 billion 
2009 GDP (est): $341 billion 15. Germany - 182.5% External debt (as % of GDP): 182.5% 

Gross external debt: $5.13 trillion 
2009 GDP (est): $2.81 trillion 14. Spain - 186.1% External debt (as % of GDP): 186.1% 

Gross external debt: $2.55 trillion (2009 Q3) 
2009 GDP (est): $1.37 trillion 13. Norway - 202.6% External debt (as % of GDP): 202.6% 

Gross external debt: $553.4 billion 
2009 GDP (est): $273.1 billion 13. Norway - 202.6% External debt (as % of GDP): 202.6% 

Gross external debt: $553.4 billion 
2009 GDP (est): $273.1 billion 12. Finland - 220.2% External debt (as % of GDP): 220.2% 

Gross external debt: $402.24 billion 
2009 GDP (est): $182.6 billion 11. Hong Kong - 223.1% External debt (as % of GDP): 223.1% 

Gross external debt: $672.9 billion 
2009 GDP (est): $301.6 billion 10. Portugal - 235.9% External debt (as % of GDP): 235.9% 

Gross external debt: $548.45 billion 
2009 GDP (est): $232.4 billion 9. France - 248% External debt (as % of GDP): 248% 

Gross external debt: $5.23 trillion (2009 Q3) 
2009 GDP (est): $2.11 trillion 8. Austria - 256.2% External debt (as % of GDP): 256.2% 

Gross external debt: $827.9 billion 
2009 GDP (est): $323.1 billion 7. Sweden - 264.3% External debt (as % of GDP): 264.3% 

Gross external debt: $881.5 billion 
2009 GDP (est): $333.5 billion 6. Denmark - 316% External debt (as % of GDP): 316% 

Gross external debt: $627.6 billion 
2009 GDP (est): $198.6 billion 5. Belgium - 328.7% External debt (as % of GDP): 328.7% 

Gross external debt: $1.25 trillion 
2009 GDP (est): $381 billion 4. Netherlands - 376.6% External debt (as % of GDP): 376.6% 

Gross external debt: $2.46 trillion (2009 Q3) 
2009 GDP (est): $654.9 billion 3. Switzerland - 382.2% External debt (as % of GDP): 382.2% 

Gross external debt: $1.21 trillion (2009 Q3) 
2009 GDP (est): $317 billion 2. United Kingdom - 425.9% External debt (as % of GDP): 425.9% 

Gross external debt: $9.15 trillion 
2009 GDP (est): $2.15 trillion 1. Ireland - 1,312% External debt (as % of GDP): 1,312% 

Gross external debt: $2.32 trillion 
2009 GDP (est): $176.9 billion The US Deficit in Global Perspective | The Big Picture List of countries by external debt - Wikipedia, the free encyclopedia

August 25 2010 at 1:16 PM Report abuse -1 rate up rate down Reply
dmf4357

Someon needs to make a list of all the countries we've loaned money to, and how much they owe!

August 25 2010 at 1:17 PM Report abuse +2 rate up rate down Reply
rbeekman

What high return investments? The governments have these? What governments?

August 25 2010 at 10:45 AM Report abuse +3 rate up rate down Reply
realism111

Yes! Bring on the European recession. Hopefully the exchange rate will rise in our favor which will make traveling to that part of the world more affodable. They have had it too easy coming over to our shores with the current rate. Especially those Brits.

August 25 2010 at 10:29 AM Report abuse +4 rate up rate down Reply