Economist Joseph Stiglitz says the euro will survive Europe's debt crisis even as spending cuts and tax increases restrain economic growth.
“Europe is likely to go through a weak period” as governments implement “more austerity measures in the face of a weak economy,” Stiglitz says.
Political leaders will do “everything to save the euro and they will muddle through,” Stiglitz told Business Week.
Though he remains concerned about Europe’s financial crisis and fears that European leaders probably won’t do “enough to build the institutions that will allow for a quick recovery,” Stiglitz believes a Greek default is less likely now than it was several weeks ago.
Europe, Stiglitz says, will go through “a period of high volatility, with political action being taken only each time Europe comes to the brink, but when you play brinkmanship, there’s always the risk that one of the times that you are on the brink, you wait a little bit too long.”
Also, Stiglitz observed that the strong dollar versus the euro and weak growth prospects in Europe have diminished hopes that the U.S. would have an export-led growth recovery.
The euro’s problems have affected General Motors, which applied to Germany for aid in the amount of 1.1 billion euros ($1.33 billion) to help rescue its money-losing Opel unit, which is based in Germany.
The panel that reviewed the loan application denied GM’s request, Bloomberg reports.
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