December 8, 2008 / 6:20 PM / 9 years ago

Nobel winner Krugman's worst case: a lost decade

2 Min Read

<p>Paul Krugman of the U.S., winner of the Nobel Prize in Economics for 2008, gives his Nobel lecture at Stockholm University in Stockholm December 8, 2008.Bob Strong</p>

STOCKHOLM (Reuters) - Paul Krugman, winner of this year's Nobel economics prize, said on Monday that the world could face a Japan-style, decade-long slump.

Speaking in Stockholm where he will collect his 10 million Swedish crowns ($1.3 million) prize, U.S. economist Krugman again called on policy makers to spend liberally to cushion a withering global downturn.

"A scenario I fear is that we'll see, for the whole world, an equivalent of Japan's lost decade, the 1990s -- that we'll see a world of zero interest rates, deflation, no sign of recovery, and it will just go on for a very extended period," he told a news conference.

"And that's unfortunately very easy to see happen."

Krugman added that in his worst case scenario there would also be a series of extremely serious crises "in particular countries that are in big trouble."

<p>Paul Krugman of the U.S., winner of the Nobel Prize in Economics for 2008, prepares to give his Nobel lecture at Stockholm University in Stockholm December 8, 2008.Bob Strong</p>

He said there were already premonitions of economic and political crises in line with those in Argentina and Indonesia in the 1990s-early 2000s, particularly "in the European periphery."

Iceland and Latvia are among European countries that have been hit hard by the global financial crisis.

"We can easily be talking about a world economy that is depressed until 2011 and maybe beyond," Krugman said.

"If there's a safe place I can't see it."

Krugman is in the Swedish capital for the "Nobel Week," when laureates attend news conferences and events culminating with the prize ceremony and a gala dinner on Wednesday.

Reporting by Anna Ringstrom; Editing by Victoria Main

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