Greenspan sees US rates rising, Eurozone breaking up

Low levels of interest rates in the States could not be maintained for much longer, one of the former chairmen of the US central bank said.

In an interview with Bloomberg Radio, Alan Greenspan said "I cannot perceive that we can maintain these levels of interest rates for very much longer.

"They have to start to move up and when they do they could move up and surprise us with the degree of rapidity which may occur."

Greenspan reportedly also repeated his recurring worry that the US economy was heading into a period of so-called stagflation, in which low growth is accompanied by elevated price pressures.

In his opinion, recent increases in unit labour costs and the acceleration in the rate of growth of money supply were early signs of such an outcome.

The former US Federal Reserve official also made a dire prediction regarding the euro area, predicting it would break-down.

“It will break down, as indeed it is showing signs of in many different areas."

For Greenspan, trying to combine the different attitudes towards inflation in southern and northern European countries was not workable.

On 18 August, ex- International Monetary Fund chief economist Joseph Stiglitz took a different view.

Stiglitz told Bloomberg TV the optimal result would be reforms in the single currency bloc to turn it into a properly functioning currency bloc.

Nonetheless, he believed those were unlikely, in which case an amicable split-up might be better.

“If they can’t get it together, then an amicable divorce, probably dividing into two or three different currency areas.”