Austerity measures “don’t work” and prevent countries from creating jobs needed to generate economic growth, said Nobel Prize winning economist Joseph Stiglitz.
“Austerity is an experiment that has been tried before with the same results,” Stiglitz said today in a speech in Copenhagen. Cutting budgets in low-growth cycles leads to higher unemployment and hampers recovery, he said.
Greece, Ireland and Portugal are under pressure to push through austerity measures that have sparked anti-government protests and general strikes as the three euro members struggle to comply with the terms of their bailout programs. The budget cuts have failed to persuade most investors the countries will avoid a default, a Bloomberg Global Poll published today showed.
Europe’s leaders are gripped by “deficit fetishism,” Stiglitz said. Austerity “doesn’t work, it does not lead to more efficient, faster growing economies,” said Stiglitz, a professor at Columbia University in New York who won the Nobel Prize for economics in 2001.
The U.S. economic expansion will exceed European growth this year and the next, the European Commission in Brussels said today. U.S. gross domestic product will rise 2.6 percent this year and 2.7 percent in 2012, while the euro area will expand 1.6 percent in 2011 and 1.8 percent next year.
The U.S. federal budget deficit is projected to reach $1.5 trillion, or 9.8 percent of gross domestic product, this year, according to the Congressional Budget Office. The 17-member euro region’s deficit is forecast to be 4.3 percent of GDP this year, the European Commission forecasts.
A 2009 U.S. stimulus package increased the number of people employed by between 1.4 million and 3.3 million and cut unemployment by 0.7 percentage point to 1.8 percentage point, according to U.S. CBO.
Eighty-five percent of those surveyed this week said Greece probably will default, with majorities predicting the same fate for Portugal and Ireland, which followed Greece in seeking European Union-led bailouts, the Bloomberg poll showed. The outlook for all three deteriorated since a January poll.