Noble Prize winning economist, Joseph Stiglitz has called for immediate action by European nations to manage Financial Crisis, that the region is facing. In an interview in Geneva on September 24, Stiglitz said that European nations should consider mutualization of their debts to ease the high interest rate problem faced by Spain and Greece.

To prevent capital flight in Europe, the countries in the region should decide on the formation and implementation of a banking union with deposit insurance, said Stiglitz, who was the Chairman of the US President Bill Clinton’s Council of Economic Affairs from 1995 to 1997.

Europe is currently amidst a deep financial crisis with various nations disagreeing over the formation of a banking union with Greece and Spain dragging on to find a bailout solution. The policy makers in the region continue to focus on austerity measures while failing to take any kind of urgent remedial measures.

Any kind of delay in resolving this situation is bound to have an adverse dynamic impact on the European financial segment falling apart and weak nations suffering the most, said Stiglitz. Not only this, if corrective action is not taken quickly, Spanish banks will be bankrupt with no money.

Even the European Union President, Herman Van Rompuy has warned against the loss of urgency in resolving the debt crisis which started in Greece three years ago. Any delay in implementing a banking framework in Europe will make the situation worse and the system may fail totally, said Stiglitz.

Stiglitz, 69, warned that Europe will witness an overall failure of the economic system, if the policy makers of Europe continue to wait any further before taking steps to resolve the issues. Spain’s banking system will become weak and have a drastic impact on the country’s overall economy, suggested Stiglitz.

Author of a book titled, “The Price of Inequality: How Today’s Divided Society Endangers Our Future,” Stilglitz warned that failure to take corrective action will lead to an uncertain political situation. European policy makers need to think of a new strategy besides their focus on austerity, Stilglitz said. The Noble Prize winner further added that the continued commitment of the region’s policy makers towards the euro offered a ray of hope for Europe financial crsis.