Misdiagnosis

Europe's single-minded focus on austerity is a result of a misdiagnosis of its problems. Greece overspent, but Spain and Ireland had fiscal surpluses and low debt-to-GDP ratios before the crisis. Giving lectures about fiscal prudence is beside the point. Taking the lectures seriously - even adopting tight budget frameworks - can be counterproductive.

Regardless of whether Europe's problems are temporary or fundamental - the eurozone, for example, is far from an "optimal" currency area, and tax competition in a free-trade and free-migration area can erode a viable state - austerity will make matters worse.

The consequences of Europe's rush to austerity will be long-lasting and possibly severe.

If the euro survives, it will come at the price of high unemployment and enormous suffering, especially in the crisis countries. And the crisis itself almost surely will spread. Firewalls won't work, if kerosene is simultaneously thrown on the fire, as Europe seems committed to doing: there is no example of a large economy - and Europe is the world's largest - recovering as a result of austerity.

As a result, society's most valuable asset, its human capital, is being wasted and even destroyed. Young people who are long deprived of a decent job - and youth unemployment in some countries is approaching or exceeding 50 percent, and has been unacceptably high since 2008 - become alienated. When they eventually find work, it will be at a much lower wage. Normally, youth is a time when skills get built up; now, it is a time when they atrophy.

So many economies are vulnerable to natural disasters that adding a man-made disaster is all the more tragic. But that is what Europe is doing. Indeed, its leaders' willful ignorance of the lessons of the past is criminal.

The pain that Europe, especially its poor and young, is suffering is unnecessary. Fortunately, there is an alternative. But delay in grasping it will be very costly, and Europe is running out of time.

Joseph E. Stiglitz is University Professor at Columbia University, a Nobel laureate in economics, and the author of "Freefall: Free Markets and the Sinking of the Global Economy." Copyright: Project Syndicate, 2012.www.project-syndicate.org