Nobel economist praises Brown

Sunday, June 14, 2009 - 10:22 AM

Embattled British Prime Minister Gordon Brown won some backing from a Nobel Prize-winning economist today, who said the UK economy looked to be faring the best in Europe.

Princeton University economics professor Paul Krugman praised Mr Brown's handling of the banking crisis and his economic policies as "intelligent".

"I think the UK economy looks the best in Europe at the moment," he told The Observer. "The fact of the matter is that Britain did manage to stabilise the banking system."

He added: "If the government can hold off having an election until next year, Labour might be able to run as 'the people who brought Britain out of the slump'."

His comments come in the wake of predictions that the UK might be past the worst of the recession.

One respected think-tank said last week the downturn had already ended, while other key financial data suggested that both the manufacturing and services sectors grew for the first time in a year during May.

The pound soared against the dollar and the euro over the past few days as investors bought back into sterling on the back of the upbeat news.

Mr Krugman said high levels of private debt fuelled the economic crisis, and advocated greater financial regulation in order to help boost any recovery.

He said: "The huge increase in private sector leverage is at the core of how we got so vulnerable.

"We went for 50 years after the Great Depression without any major financial crises and that, I think, was because we had a financial sector that didn't let people get as deeply into debt as they have now."

Mr Krugman was awarded the Nobel Prize for Economics last year "for his analysis of trade patterns and location of economic activity".