Europe’s debt troubles could undermine its currency, White House Economic Adviser Paul Volcker said Thursday.
Volcker, a former Federal Reserve chairman and a widely respected economist, told students at the London School of Economics that it was difficult to have a common currency without a common government. “Initially I thought the euro was a good idea,” Volcker said.
His comments came just days after European officials cobbled together a $1 trillion rescue package to prevent Greece’s debt crisis from spilling over into other vulnerable European economies.
The plan initially sparked a powerful global stock market rally, but doubts remain as to whether countries can successfully cut spending and raise taxes enough to put public finances back on a sustainable path.
Volcker said the United States faces the same problem as other countries with large deficits and will likely have to have a debate about the tax structure to pay for them. “We are in this dilemma that many other governments are in,” he said.”The deficit is far too large.”
Still, he said the U.S. economy is currently doing a little bit better than he would have expected.
(Reporting by Huw Jones in London; Editing by James Dalgleish and Dan Grebler)
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