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Old 12th Dec 2013, 08:44
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Dismantle the euro, says Nobel-winning economist who once backed currency union

A leading economist who once argued for the creation of the euro now claims the single currency should be abandoned as it is fuelling unemployment and dividing Europe.

A Nobel prize-winning economist will on Thursday withdraw his support for the euro saying it has created a “lost generation” unemployed youngsters and should be broken up. Sir Christopher Pissarides was once a key proponent of a single currency but will on Thursday accuse the euro of “dividing Europe” and say action is needed to “restore the euro’s credibility in international markets” and the “trust that Europe’s nations once had in each other”, according to the Daily Mail.

Speaking at the London School of Economics, where he teaches, Professor Pissarides will say: “The euro should either be dismantled in an orderly way or the leading members should do the necessary as fast as possible to make it growth and employment-friendly,. We will get nowhere plodding along with the current line of ad hoc decision-making and inconsistent debt-relief policies. The policies pursued now to steady the euro are costing Europe jobs and they are creating a lost generation of educated young people. This is not what the founding fathers promised.”

The Cypriot-British economist, who won the Nobel prize in 2010, is speaking days after Christine Lagarde, the head of the International Monetary Fund, insisted the crisis in the eurozone was not yet over.

The eurozone economy grew by just 0.1 per cent in the third quarter of the year compared with 0.8 per cent in Britain and 0.9 per cent in the US. Unemployment within the single currency area now stands at 12.1 per cent, meaning more than 19million people are out of work.

Some economists argue Europe cannot enact the policies needed to boost growth and create jobs due to the huge variations in economies across the region. German taxpayers are unwilling to pay out to help crumbling economies such as Greece or Spain while even France now faces financial crisis.

Explaining why he had worked hard to persuade Cyprus to join the currency union in 2008, Professor Pissarides will say: “I was completely sold on the idea. Back then, the euro looked like a great idea. But it has now backfired. It is holding back growth and job creation and it is dividing Europe. The present situation is untenable.”

Professor Pissarides, 65, is the regius professor of economics at the LSE and chairman of its new Centre for Macroeconomics. He was knighted in June.
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