Nobel Winner Feared Euro Debt Crisis a Decade Ago

December 7, 2011 - 10:55 AM
Sweden Nobel

The 2011 Nobel Prize laureates, Christopher A. Sims, left, Memorial Prize in Economic Science of the United States sitting with Dan Shechtman, right, chemistry, of Israel, speaks during a press conference at The Royal Swedish Academy of Sciences on Wednesday Dec. 7, 2011, in Stockholm. (AP Photo Janerik Henriksson) SWEDEN OUT

STOCKHOLM (AP) — A winner of the Nobel prize in economics says that a decade ago he feared the euro would face problems because there wasn't enough fiscal coordination between countries to support it.

Christopher Sims, who shares this year's $1.5 million award in economics with fellow American Thomas Sargent, said Wednesday that the European financial crisis was partly caused because the common European currency, now shared by 17 EU members, didn't have "clear fiscal backing" when it was created.

Sims referred to his 2002 paper "The precarious fiscal foundations of EMU (European Monetary Union)" in which he wrote about the risks of a euro crisis and the possibility of it spreading.

His conclusion at the time had been that it was "likely there would be some kind of a crisis," he told reporters.

Sims said Wednesday he could not propose measures for European governments to take. "That is still the question. We don't know yet."

Sims was in the Swedish capital with this year's other Nobel laureates in economics, physics, chemistry and medicine. They have gathered for a week of lectures and interviews before their prizes are awarded at a ceremony on Saturday, followed by a banquet.

Sims and Sargent won the Nobel prize for research on the cause-and-effect relationship between the economy and government policy, which helps policymakers determine if governments should cut deficits or spend more to help invigorate the global economy.

The economics prize is not among the original Nobel awards but was created in 1968 by the Swedish central bank.

It is handed out with the other Nobel science prizes in Stockholm on Dec. 10 — the anniversary of Swedish industrialist Alfred Nobel's death in 1896.

The Nobel Peace Prize is presented in Oslo, Norway, on the same day.