Nobel Prize in Economics laureate Dale Mortensen yesterday said a global recession would emerge again if the eurozone debt crisis is not resolved within a year.
“The European countries need to come up with a mechanism in a short term, which I believe they are doing right now, to resolve the problem, preventing from generating a global financial crisis like that in 2008,” Mortensen told a press conference in Taipei.
In the long term, Mortensen said European countries have realized they need to modify the EU’s fiscal policy to maintain a steady financial system and a stable euro.
This would mean some of the countries in Europe might have to surrender some of their sovereign authority so that a consistent fiscal policy could be pursued, Mortensen added.
His ideas are in line with those of central bank Governor Perng Fai-nan (彭淮南), who said in the legislature earlier this month that the EU needed to establish a ministry of finance to help it prevent problems, such as the sovereign debt crisis in Greece, from spreading to other countries.
Mortensen, 72, shared last year’s Nobel with Christopher Pissarides of the London School of Economics and Peter Diamond of the Massachusetts Institute of Technology. Mortensen is a professor at Northwestern University in Evanston, Illinois.
Mortensen, who is scheduled to give a speech in Taipei on unemployment today, said while the global economy might not have fallen into a technical recession, the pace of recovery is far from robust.
Other than the eurozone debt crisis, the US economy is still the major key for the global economy, Mortensen said, adding that the weak consumer consumption in the US is the most crucial factor that could drag down its economy.
“Unless people’s consumption and spending on the house market could rebound, the US economy would not get back to the track of robust recovery,” he said.
On the topic of the government’s recent proposal to encourage companies’ to hire doctoral students by subsiding almost half of their salaries, he said it would only work as a short-term policy to address the issue.