4 March AtoZForex, Lagos – The European Union’s (EU) ailing economic condition is a result of “deliberate policy choices” made by EU elites, according to Lord Mervyn King, former governor of the Bank of England. He has continued his criticism of the EU leadership, having previously opined that the bloc currency nation will have to be broken up, in a bid to “free its weakest members from unremitting austerity and record levels of unemployment.”
Greece situation similar to 1930s great depression
Lord King argues that Greece has suffered an economic collapse similar to 1930s, as the nation suffers a contraction eclipsing the US depression in the inter-war years. This is an indication of the depth of the “appalling” economic policy failure, he said to an audience at the London School of Economics during his recent book launch.
Speaking of the Greek crisis and the Euro depression, he said:
“In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem.I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece. It is appalling and it has happened almost as a deliberate act of policy which makes it even worse”.
Having spent about 10 years combating the worst financial crisis in history at the Bank of England, Lord King argues that the weakest Eurozone countries “face little choice but to return to their national currencies as the only way to plot a route back to economic growth and full employment”.
Global economic outlook
Speaking of the global economic outlook at large, Lord King is more optimistic than most, as he dismissed the ideaology of “secular stagnation”, made popular by the likes of US treasury secretary Larry Summers. He says: I see absolutely no reason to suppose that because we had a banking crisis and a recession that have permanently disappeared. They haven’t and are waiting to spring back.
“The thinking that all these ideas will not come through to have practical ways of improving our living standards, seem extraordinarily pessimistic and something for which there is no basis in fact at all over the last 250 years of economic growth.”
And as for his opinion on recent central bank policies, he believes that the moves to boost levels of demand and encourage spending were necessary but not sufficient solutions to the world’s growth problems, only “buying time” for policymakers.
“We have to use that time to shift economies from their present disequilibrium to a new equilibrium where there is a proper balance between spending and saving, exports and consumption. Only then can we achieve rapid growth, and stable inflation. That is the prize. I think we can do it.”
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