One of the winners of this year’s Nobel Prize in economics on Sunday accused the British government of exaggerating the threat of a debt crisis and jeopardizing the economic recovery with severe budget cuts.
London School of Economics Professor Christopher Pissarides said there was “minimal” risk of Britain experiencing a sovereign debt crisis like the one that brought Greece to the edge of bankruptcy earlier this year. Prof. Pissarides wrote in the Sunday Mirror newspaper that the government “has exaggerated the sovereign risks that are threatening the country.”
He said that unemployment was high and job vacancies few, and rapid spending cuts might make the situation worse. He advocated reducing the budget at a slower pace.
The government has raised the specter of a Greek-style collapse in investor confidence, which would leave Britain facing punitive interest rates to finance its borrowing, to argue for the need for deep spending cuts.
Prime Minister David Cameron defended his government’s plan to reduce public spending by more than ₤80 billion ($125 billion), saying that without austerity Britain is “looking down the barrel of economic ruin.” The government says the cuts will eliminate the country’s ₤156 billion deficit by 2015.
“I don’t underestimate how difficult this will be. But we are doing what we are doing because it is the right thing to do {hbox}” right by our economy, right for our country,” Cameron said in a podcast posted Saturday on the 10 Downing St. website.
Critics say slashing public-sector jobs, services and social programs will disproportionately hurt the poor.
