New York, June 11 (Finance Enquiry.com) – Spain bailout which many thought as a panacea for all the ills affecting the nation, may actually turned out to be far worse than the existing state of affairs, argues Nobel Prize-winning economist Joseph Stiglitz.
Explaining his doubts on the deal , which Stiglitz, a former economic advisor of US President Bill Clinton, thinks in like Spanish government and the Spanish central banks propping each other, funded by EU. He said, “The system … is the Spanish government bails out Spanish banks, and Spanish banks bail out the Spanish government.”
Yesterday, seventeen EU ministers have announced the plans to fund Spanish banks up to 100 billion euros to recapitalize the banking system. It would add 10% to already burgeoning Spanish debt, the currently the debt is almost 80% of nation’s GDP. It means the Spain will not get investors to sell its sovereign bonds.
Calling the exercise voodoo economics, Stiglitz said, “It is not going to work and it’s not working.”
He called on European leaders to make plans for common banking system to save the EU from recurring financial crisis. “There is no way in which when an economy goes into a downturn it will be able to sustain policies that will restore growth without a form of European system,” he argued.
Lambasting the policy makers and European leadership, Stieglitz contended, “Having firewalls when you’re pouring kerosene on the fire is not going to work.’’ Europe should look for ways and means to bring growth on agenda, he further stated, “You have to actually face the underlying problem, and that is, you’re going to have to promote growth.”
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