Germany’s push for fiscal austerity is preventing the euro zone economy from growing—and instead, the region’s debts should be written off in a “modern-day debt jubilee”, a leading professor told CNBC on Monday.
“If you have got the private sector paying its debt down and you tell the government to do the same thing, you are saying ‘hey guys, let’s shrink the amount of money in the economy, and see if you can grow’,” Australian economist and author Steve Keen said on Monday.
Keen—who describes himself as a “long-term critic of conventional economic thought”—spoke to CNBC after data out on Monday showed manufacturing output in the euro zone slowed in August.
Markit’s manufacturing purchasing managers’ index (PMI) for the single currency zone fell to a 13-month low of 50.7 last month, down from 51.8 in July. This was narrowly below expectations.
The individual PMI readings for Italy and France came in below 50, suggesting that manufacturing output in these countries contracted in August. Germany’s manufacturing sector grew, but at its slowest rate in 11 months.