The European economy has been stalled since the 2008 recession, dragging the global economy down with it and leading to the rise of political extremism across the continent. Nobel Prize–winning economist Joseph Stiglitz thinks he knows the culprit. In his new book, The Euro: How a Common Currency Threatens the Future of Europe, Stiglitz argues with his customary force and lucidity that adopting a single European currency was a fatal error, since it prevents weaker economies from having the monetary flexibility they need in times of recession. Stiglitz proposes reforming the Eurozone, warning that the entire European Union project might have to be scrapped if reform proves impossible. Beyond the story of the euro, Stiglitz’s book also contends that neoliberalism is a stifling economic ideology that may have run its course.

In this interview, which has been condensed and edited for clarity, Stiglitz talks about his new book and the worldwide implications of the euro’s failure.

Jeet Heer: You attribute the problems that the European economy has had for the last decade—especially since the Great Recession started—to the euro. Why is the euro such a problem?

Joseph Stiglitz: It impeded or made impossible the ability to adjust when there was a shock. It was a big shock, 2008, and the basic idea was that exchange rate systems are part of the adjustment mechanism. And when they created the euro, they took away that adjustment to a shock, and they didn’t put anything in its place. It might have been able to work if they had completed the project, if they had done the other things they needed to do, but they didn’t. Instead they went in the other direction and compounded the structural mistakes with the policy mistakes of austerity.

So the combination of austerity with the euro’s structural problems is the bigger problem?