Nobel Prize in Economics laureate Christopher Pissarides said yesterday the EU summit held last week was a good start for closer fiscal cooperation in Europe, but that it did not focus enough on discussion of the details.
Pissarides, who is scheduled to deliver lectures on the causes and remedies of the European debt crisis today and tomorrow, said the summit held in Brussels last week was on the right track by discussing closer cooperation on the region’s fiscal policy.
“Unfortunately, the focus [of the summit] seemed to have been shifted, or spread, to a wider question of Britain’s role in Europe and the role of financial services,” Pissarides told a press conference in Taipei.
Pissarides said he was optimistic that the eurozone would survive in its current form, and that all 17 countries now using the euro would continue to use it.
However, the eurozone might not survive with its current fiscal and monetary policy, Pissarides said, adding that new fiscal measures should be applied in the region, in line with views that have been epoused by many experts, including Taiwanese central bank Governor Perng Fai-nan (彭淮南).
Pissarides said unless the eurozone’s debt problem could be solved, the current weak economic momentum in the region could not be rescued, even with new stimulus measures.
Compared with Europe, the situation in the US has been better, Pissarides said, adding that recovery of growth in the US would play an important role in the global economy.
Emerging economies are likely to maintain relatively strong growth next year compared with developed economies, but emerging economies will see the pace of that growth become slower from this year, Pissarides said.
Facing the global economic slowdown, Pissarides said the “unpaid leave” that has been implemented at some Taiwanese companies would be good for employees and employers over the short term when compared with direct layoffs.
However, some supporting measures should be established in the meantime to help employees taking unpaid leave, Pissarides said, adding that the government should set up a security fund.
Pissarides said money for the fund should come from a tax on companies in the good times and when recession comes, the government should use the money to support workers on unpaid leave.
Pissarides, 62, shared last year’s Nobel Prize in Economics with Dale Mortensen of Northwestern University and Peter Diamond of the Massachusetts Institute of Technology.
Passarides is a professor at the London School of Economics.