Fiscal restraints are not enough to solve euro crisis

Eight economists explain the origins of the euro crisis and look at what would happen if the currency were abolished

JOSEPH STIGLITZ

I don’t doubt the commitment of Europe’s leaders to preserve the euro. But there a lack of understanding of what is required and/or a willingness to do what is required, either for ideological or political reasons. These leaders must know that austerity by itself will restore neither growth nor confidence. They must know that even if strong fiscal constraints might prevent the next crisis, they don’t solve the current one. And they must know that, as desirable as the structural reforms that are being discussed may be, they are supply-side measures when the problem in many of these countries is inadequate demand, and the time horizon required for their implementation is out of sync.