European leaders and markets have something in common when it comes to acknowledging financial and economic risk emanating from the continent, Nobel Prize-winning economist Joseph Stiglitz told CNBC on Wednesday.
They have their heads in the sand.
Following a brief dip in the wake of Britain's vote in June to leave the European Union, U.K. stocks have moved sharply higher, and U.S. equities have struck new all-time highs. But markets are underpricing risks that include growing distrust of pro-EU centrist leaders amid widespread youth unemployment and a euro that has been proven a failure, Stiglitz said on CNBC's "Squawk Box."
He criticized European leaders, including
European Commission President Jean-Claude Juncker, who appear set on pushing a message that any country that leaves the union will be punished.
"That's the kind of idea that says the only way we're going to keep people together is not through the benefits we give, but through the fear of leaving. That's not a healthy attitude, and that will speed the breakup," he said.
Further, Stiglitz said European economic statistics since 2008 have been "dismal."
"The best-performing country, Germany, would be given a D if it were not for comparison with how bad the rest of Europe is doing," he said. "In that context, it's inevitable that there's going to be large fractions of the population that are going to be upset."
Stiglitz said this has not always been the case, but the European Union's fortunes have taken a turn for the worse since the 28-nation bloc adopted a common currency, which he blames for much of the continent's present-day woes.