BUDAPEST - The European Union will prolong the global downturn if policymakers in the bloc's big economies insist on austerity measures to cut budget deficits, Nobel Prize winning economist Joseph Stiglitz said on Tuesday.
Stiglitz, winner of the Nobel Prize for Economics in 2001, said austerity as a policy to end the global crisis was a 'disaster', adding that Europe was heading towards more economic difficulties if politicians meant what they say when they promised to cut back spending rather than just trying to calm down markets.
'If that (austerity) happens I think it is likely that the economic downturn will last far longer and human suffering will be all the greater,' he said.
Historical evidence showed that increased state spending rather than austerity measures can help economies emerge from recession, he said.
'In spite of all that evidence there is a drumbeat, particularly from many of the economists who were responsible for the crisis ... to focus on austerity,' Stiglitz told reporters on the sidelines of a conference.
He said the example of Ireland, a small economy, showed that austerity leads to declining output, rising unemployment and high bond spreads, instead of renewed investor.
SCROLL TO CONTINUE WITH CONTENT
Never Miss a Beat.
Get our best delivered to your inbox.
'I feel sorry for the Irish people who have to suffer from this policy ... but it doesn't have global or European consequences,' he said.
'But if the UK, Germany or other countries do it, then it is going to have systemic consequences for Europe and the whole world,' he added.
Stiglitz said the real question Europe and the world faced was not whether the global economy was on track to a double dip.
'From the perspective of the world, or workers, there is very little difference between growth of a quarter point of a percent and a decline of a quarter point of a percent,' he said.
'What workers care about is if growth will be strong enough to reduce the high level of unemployment in the U.S. or Europe.'
(Reporting by Sandor Peto; Editing by Susan Fenton)