ECONOMY er-international
US history key to solving crisis, Nobel laureates say
PRINCETON, New Jersey - Agence France-Presse | 10/11/2011 12:00:00 AM |
The winners of this year’s Nobel prize in economics said yesterday that the eurozone crisis is mainly a political issue, not an economic one.
The winners of this year’s Nobel prize in economics said yesterday that the eurozone crisis is mainly a political issue, not an economic one.
New York University’s Thomas Sargent, who with Princeton University colleague Christopher Sims captured the annual prize for economics, said the founding of the United States shows what the issues and solutions are.
“There are no new issues in economic theory with Europe and the euro... the difficult thing is the politics,” Sargent told a news conference in Princeton. “In the 1780s, the United States is a basket case,” he added, with 13 sovereign governments, each of which could raise taxes and print money.
In contrast, the nation had a very weak center, not having yet established a central bank or gained taxing power.
Sims said the crisis of the euro was predictable, and that he had predicted it. “I wrote a paper a few years ago on the precarious fiscal foundations of the European Monetary Union (EMU),” he said. “The euro was founded with a central bank but no unified fiscal authority, [which] raised questions about what would happen when the need for fiscal and monetary coordination arose.”
The eurozone nations “will have to work out a way to share fiscal burdens and connect fiscal authorities to the European Central Bank (ECB),” he said. “Right now none of those connections are clear... and the prospects for the euro are dim.”
Sargent said the way the 13 American states came together in 1787 to combine their debt under the new federal government and allow the federal government to levy taxes to be able to service the debt points the way for the eurozone.
“We were born with a determined solution to the problem that Europe is facing now. And it was a comprehensive solution,” he told journalists. “It was all done simultaneously, through a process that looks like a miracle.”