One of the world's leading economists and winner of the Nobel Prize for Economics in 2008, Paul Krugman, spoke about challenges of the economic crisis at the 2nd Adris Business Forum in the northern Adriatic resort town of Rovinj on Friday.
Noting that he was not familiar with the situation in Croatia in detail, Krugman said that the Croatian government should accept demands of outside players but need not do more than necessary.
He said that the introduction of the euro laid the foundation for the crisis in Europe, but that going back now would be even a greater catastrophe. He said that Croatia should be in no hurry to join the eurozone.
Comparing Europe and America, Krugman said that the European Union is still not a state with a common policy and that its budget, which could be used for transfers from the rich countries to the poor, is too small for any intervention.
He said that one of the main problems is that the euro zone does not have a common language, which hinders mobility, and that an even bigger problem is that there is no fiscal and banking unity, as exists in the United States.
Europe should be helping its member states in the same way the US does. Florida experienced a similar collapse as Spain, but it received support from Washington, Krugman said.
He compared Croatia to Spain in terms of the poor flexibility of foreign exchange rates and the balance of payments deficit.
The governments of small countries, such as Croatia, do not have much room for manoeuvre. The government should accept demands of outside players, but need not do more than necessary. The Croatian government cannot say no to demands from the European Union, but should adapt, Krugman concluded.
Among those attending the forum were First Deputy Prime Minister Radimir Cacic, Labour and Pension System Minister Mirando Mrsic and Tourism Minister Veljko Ostojic.
