NOBEL laureate economist and head of the National Economy Council Professor Sir Christopher Pissarides said last night the situation in the eurozone had become very unsatisfactory and that the single currency should either be rescued by rapidly making it more growth and employment friendly or be dismantled.
Delivering his inaugural lecture as the first Regius Professor of Economics at the LSE, Pissarides said: “If we don’t make the reforms, we might as well give up.”
He said the eurozone had reached a point where unless the necessary reforms were made in order to encourage growth and job creation, “there is no point in just dealing with each problem in an ad hoc way and think we have succeeded because we managed to keep (the eurozone) alive for a few more months and not taking the important decisions needed.”
Pissarides conceded that he had changed his position the benefits of the single currency as regards the states of southern Europe. “Not only politicians but economists got it wrong as well,” he said.
“We didn’t think that freezing exchange rates would hurt the south, but of course it has proved wrong.” A one-size-fits-all policy was not feasible, he said.
He warned that austerity has essentially created a two-tier Europe: Germany and other northern countries, and the “Club Med” southern countries.