Global Economy

[acharya]

<b>Krugman Says Mild U.S. Recession Became a ‘Plunge’ (Update1)
</b>
By Meera Louis

March 17 (Bloomberg) -- Nobel laureate economist Paul Krugman said the world is in a “coordinated global slump” that “looks worse in Europe and in Japan” than in the U.S. and he called for more public spending to combat the crisis.

“What began as a relatively mild recession” in the U.S. “has now turned into a plunge,” Krugman said in Brussels today. “This is a crisis that’s hitting manufacturing really hard.”

The financial turmoil that started in the U.S. has ricocheted through the global economy and pushed Europe and Japan into what may be their worst recessions in more than three decades. While governments around the world are pumping money into their economies to revive growth, Krugman says the measures are insufficient to tackle the problem.

“The United States is not doing enough to fight the crisis and Europe is doing a bit less than half as much as the United States,” the Princeton University economist said. “We’re in real danger.”

Krugman said the fiscal-stimulus programs in both the U.S. and Europe should be increased to total about 4 percent of gross domestic product. The European Union says its stimulus measures amount to 3.3 percent of the 27-nation bloc’s GDP and EU policy makers are resisting calls to do more. The U.S.’s stimulus amounts to 2 percent of output in 2009 and 1.8 percent next year, International Monetary Fund data show.

‘Horrific Economic Crisis’

“My back of the envelope says on both sides of the Atlantic we should be having a stimulus that peaks at 4 percent of GDP annually,” said Krugman, 56, who won the Nobel Prize in economics in October for his theories on international trade. The world is suffering a “horrific economic crisis with as far as I can tell no end in sight.”